Project Neeraj SMU 520751161

Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance
its
growth with a case study of B.S.N.L., a telecom service provider of India
University Centre Address
InfoTech, University Study Centre (Sikkim Manipal University), 3/7, Central Park, City Centre,
Durgapur-713216, West Bengal.
Centre Code
0249
Title of the project report
“Descriptive qualitative approach towards the financing needs of Indian telecom sector and
different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service
provider of India.”
By- Neeraj Kumar Singh (Roll No-520751161)
A project report submitted in partial fulfillment of the requirements for the degree of Master of
Business Administration of Sikkim Manipal University, India.
Sikkim-Manipal university of Health, Medical and technological sciences,

Distance education wing,
Syndicate house,
Manipal-576104.
1
By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its
Project Synopsis
Title
“Descriptive qualitative approach towards the financing needs of Indian telecom sector and
different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service
provider in India.”
Objectives
The objective of the project can be summarized as follows-
1) The first objective is to access the Indian telecom sector, its current status & structure, its
appellate authority, its telecom policies, service offerings, investment opportunities & incentives,
research & development works, growth potential, government vision and mission etc.
2) The second objective is to find out the socio-economic impact of telecommunication investment
in developing countries like India, the effect of information and communication technologies, the
digital divide in developing and developed nations.
3) The third objective is to find out different financing strategies and financial ways to finance a
telecom projects in India, and to access the different financial risks associated with.
4) The fourth objective is to establish the relation between the telecom investment and its effect on
the growth in global perspective.
5) The fifth objective is to take the case of B.S.N.L. ( A govt. of India enterprise), a telecom service
provider, to access its current business structure, service offerings, current growth in terms of
revenue and profits, service expansions, its asset structure, social commitment.
6) The sixth objective is to find out the telecom trends in global perspective, high growth drivers,
business patterns, cost efficient operation, and how to expand in low ARPU Rural markets.
7) The seventh objective is to see the picture of public-private partnership contribution in telecom
growth in India, their investment pattern and their differential contribution to the telecom growth.
8) The eighth objective is to look into the telecom investment opportunities and potential in Indian
telecom sector and the public private investment avenues and nodal agencies.
9) At last, to bring out the conclusion for financing needs of telecom sectors, their socio-economic
effects, find out the viable technological options to grow in rural telephony, proving the purpose
of people’s growth, analyzing the global telecom growth and public private contributions,
observing the chunk of investment required to revolutionize the growth, in developing nations
like India.
Methodology
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To fulfill the objective of the project, different research methodologies have been used to come on the
conclusions.
Mainly descriptive study has been made to keep the research simple and narrative and some time
quantitative and mainly qualitative approaches have been made to the subject.
Mainly secondary data which have been collected from different websites, magazine, research papers,
interactions and books, have been used for analysis purpose.
Different case studies have been taken in to consideration to bring out some facts.
Company financials available in public domains have been compared and telecommunication papers
available on websites of ministry of finance, D.O.T., and TRAI have been looked up.
Some surveys of telecom vendors in India, have also been taken into consideration to pull out the
conclusions on the subject.
Acknowledgement
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I am very much thankful to the people who have helped me in preparation of this project, directly or
indirectly. I would like to give special thanks to Mr. Srikanta Ghosh, faculty at Sikkim Manipal
University study centre, Durgapur, who has given me the opportunities to do this project.
I am very much grateful to Mr. D. Rana, D.E. (Admin), B.S.N.L., Durgapur, Mr. N. Chakraborty, S.D.E.
/ Panagarh & B.B., B.S.N.L., Durgapur for their endeavor support for completing this project. I am
thankful to my friends giving their remarkable contribution and special thanks to Mr. Srikanta Ghosh,
who not only explained the topics very well but has thrown the light on the practical aspect of the
project too.
(Neeraj Kumar Singh)
Table of Content
1. Executive Summary of the Project ………………………………………………………………7
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2. Bharat Sanchar Nigam Limited (Company Profile) ………………………………………….9

2.1 Introduction ………………………………………………………………………………9
2.2 Vision, Mission & Objectives ………………………………………………………...11
2.3 Organization Chart of BSNL ………………………………………………………….12
2.4 Staff ……………………………………………………………………………………13
2.5 Finance …………………………………………………………………………………14
3. Indian Telecom Sector at a Glance ……………………………………………………………15

3.1 Status of Telecom Sector………………………………………………………… ……15
3.2 Target Set by the Government …………………………..…………………………….29
3.3 Indian Telecommunications at a glance …………………………………………………31
3.4 Bharat Nirman …………………………………………………………………………32
4. Institutional History of the Telecom Sector in India ………………………………………….34
4.1 Progress of Reforms …………………………………………………………………...36
4.2 Pre-reform Period and Telecommunication in India …………………………………..38
4.3 Liberalization and Reforms in Telecom Sector since early 1990’s …………………...39
5. Why Telecom Investment and Expansion?? ...............................................................................47
5.1 Traditional methods of financing telecommunication in developing countries .......……47
5.2 Investing in telecommunication projects – a multiplication effect? ...............................49
5.3 What is Information and Communications Technology? ...............................................50
5.4 The Digital Divide ……………………………………………………………………..51
6. What is creative or innovative financing? ....................................................................................59
6.1 What is financial engineering? .........................................................................................59
6.2 Financing Strategies……………………………………………………………………..61
6.3 Financing ways …………………………………………………………………………65
6.4 Financial risks …………………………………………………………………………..73
6.5 Leverage effects on ways to finance telecommunication ………………………………78
6.6 How financial development may promote growth …………………………………….79
6.7 The importance of telecommunication for economic growth ………………………….80
7. B.S.N.L. as a Telecom Service Provider ………………………………………………………85
7.1 BSNL as an integrated telecom service provider ……………………………………...85
7.2 Growth Plan ……………………………………………………………………………92
7.3 Projects Recently Implemented / Under Development ………………………………..94
7.4 Social Commitment ……………………………………………………………………95
7.5 Summary of financial statement ……………………………………………………….96
8. Telecom Trends and High Growth Drivers ……………………………………………………98
8.1 General Outlook of communication services ……………………………………………98
9. Cost efficient operations and rural telecom infrastructure convergence ………………………105
9.1 Optimised network operations …………………………………………………………106
9.2 Price to optimize network utilization…………………………………………………...108
9.3 Shared access is a bridge to personal connectivity……………………………………..108
9.4 India's WiMAX subscribers to top 13 million by 2013 ………………………………111
10. The Role of Public & Private Players in Indian Telecom Sector………………………………113
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10.1 Airtel as a private telecom service provider……………………………………………115

10.2 Performance parameters of BSNL ……………………………………………………119
11. Telecom Investment opportunities and Potential In India …………………………………….129
11.1 Opportunities …………………………………………………………………………...129
11.2 Potential ………………………………………………………………………………..130
11.3 Investment Facilitation Agencies …………………………………………………...131
12. Methodology ………………………………………………………………………………….133
12.1 The road to answering our purpose……………………………………………………..133
12.2 Data collection methods………………………………………………………………...134
12.3 Source critique………………………………………………………………………….134
13. Analysis ……………………………………………………………………………………….134
13.1 The benefits of wireless ……………………………………………………………….135
13.2 Delivering service to customers ……………………………………………………….136
13.3 Technology choices ……………………………………………………………………137
13.4 Enter WiMAX …………………………………………………………………………138
13.5 Looking to the future …………………………………………………………………..138
13.6 Streamlining Telco’s process efficiency ………………………………………………139
13.7 Growing pains …………………………………………………………………………139
13.8 Next-generation technologies ………………………………………………………….140
13.9 Public-Private Investment ……………………………………………………………..141
13.10 World telecoms and IT outlook ………………………………………………………..143
14. Findings, Conclusions, and Recommendations ……………………………………………….146
15. References …………………………………………………………………………………….148
15.1 Internet………………………………………………………………………………….148
15.2 Articles………………………………………………………………………………….150
15.3 Literature………………………………………………………………………………..152
16. Explanation Of Words ………………………………………………………………………..153
17. Appendix ………………………………………………………………………………………170
17.1 Basic Information of Indian economy and social structure …………………………..170
17.2 Financial Statement of BSNL …………………………………………………………171
17.3 Financial Performance of Airtel ………………………………………………………177
17.4 World Telecom and Telecom Industry ………………………………………………..178
17.5 Tele-density Picture in India …………………………………………………………..179
17.6 Economic and social indicators of India ………………………………………………180
17.7 Sector Distribution of Investment Commitments to Infrastructure Projects ………….188
17.8 Auditor General of India Report on Outstanding Billed Amount in Telecom ………...189
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Unit-1 Executive Summary of the Project
India has taken positive steps towards liberalizing the telecommunications market and introducing
private investment and competition in basic telecommunications services. Foreign equity in value-added
services is limited to 51 percent. For basic services, the limit is 49 percent as it has been difficult to raise
the amounts of money needed to finance the new networks, creative financing arrangements have been
allowed in some cases that extend the limit to 74 percent.
The Indian Telecommunications network with 353 million connections (as on September 2008) is the
third largest in the world. The sector is growing at a speed of 46-50% during the recent years. NTP-99
laid down a clear roadmap for future reforms, contemplating the opening up of all the segments of the
telecom sector for private sector participation. The Government is committed to expanding rural
connectivity through a slew of measures so that rural users can access information of value and transact
business. This will include connecting block headquarters with fiber optic network, using wireless
technology to achieve last mile connectivity and operating information kiosks through a partnership of
citizens, panchayats, civil society organizations, the private sector and Government.
Telecommunication plays a central role in helping developing countries participate in the global
economy. Telecommunication is pervasive in all aspects of our lives, from the stereo in your living room
to the mobile phone you carry with you. These technological innovations we have in our lives are often
taken for granted and it is unfeasible for us to imagine how we can function without them. By
encouraging the establishment of telecommunication industries within their countries, not only is their
GNP boosted from the production of higher value-added goods, but also, the economy can progress to
that which is predominantly characterized by secondary or tertiary industries
Usually financial engineering are used to reduce the financial risk, a second thing is to restructure cash
flows for better financial management. Because financial engineering are used to finance projects it can
be used to finance telecom projects around the world, and especially in India. This kind of infrastructure
project is according to Merna & Njiru (2002) important in developing countries because they are in need
for that. Infrastructure projects in developing countries bring several improvements of the country, they
lead to:
Human welfare and economic development.
Reduction of poverty.
The environment will be improved.
“A well spread out telecommunication network provides a great impetus to the economic growth in a
country. Considering the significance of its contribution and also the need to integrate with the global
economy, several policy initiatives have been taken by the government.”
(Ministry of Finance, Govt. of India, 2004-11-26)
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To understand the telecom sector growth, it is needed to analyze the giant companies working in telecom
sector. The health of these companies tells the story of operating environment of Indian telecom
industry. Bharat Sanchar Nigam Limited, a government of India enterprise, formed on 1st October-2000,
from its parent body Department of Telecom ( DOT ) working under ministry of telecommunication,
India, is playing a major role in India’s telecom arena. When B.S.N.L. formed, the growth of telecom in
India was very much dismal, great challenges were before the government to fire the telecommunication
growth, pacing the structural growth of India. So, corporatization of DOT done. New entity, B.S.N.L,
got more independence, made professional approach in its growth keeping the mission of government’s
social view, and maintaining its financial health. It has been expanded into different kind of telecom
fields and being competitive with others private players in the sector. Because it is wholly owned by
government, it can be said to be the government purpose vehicle, to regulate the Indian telecom industry,
fulfilling the purpose of socio-economic development of India.
The exploded growth in Indian telecom industry after telecom reforms has shown at the one side a
tremendous telecom infrastructure growth both by B.S.N.L. and other private players, but at the other
side, fierce competition between these operators, has shrank the margins of operation. At the one side
where Indian people have got improved and diverse services at better prices, the financial health of these
companies have been affected.
Here, we have taken the case of B.S.N.L, and analyzed its business operations, its financial needs,
growth areas, non-profitable operations, in the perspective of Indian telecom sector as a whole. The
growth figure of Airtel has been seen and analyzed the contribution of private players in telecom growth
in India. Now different technologies and market efficient technologies are available. Their social impact
has been viewed and trend in telecom evolution has been considered to make the viable investment.
The telecommunication markets are evolving all over the world very rapidly and day by day a new
technology is coming to rock the bourses but at some cost. The time span of these technologies are very
less, and before implementing the options available, the company should analyze its commercial aspect,
and should try implementing the project of lesser break-even time. In this competitive era, you can’t get
the chance to be left out in implementing the new technology, in spite of how much it cost to your
exchequer. New technology in telecom brings the new dimension of businesses, and new reform in
social arena, so it is indispensable for the country’s growth.
All development, expansion, growth need financing. How these financing can be arranged. Different
kinds of innovative ways of financing are available and which will be suited best, it should be analyzed
case by case basis, so that financing needs may be fulfilled and growth can be intact.
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Unit-2 Bharat Sanchar Nigam Limited (Company Profile)
2.1 Introduction
Bharat Sanchar Nigam Ltd. formed in October, 2000, is World's 7th largest telecommunications
company providing comprehensive range of telecom services in India like Wireline, CDMA mobile,
GSM Mobile, Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP services, IN Services etc.
Within a span of five years it has become one of the largest public sector unit in India.
BSNL has installed quality telecom network in the country and now focusing on improving it,
expanding the network, introducing new telecom services with ICT applications in villages and wining
customer's confidence. Today, it has about 46.188 million basic line telephone capacity, 7.96 million
WLL capacity, 45.288 million GSM Capacity, 4.854million internet capacity, 5.807 million broadband
capacity, more than 37382 fixed exchanges, 60000 BTS, 287 Satellite Stations, 480196 Rkm of OFC
Cable, 63730 Rkm of Microwave Network connecting 602 Districts, 7330 cities/towns and 5.5 Lakhs
villages.
BSNL is the only service provider, making focused efforts and planned initiatives to bridge the Rural-
Urban Digital Divide ICT sector. In fact there is no telecom operator in the country to beat its reach with
its wide network giving services in every nook & corner of country and operates across India except
Delhi & Mumbai. Whether it is inaccessible areas of Siachen glacier and North-eastern region of the
country. BSNL serves its customers with its wide bouquet of telecom services.
BSNL is numero uno operator of India in all services in its license area. The company offers vide
ranging & most transparent tariff schemes designed to suite every customer. BSNL cellular service,
CellOne, has more than 46.732 million cellular customers as on March-2009, garnering 16.19 percent of
all mobile users as its subscribers. In basic services, BSNL is miles ahead of its rivals, with 29.346
million Basic Phone subscribers i.e. 85 per cent share of the subscriber base and 92 percent share in
revenue terms.
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BSNL has more than 5.436 million WLL subscribers and 3.693 million Internet Customers who access
Internet through various modes viz. Dial-up, Leased Line, DIAS, Account Less Internet(CLI). BSNL has
been adjudged as the NUMBER ONE ISP in the country.
BSNL has set up a world class multi-gigabit, multi-protocol convergent IP infrastructure that provides
convergent services like voice, data and video through the same Backbone and Broadband Access
Network. At present there are 3.557 million DataOne broadband customers and 5.807 million
equipped capacity at the end of March-2009. The company has vast experience in Planning,
Installation, network integration and Maintenance of Switching & Transmission Networks and also has a
world class ISO 9000 certified Telecom Training Institute.
Scaling new heights of success, the present turnover of BSNL is more than Rs.351,820 million (US $
8 billion) with net profit to the tune of Rs.99,390 million (US $ 2.26 billion) for financial year 2006-
07. The infrastructure asset on telephone alone is worth about Rs.630,000 million (US $ 14.37 billion).
BSNL plans to expand its customer base from present 47 millions lines to 125 million lines by
December 2007 and infrastructure investment plan to the tune of Rs.733 crores (US$ 16.67 million) in
the next three years.
The turnover, nationwide coverage, reach, comprehensive range of telecom services and the desire to
excel has made BSNL the No. 1 Telecom Company of India.
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2.2 Vision, Mission & Objectives
2.2.1 VISION
To become the largest telecom Service Provider in Asia.
2.2.2 MISSION
i. To provide world class State-of-art technology telecom services to its customers on demand at
competitive prices.
ii. To Provide world class telecom infrastructure in its area of operation and to contribute to the
growth of the country's economy.
2.2.3 OBJECTIVES
• To be the Lead Telecom Services Provider.
• To provide quality and reliable fixed telecom service to our customer and there by increase
customer's confidence.
• To provide mobile telephone service of high quality and become no. 1 GSM operator in its area
of operation.
• To provide point of interconnection to other service provider as per their requirement promptly.
• To facilitate R & D activity in the country.

• Contribute towards:
i. National Plan Target of 500 million subscriber base for India by 2010.
ii. Broadband customers base of 20 million in India by 2010 as per Broadband Policy 2004.
iii. Providing telephone connection in villages as per government policy.
iv. Implementation of Triple play as a regular commercial proposition.
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2.3 Organization Chart of BSNL
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2.4 Staff
Distribution of Group-wise staff strength of DoT and BSNL (numbers) as on 31st March 2007 is
indicated below:
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2.5 Finance
Bharat Sanchar Nigam Limited, the largest Public Sector Undertaking of the Nation, is certainly on a
financial ground that's sound.
The Company has a net worth of Rs. 88,128 crores (US$ 22.02 billion), authorised equity capital of Rs.
10,000 crores (US $ 2.50 billion), Paid up Equity Share Capital of Rs. 5,000 crores (US $ 1.25 billion)
and Revenues is Rs. 38053 crores (US $ 9.51 billion) in 2007-08.
(Note: 1 US $ = 40.02 INR as on 31-03-2008)
2.5.1 Gross Investment in Fixed Assets
The BSNL is making substancial investment year to year for its network expension and mordenisation.
During the current financial year BSNL has made the gross investment of Rs. 7180 crore ( US $ 1.79
billion) in Fixed Assets. These investments have been financed by the internal accruals.
2.5.2 Cumulative Capital Outlay
BSNL has Gross Fixed Assets of over Rs. 124578 Crores (US $ 31.13 billion) as on 31.03.2008.
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Unit-3 Indian Telecom Sector at a Glance
The telecom services have been recognized the world-over as an important tool for socio-economic
development for a nation. It is one of the prime support services needed for rapid growth and
modernization of various sectors of the economy. Indian telecommunication sector has undergone a
major process of transformation through significant policy reforms, particularly beginning with the
announcement of NTP 1994 and was subsequently re-emphasized and carried forward under NTP 1999.
Driven by various policy initiatives, the Indian telecom sector witnessed a complete transformation in
the last decade. It has achieved a phenomenal growth during the last few years and is poised to take a
big leap in the future also.
3.1 Status of Telecom Sector

The Indian Telecommunications network with 353 million connections (as on Setember 2008) is the
third largest in the world. The sector is growing at a speed of 46-50% during the recent years. This rapid
growth is possible due to various proactive and positive decisions of the Government and contribution of
both by the public and the private sectors. The rapid strides in the telecom sector have been facilitated
by liberal policies of the Government that provides easy market access for telecom equipment and a fair
regulatory framework for offering telecom services to the Indian consumers at affordable prices.
3.1.1 Telecom Regulatory Authority of India (TRAI)
The entry of private service providers brought with it the inevitable need for independent regulation. The
Telecom Regulatory Authority of India (TRAI) was, thus, established with effect from 20th February
1997 by an Act of Parliament, called the Telecom Regulatory Authority of India Act, 1997, to regulate
telecom services, including fixation/revision of tariffs for telecom services which were earlier vested in
the Central Government.
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TRAI’s mission is to create and nurture conditions for growth of telecommunications in the country in
manner and at a pace, which will enable India to play a leading role in emerging global information
society. One of the main objectives of TRAI is to provide a fair and transparent policy environment,
which promotes a level playing field and facilitates fair competition. In pursuance of above objective
TRAI has issued from time to time a large number of regulations, orders and directives to deal with
issues coming before it and provided the required direction to the evolution of Indian telecom market
from a Government owned monopoly to a multi operator multi service open competitive market. The
directions, orders and regulations issued cover a wide range of subjects including tariff, interconnection
and quality of service as well as governance of the Authority.
The TRAI Act was amended by an ordinance, effective from 24 January 2000, establishing a
Telecommunications Dispute Settlement and Appellate Tribunal (TDSAT) to take over the adjudicatory
and disputes functions from TRAI. TDSAT was set up to adjudicate any dispute between a licensor and a
licensee, between two or more service providers, between a service provider and a group of consumers,
and to hear and dispose of appeals against any direction, decision or order of TRAI.
3.1.2 New Telecom Policy 1999
The most important milestone and instrument of telecom reforms in India is the New Telecom Policy
1999 (NTP 99). The New Telecom Policy, 1999 (NTP-99) was approved on 26th March 1999, to
become effective from 1st April 1999. NTP-99 laid down a clear roadmap for future reforms,
contemplating the opening up of all the segments of the telecom sector for private sector participation. It
clearly recognized the need for strengthening the regulatory regime as well as restructuring the
departmental telecom services to that of a public sector corporation so as to separate the licensing and
policy functions of the Government from that of being an operator. It also recognized the need for
resolving the prevailing problems faced by the operators so as to restore their confidence and improve
the investment climate.
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Key features of the NTP 99 include:
· Strengthening of Regulator.
· National long distance services opened to private operators.
· International Long Distance Services opened to private sectors.
· Private telecom operators licensed on a revenue sharing basis, plus a one-time entry fee.
Resolution of problems of existing operators envisaged.
· Direct interconnectivity and sharing of network with other telecom operators within the service
area was permitted.
· Department of Telecommunication Services (DTS) corporatised in 2001.
· Spectrum Management made transparent and more efficient.
All the commitments made under NTP 99 have been fulfilled, each one of them, in letter and spirit,
some even ahead of schedule, and the reform process is now complete with all the sectors in
telecommunications opened for private competition.
3.1.3 National Long Distance
National Long Distance opened for private participation. The Government announced on 13.08.2000 the
guidelines for entry of private sector in National Long Distance Services without any restriction on the
number of operators. The DOT guidelines of license for the National Long Distance operations were
also issued.
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Highlights - NLD Guidelines
· Unlimited entry for carrying both inter-circle and intra-circle calls.
· Total foreign equity (including equity of NRIs and international funding agencies) must not
exceed 74%. Promoters must have a combined 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.
· Seven years time frame set for rollout of network, spread over four phases. Any shortfall in
network coverage would result in encashment and forfeiture of bank guarantee of that phase.
· Private operators to pay one-time entry fee of Rs.25 million plus a Financial Bank Guarantee
(FBG) of Rs.200 million. The revenue sharing agreement would be to the extent of 6%.
· Private operators allowed to set up landing facilities that access submarine cables and use
excess bandwidth available.
· Licence period would be for 20 years and extendable by 10 years.
3.1.4 International Long Distance
In the field of international telephony, India had agreed under the GATS to review its opening up in
2004. However, open competition in this sector was allowed with effect from April 2002 itself. There is
now no limit on the number of service providers in this sector. The licence for ILD service is issued
initially for a period of 20 years, with automatic extension of the licence by a period of 5 years. The
applicant company pays one-time non-refundable entry fee of Rs.25 million plus a bank guarantee of
Rs.250 million, which will be released on fulfillment of the roll out obligations. The annual licence fee
including USO contribution is @ 6% of the Adjusted Gross Revenue and the fee/royalty for the use of
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spectrum and possession of wireless telegraphy equipment are payable separately. At present 10 ILD
service providers (9 Private and 1 Public Sector Undertaking) are there. As per current roll out
obligations under ILD license, the licensee undertakes to fulfill the minimum network roll out
obligations for installing at least one Gateway Switch having appropriate interconnections with at least
one National Long Distance service licensee. There is no bar in setting up of Point of Presence (PoP) or
Gateway switches in remaining location of Level I Tax’s. Preferably, these PoPs should conform to
Open Network Architecture (ONA) i.e. should be based on internationally accepted standards to ensure
seamless working with other Carrier’s Network.
3.1.5 Universal Service Obligation Fund
Another major step was to set up the Universal Service Obligation Fund with effect from April 1, 2002.
An administrator was appointed for this purpose. Subsequently, the Indian Telegraph (Amendment) Act,
2003 giving statutory status to the Universal Service Obligation Fund (USOF) was passed by both
Houses of Parliament in December 2003. The Fund is to be utilized exclusively for meeting the
Universal Service Obligation and the balance to the credit of the Fund will not lapse at the end of the
financial year. Credits to the Fund shall be through Parliamentary approvals. The Rules for
administration of the Fund known as Indian Telegraph (Amendment) Rules, 2004 were notified on
26.03.2004.
The resources for implementation of USO are raised through a Universal Service Levy (USL) which has
presently been fixed at 5% of the Adjusted Gross Revenue (AGR) of all Telecom Service Providers
except the pure value added service providers like Internet, Voice Mail, E-Mail service providers etc. In
addition, the Central Govt. may also give grants and loans. An Ordinance was promulgated on
30.10.2006 as the Indian Telegraph (Amendment) Ordinance 2006 to amend the Indian Telegraph Act,
1885 in order to enable support for mobile services and broadband connectivity in rural and remote areas
of the country. Subsequently, an Act has been passed on 29.12.2006 as the Indian Telegraph
(Amendment) Act 2006 to amend the Indian Telegraph Act, 1885.
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3.1.6 Unified Access Services
Unified access license regime was introduced in November’2003. Unified Access Services operators
are free to provide, within their area of operation, services, which cover collection, carriage,
transmission and delivery of voice and/or non-voice messages over Licensee’s network by deploying
circuit, and/or packet switched equipment. Further, the Licensee can also provide Voice Mail, Audiotex
services, Video Conferencing, Videotex, E-Mail, Closed User Group (CUG) as Value Added Services
over its network to the subscribers falling within its service area on non-discriminatory basis. The
country is divided into 23 Service Areas consisting of 19 Telecom Circle and 4 Metro Service Areas for
providing Unified Access Services (UAS). The licence for Unified Access Services is issued on non-
exclusive basis, for a period of 20 years, extendable by 10 years at one time within the territorial
jurisdiction of a licensed Service Area. The licence Fee is 10%, 8% & 6% of Adjusted Gross Revenue
(AGR) for Metro and Category `A’, Category `B’ and Category `C’ Service Areas, respectively. Revenue
and the fee/royalty for the use of spectrum and possession of wireless telegraphy equipment are payable
separately. The frequencies are assigned by WPC wing of the Department of Telecommunications from
the frequency bands earmarked in the applicable National Frequency Allocation Plan and in
coordination with various users subject to availability of scarce spectrum. At present 3 to 6 service
providers (2-5 Private and 1 Public Sector Undertaking) are there in most of the service areas.
3.1.7 Internet Service Providers (ISPs)

Internet service was opened for private participation in 1998 with a view to encourage growth of Internet
and increase its penetration. The sector has seen tremendous technological advancement for a period of
time and has necessitated taking steps to facilitate technological ingenuity and provision of various
services. The Government in the public interest in general, and consumer interest in particular, and for
proper conduct of telegraph and telecom services has decided to issue the new guidelines for grant of
license of Internet services on non-exclusive basis. Any Indian company with a maximum foreign equity
of 74% is eligible for grant of license.
3.1.8 Interconnection Usage Charges
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In January 2003, TRAI notified the Interconnection Usage Charges (IUC) Regulation, 2003 and issued
the same in October 2003, which covered arrangements amongst service providers for payment of IUC,
covering Basic Services, including Wireless-in-Local Loop (Mobile), Cellular Mobile Services, National
Long Distance (NLD) and International Long Distance (ILD) services. This regulation provided for
charges payable by one operator to another for origination, transit and termination of calls in a multi-
operator environment. It came into force with effect from 1 February 2004. The main features of the new
IUC regime were lower Access Deficit Charges (ADC), uniform termination charges of Rs 0.30 per
minute irrespective of the terminating network, reduction of ADC on NLD and ILD calls, all of which
resulted in lower tariff environment on voice telephony.
3.1.9 Broadband Policy 2004
Recognizing the potential of ubiquitous Broadband service in growth of GDP and enhancement in
quality of life through societal applications including tele-education, tele-medicine, e-governance,
entertainment as well as employment generation by way of high-speed access to information and web
based communication; Government has announced Broadband Policy in October 2004. The main
emphasis is on the creation of infrastructure through various technologies that can contribute to the
growth of broadband services. These technologies include optical fibre, Asymmetric Digital Subscriber
Lines (ADSL), cable TV network; DTH etc. Broadband connectivity has been defined as “ Always On”
with the minimum speed of 256 kbps. It is estimated that the number of broadband subscribers would be
9 million by 2007 and 20 million by 2010. With a view to encourage Broadband Connectivity, both
outdoor and indoor usage of low power Wi-Fi and Wi-Max systems in 2.4 GHz-2.4835 GHz band has
been delicensed. The use of low power indoor systems in 5.15-5.35 GHz and 5.725-5.875 GHz bands
has also been delicensed in January 05. The SACFA/WPC clearance has been simplified. The setting
up of National Internet Exchange of India (NIXI) would enable bringing down the international
bandwidth cost substantially, thus making the broadband connectivity more affordable.
21
The prime consideration guiding the Policy includes affordability and reliability of Broadband services,
incentives for creation of additional infrastructure, employment opportunities, induction of latest
technologies, national security and bring in competitive environment so as to reduce regulatory
interventions.
By this new policy, the Government intends to make available transponder capacity for VSAT services at
competitive rates after taking into consideration the security requirements. The service providers
permitted to enter into franchisee agreement with cable TV network operators. However, the Licensee
shall be responsible for compliance of the terms and conditions of the licence. Further in the case of
DTH services, the service providers permitted to provide Receive-Only-Internet Service. The role of
other facilitators such as electricity authorities, Departments of ITs of various State Governments,
Departments of Local Self Governments, Panchayats, Departments of Health and Family Welfare,
Departments of Education is very important to carry the advantage of broadband services to the users
particularly in rural areas.
The Year 2007 was declared the year of broadband. Target has been set for 20 million broadband
connections by 2010 and providing Broadband connectivity to all secondary and higher secondary
schools, public health institutions and panchayats by 2008.
In rural areas, connectivity of 512 KBPS with ADSL 2 plus technology (on wire) will be provided from
about 20,000 existing exchanges in rural areas having optical fibre connectivity. Community Service
Centres, secondary schools, banks, health centres, Panchayats, police stations etc. can be provided with
this connectivity in the vicinity of above-mentioned 20,000 exchanges in rural areas. DOT will be
subsidizing the infrastructure cost of Broadband network through support from USO Fund to ensure that
Broadband services are available to users at affordable tariffs.
22
3.1.10 Tariff Changes
The Indian Telecom Sector has witnessed major changes in the tariff structure. The Telecommunication
Tariff Order (TTO) 1999, issued by regulator (TRAI), had begun the process of tariff balancing with a
view to bring them closer to the costs. This supplemented by Calling Party Pay (CPP), reduction in ADC
and the increased competition, has resulted in a dramatic fall in the tariffs.
· The peak National Long Distance tariff for above 1000 Kms. in 2000 has come down from US$
0.67 per minute to US$ 0.02 per minute in 2006.
· The International Long Distance tariff from US$ 1.36 per minute in 2000 to US$ 0.16 per minute in
2004 for USA, Canada & UK.
· The mobile tariff for local calls has reduced from US$0.36 per minute in 1999 to US$ 0.009 - US$
0.04 per minute in 2006.
· The Average Revenue Per User of mobile is between US$ 5.06 - US$ 7.82 per month
23
3.1.11 Foreign Direct Investment (FDI)
In Basic, Cellular Mobile, Paging and Value Added Service, and Global Mobile Personal
Communications by Satellite, Composite FDI permitted is 74% (49% under automatic route) subject to
grant of license from Department of Telecommunications and adherence by the companies (who are
investing and the companies in which investment is being made) to the license conditions for foreign
equity cap and lock in period for transfer and addition of equity and other license provision. (Press Note
3(2007))
Foreign direct investment upto 74% permitted, subject to licensing and security requirements for the
following: -
· Radio Paging Service
FDI upto 100% permitted in respect of the following telecom services: -
· Infrastructure Providers providing dark fibre (IP Category I);
· Electronic Mail; and
· Voice Mail
The above would be subject to the following conditions: -
· FDI upto 100% is allowed subject to the conditions that such companies would divest 26% of their
equity in favor of Indian public in 5 years, if these companies were listed in other parts of the world.
· The above services would be subject to licensing and security requirements, wherever required.
· Proposals for FDI beyond 49% shall be considered by FIPB on case-to-case basis.
In manufacturing sector 100% FDI is permitted under automatic route.
24
3.1.12 Investment Opportunities and Incentives
An attractive trade and investment policy and lucrative incentives for foreign collaborations have made
India one of the world’s most attractive markets for the telecom equipment suppliers and service
providers.
· No industrial license required for setting up manufacturing units for telecom equipment.
· Automatic approval of 100 percent foreign equity, technology fee up to US $ 2 million, royalty
up to 5 percent for domestic sales and 8 percent for exports in telecom manufacturing projects.
· Foreign equity of 74%(49 % under automatic route) permitted for telecom services - basic,
cellular mobile, paging, value added services - and global mobile personal communications by
satellite.
· Telecom services projects extended a number of incentives:
· Amortization of license fee
· Tax holiday
· Enhanced limit of external commercial borrowings
· Rebate on subscription to shares/debentures.
· Scope for tax exemption on financing through venture capital
· Concessional import duties for import of equipment by telecom service projects (including cellular,
basic, internet etc.)
· Full repatriability of dividend income and capital invested in the telecom sector.
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3.1.13 Network Expansion
The telecom sector has shown robust growth during the past few years. It has also undergone a
substantial change in terms of mobile versus fixed phones and public versus private participation. The
following table shows the growth trend of telecom sector from last five years:
The number of telephones has increased from 54.63 million as on 31.03.2003 to 353.66 million as on
30.09.2008. Wireless subscribers increased from 13.3 million as on 31.03.2003 to 315.31million as on
30.09.2008. Whereas, the fixed line subscribers decreased from 41.33 million in 31.03.2003 to 38.35
million in 30.09.2008. The broadband subscribers grew from a meager 0.18 million to 4.91 million
during the last 4 years.
3.1.14 Trend in Tele-density
Tele-density in the country increased from 5.11% in 2003 to 30.64 % in September 2008 i.e. an
incremental growth of 34.15 % during last 5 years (about 7% per annum). In the rural area teledensity
increased from 1.49% in Mar 2003 to approx. 11.5% in September 2008 and in the urban areas it is
increased from 14.32% in Mar 2003 to 75.76% in september 2008.This indicates a rising trend of Indian
telecom subscribers.
3.1.15 Rural Telephony
Apart from the 76.65 million fixed and WLL connections (as on Sep. 2008) provided in the rural areas,
551064 VPTs have been provided. Thus, 92% of the villages in India have been covered by the VPTs.
More than 2 lakh PCOs are also providing community access in the rural areas. Further, Mobile Gramin
Sanchar Sewak Scheme (GSS) – a mobile Public Call Office (PCO) service is provided at the doorstep
of villagers. At present, 2772 GSSs are covering 12043 villages. Also, to provide Internet service,
Sanchar Dhabas (Internet Kiosks) have been provided in more than 3500 Block Headquarters out of the
total 6337 Blocks in the country. The target of 80 million rural connection by 2010 will be met during
26
year 2008 itself. USO subsidy support scheme is also being utilized for sharing wireless infrastructure in
rural areas with about 18,000 towers by 2010.
3.1.16 Opportunities
India offers an unprecedented opportunity for telecom service operators, infrastructure vendors,
manufacturers and associated services companies. A host of factors are contributing to enlarged
opportunities for growth and investment in telecom sector:
· An expanding Indian economy with increased focus on the services sector
· Population mix moving favorably towards a younger age profile
· Urbanization with increasing incomes
Investors can look to capture the gains of the Indian telecom boom and diversify their operations outside
developed economies that are marked by saturated telecom markets and lower GDP growth rates.
Inflow of FDI into India’s telecom sector during Jan 1991 to August 2008 was about Rs 233,344
million. Also, more than 6 per cent of the approved FDI in the country is related to the telecom sector.
3.1.17 Research & Development
27
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. 3G and Broadband Wireless Access(BWA)
policies has since been issued. 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 Centres 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 country’s security.
· 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
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3.2 Targets Set By The Government
3.2.1 Network expansion
· 500 million connections by the year 2010.
· Provision of mobile coverage of 90% geographical area by 2010.
3.2.2 Rural telephony
· One phone per two rural households by 2010 (about 80 million rural connections).
· Reduce urban-rural digital divide from present 25:1 to 5:1 by 2010.
3.2.3 Broadband
· Broadband with minimum speed of 1 mbps.
· Broadband coverage for all secondary & higher secondary schools and public health care
centres by the end of year 2008.
· Broadband coverage for all Gram panchayats by the year 2010
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3.2.4 Infrastructure Sharing
· USO subsidy support scheme for shared wireless infrastructure in rural areas with about 18,000
towers by 2010.
· Increase sharing in urban areas to 70% by 2010.
3.2.5 Introduction of Spread of IPTV and Mobile TV
· IPTV in 600 towns by 2010.
3.2.6 Manufacturing
· Making India a hub for telecom manufacturing by facilitating more and more telecom specific
SEZs.
· Quadrupling production in 2010.
· Achieving exports of 6 times from present level of 0.5 billion in 2010.
3.2.7 Research & Development
· Pre-eminence of India as a technology solution provider.
· Comprehensive security infrastructure for telecom network.
· Tested infrastructure for enabling interoperability in Next Generation Network.
· Doubling the telecom equipment R&D by 2010 from present level of 15%.
3.2.8 International Bandwidth
30
· Facilitating availability of adequate international bandwidth at competitive prices to drive ITES

sector at faster growth.
3.3 Indian Telecommunications at a glance

(As on 30th September 2008)
Rank in world in network size 3rd

Tele–density (per hundred populations) 30.64
Telephone connection (In million)
Fixed 38.35
Mobile 315.31
Total 353.66
Village Public Telephones 5.6 lakh
Foreign Direct Investment (in million) (from 182042
January 2000 till August 2008) million
Licenses issued
Basic 2
CMTS 60
UAS 224
Infrastructure Provider I 177
ISP (Internet) 382
ISP with Telephony (Broadband) 125
31
National Long distance 24

International Long Distance 19
3.4 Bharat Nirman
A time-bound plan for rural infrastructure by the Government of India in partnership with State
Governments and Panchayat Raj Institutions 2005-2009.
“Bharat Nirman will be a time-bound business plan for action in rural infrastructure for the next four
years. Under Bharat Nirman, action is proposed in the areas of irrigation, road, rural housing, rural
water supply, rural electrification and rural telecommunication connectivity. We have set specific
targets to be achieved under each of these goals so that there is accountability in the progress of this
initiative.”
- Dr. Manmohan Singh

Prime Minister
Goal: Every village to be connected by telephone: remaining 66,822 villages to be covered by

November 2007
The Department of Telecom in the Ministry of Communications and Information Technology has the
responsibility of providing telephone connectivity to the 66,822 villages that remain to be covered.
3.4.1 Funds
The resources for implementation of universal services obligation are raised through a Universal Service
Levy which has presently been fixed at 5% of the adjusted gross revenue of all telecom service
providers except the pure value added service providers like internet, voice mail, e-mail service
providers.
The rules also make a provision for the Central Government to give grants and loans to the Fund. The
balance to the credit of the Fund does not lapse at the end of the financial year. USO Fund assigns the
task of providing VPTs on the basis of bids through open tender and in this case the work has been
assigned to Bharat Sanchar Nigam Ltd. Out of the 66,822 villages identified, connectivity in 14,183
remote and far-flung villages will be provided through digital satellite phone terminals. From the USOF,
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assistance is provided for both capital expenditure as well as operational expenditure. It is estimated that
a total sum of Rs.451 crore would be required to provide VPTs in these 66,822 villages and the entire
sum will be met out of USOF and no separate allocation from Government would be required.
3.4.2 Additional Incentives
Telecom service providers are being assisted through the USOF to penetrate into the rural areas for
the following activities:
- Maintenance of existing village public telephones (VPTs).
- Provision of an additional rural community phone in villages with a population of more than
two thousand and where no public call office exists.
- Replacement of village public telephones installed on Multi Access Radio Relay (MARR)
technology.
- Telephone lines installed in household in specified rural areas.
3.4.3 Increasing Rural Teledensity
Rural teledensity will be significiantly enhanced during the period of Bharat Nirman.
3.4.4 Knowledge Connectivity
The Government is committed to expanding rural connectivity through a slew of measures so that rural
users can access information of value and transact business. This will include connecting block
headquarters with fibre optic network, using wireless technology to achieve last mile connectivity and
operating information kiosks through a partnership of citizens, panchayats, civil society organizations,
the private sector and Government.
33
Unit-4 Institutional History Of The Telecom sector in India
The telegraph act of 1885 governed the telecommunications sector. Under this act, the government was
in-charge of policymaking and provision of services . Major changes in telecommunications in India
began in the 1980s. Under the Seventh Plan (1985-90), 3.6 percent of total outlay was set aside for
communications and since 1991, more than 5.5 percent is spent on it (Figure 1). The initial phase of
telecom reforms began in 1984 with the creation of Center for Department of Telematics (C-DOT) for
developing indigenous technologies and private manufacturing of customer premise equipment. Soon
after, the Mahanagar Telephone Nigam Limited (MTNL) and Videsh Sanchar Nigam Limited (VSNL)
were set up in 1986. The Telecom Commission was established in 1989.
When telecom reforms were initiated in 1994, there were three incumbents in the fixed service sector,
namely DoT (Department of Telecom), MTNL and VSNL. Of these, DoT operated in all parts of the
country except Delhi and Mumbai. MTNL operated in Delhi and Mumbai and VSNL provided
international telephony.
Given its all-India presence and policy-making powers, the DoT enjoyed a monopoly in the telecom
sector prior to the major telecom reforms. However, subsequent to the second phase of reforms in 1999,
which included restructuring the DoT to ensure a level playing field among private operators and the
incumbent, the service-providing sector of DoT was split up and called Department of Telecom Services
(DTS). DTS was later corporatized and renamed Bharat Sanchar Nigam Limited (BSNL). This meant
separation of the incumbent service provider from the policy-maker. Broadly, DoT is now responsible
for policy-making, licensing and promotion of private investments in both telecom equipment and
manufacture and provision of telecom services. BSNL, a corporate body, is responsible for the provision
of services.
A crucial aspect of the institutional reform of the Indian telecom sector was setting up of an independent
regulatory body in 1997 – the Telecom Regulatory Authority of India (TRAI), to assure investors that
the sector would be regulated in a balanced and fair manner. TRAI has been vested with powers to
34
ensure its independence from the government. The government has retained the licensing function with
itself. The main issue with respect to licensing has not been whether it should be with the regulator but
that the terms and conditions of licensing should involve consultations with TRAI to ensure
transparency in the bidding process Some of the main functions of TRAI include fixing tariffs for
telecom services, dispute-settlement between service providers, protecting consumers through
monitoring of service quality and ensuring compliance to license conditions, setting service targets and
pricing policy for all operators and service providers.
Further changes in the regulatory system took place with the TRAI Act of 2000 that aimed at restoring
functional clarity and improving regulatory quality. TRAI can frame regulations and can levy fees and
charges for telecom services as deemed necessary. The regulatory body also has a separate fund (called
the TRAI General Fund) to facilitate its functioning. To fairly adjudicate any dispute between licensor
and licensee, between service provider, between service provider and a group of consumers, a separate
disputes settlement body was set up called Telecom Disputes Settlement and Appellate Tribunal
(TDSAT).
Telecommunications is the transmission of data and information between computers using a

communications link such as a standard telephone line. Typically, a basic telecommunications system
would consist of a computer or terminal on each end, communication equipment for sending and
receiving data, and a communication channel connecting the two users. Appropriate communications
software is also necessary to manage the transmission of data between computers. Some applications
that rely on this communications technology include the following:
Electronic mail (e-mail) is a message transmitted from one person to another through computerized
channels. Both the sender and receiver must have access to on-line services if they are not connected to
the same network. E-mail is now one of the most frequently used types of telecommunication.
Facsimile (fax) equipment transmits a digitized exact image of a document over telephone lines. At the
receiving end, the fax machine converts the digitized data back into its original form.
Voice mail is similar to an answering machine in that it permits a caller to leave a voice message in a
voice mailbox. Messages are digitized so the caller's message can be stored on a disk.
Videoconferencing involves the use of computers, television cameras, and communications software and
equipment. This equipment makes it possible to conduct electronic meetings while the participants are at
different locations.
The Internet is a continuously evolving global network of computer networks that facilitates access to
information on thousands of topics. The Internet is utilized by millions of people daily.
35
Actually, telecommunications is not a new concept. It began in the mid-1800s with the telegraph,
whereby sounds were translated manually into words; then the telephone, developed in 1876,
transmitted voices; and then the teletypewriter, developed in the early 1900s, was able to transmit the
written word.
Since the 1960s, telecommunications development has been rapid and wide reaching. The development
of dial modem technology accelerated the rate during the 1980s. Facsimile transmission also enjoyed
rapid growth during this time. The 1990s have seen the greatest advancement in telecommunications. It
is predicted that computing performance will double every eighteen months. In addition, it has been
estimated that the power of the computer has doubled thirty-two times since World War II (With row,
1997). The rate of advancement in computer technology shows no signs of slowing. To illustrate the
computer's rapid growth, Ronald Brown, former U.S. secretary of commerce, reported that only fifty
thousand computers existed in the world in 1975, whereas, by 1995, it was estimated that more than fifty
thousand computers were sold every ten hours (U.S. Department of Commerce, 1995).
Deregulation and new technology have created increased competition and widened the range of network
services available throughout the world. This increase in telecommunication capabilities allows
businesses to benefit from the information revolution in numerous ways, such as streamlining their
inventories, increasing productivity, and identifying new markets. In the following sections, the
technology of modern telecommunications will be discussed.
4.1 Progress of reforms
4.1.1 Private Participation in Telecom
For the provision of basic services, the entire country was divided into 21 telecom circles, excluding
Delhi and Mumbai (Singh et. al. 1999). With telecom markets opened to competition, DoT and MTNL
were joined by private operators but not in all parts of the country. By mid-2001, all six of the private
operators in the basic segment had started operating (Table 1).
After a recent licensing exercise in 2002, there exists competition in most service areas. However, the
market is still dominated by the incumbent. In December 2002, the private sector provided
approximately 10 million telephones in fixed, WLL (Wireless Local Loop) and cellular lines compared
to 0.88 million cellular lines in March 1998 (DoT Annual Report, 2002). 72 per cent of the total private
investment in telecom has been in cellular mobile services followed by 22 per cent in basic services.
After the recent changes, the stage is now set for greater competition in most service areas for cellular
mobile Over time, the rise in coverage of cellular mobile will imply increased competition even for the
basic service market because of competition among basic and cellular mobile services.
36
4.1.2 Teledensity and Village Public Phones (VPTs)
India's rapid population increase coupled with its progress in telecom provision has landed India's
telephone network in the sixth position in the world and second in Asia (ITU). The much publicized
statistic about telecom development in India is that in the last five years, the lines added for basic
services is 1.5 times those added in the last five decades! The annual growth rate for basic services has
been 22 percent and over 100 percent for internet and cellular services. As Dossani (2002) argues, the
comparison of teledensity of India with other regions of the world should be made keeping in mind the
affordability issues. Assuming households have a per capita income of $350 and are willing to spend 7
percent of that total income on communications, then only about 1.6 percent of households will be able
to afford $30 (for a $1000 investment per line).
Teledensity has risen to 4.9 phones per 100 persons in India compared to the average 7.3 mainlines per
100 people around the world. Figure 2 shows the growth rate of fixed and cellular mobile subscription
between 1998 and 2002. Although, the coverage is still much higher in urban areas - 13.7 in urban areas
compared to1.4 in rural areas, the government has made efforts to connect villages through village
public telephones (VPT) and Direct Exchange Lines (DEL). This coverage increased from 4.6 lakhs in
March 2002 to 5.10 lakhs in December 2002 for VPT and from 90.1 lakhs in March to 106.6 lakhs in
December 2002 for DELs. BSNL has been mainly responsible for providing VPTs; more than 84 percent
of the villages were connected by 503610 VPTs with private sector also providing 7123 VPTs .
The overall telecom growth rate is likely to be high for some years, given the increase in demand as
income levels rise and as the share of services in overall GDP increases. The growth rate will be even
higher due to the price decrease resulting from a reduction in cost of providing telecom services. A
noteworthy feature of the growth rate is the rapid rate at which the subscriber base for cellular mobile
has increased in the last few years of the 1990s, which is not surprising in view of the relatively lower
subscriber base for cellular mobile.
4.1.3 Foreign Participation
India has opened its telecom sector to foreign investors up to 100 percent holding in manufacturing of
telecom equipment, internet services, and infrastructure providers (e-mail and voice mail), 74 percent in
radio-paging services, internet (international gateways) and 49 percent in national long distance, basic
telephone, cellular mobile, and other value added services (FICCI, 2003). Since 1991, foreign direct
investment (FDI) in the telecom sector is second only to power and oil - 858 FDI proposals were
received during 1991-2002 totaling Rs. 56,279 crores (Figure 4) (DoT Annual Report, 2002). Foreign
investors have been active participants in telecom reforms even though there was some frustration due to
initial dithering by the government. Until now, most of the FDI has come in the cellular mobile sector
partly due to the fact that there have been more cellular mobile operators than fixed service operators.
For instance, during the period 1991-2001, about 44 percent of the FDI was in cellular mobile and about
8 percent in basic service segment. This total FDI includes the categories of manufacturing and
consultancy and holding companies
37
4.1.4 Tariff-setting
An essential ingredient of the transition from a protected market to competition is the alignment of
tariffs to cost-recovery prices. In basic telecom for example, pricing of the kind that prevailed in India
prior to the reforms, led to a high degree of cross-subsidization and introduced inefficient decision-
making by both consumers and service-providers. Traditionally, DoT tariffs cross-subsidized the costs of
access (as reflected by rentals) with domestic and international long distance usage charges (Singh et. al.
1999). Therefore, re-balancing of tariffs - reducing tariffs that are above costs and increasing those
below costs - was an essential pre-condition to promoting competition among different service providers
and efficiency in general.
TRAI issued its first directive regarding tariff-setting following NTP 99 aimed at re-balancing tariffs and
to usher in an era of competitive service provision. Subsequently, it conducted periodic reviews and
made changes in the tariff levels, if necessary. Table 4 shows the current level of telephone charges in
India effective from January, 2003. Re-balancing led to a reduction in cross-subsidization in the fixed
service sector. Cost based pricing, a major departure from the pre-reform scenario, also provides a basis
for making subsidies more transparent and better targeted to specific social objectives, e.g. achieving the
USO.
4.1.5 Service Quality
One of the main reasons for encouraging private participation in the provision of infrastructure rests on
its ability to provide superior quality of service. In India, as in many developing countries, low
teledensity resulted in great emphasis being laid on rapid expansion often at the cost of quality of
service. One of the benefits expected from the private sector's entry into telecom is an improvement in
the quality of service to international standards. Armed with financial and technical resources, and
greater incentive to make profits, private operators are expected to provide consumers value for their
money. Telephone faults per 100 main lines came down to 10.32 and 19.14 in Mumbai and Delhi
respectively in 2002-03 compared to 11.72 and 26.6 in 1997-98. Quality of service was identified as an
important reform agenda and TRAI has devised QOS (Quality of Service) norms that are applicable
across the board to all operators (Singh et. al. 1999).
4.2 Pre reform period and Telecommunication in India
Before 1990's Telecommunication services in India were complete government Monopoly - the
Department of Telecommunication (DoT). Government also retained the rights for manufacturing of
Telecommunication equipments. MTNL and VSNL were created in the year 1986.Early 1990's saw
38
initial attempts to attract private investment. Telecommunication equipment manufacturing was deli
censed in the year 1991.
A notable revolution has occurred in the telecom sector. In the pre reforms era, this was entirely in the
hands of the central government and due to lack of competition, the call charges were quite high.
Further, due to lack of funds with the government, the government could never meet the demand for
telephones. In fact, a person seeking a telephone connection had to wait for years before he could get a
telephone connection. The service rendered by the government monopoly was also very poor. Wrong
billing, telephones lying dead for many days continuously due to slackness on the part of the telecom
staff to attend to complaints, cross connections due to faulty / ill maintained telephone lines, obsolete
instruments and machinery in the telephone department were the order of the day in the pre reforms era.
Today, there are many players in the telecom sector. The ultimate beneficiary has been the consumer.
Prices of services in this sector have fallen drastically.
Telephone connections are today affordable to everyone and are also easily available. Gone are the days,
when one had to wait for years to get a telephone connection. The number of telephone connections
which was only 2.15 million (fixed lines) in 1981 increased to 5.07 million(fixed lines) in 1991. Today
(as in 2003), there are 54.62 million telephone connections of which 41.33 million are fixed line
telephone connections, 12.69 million are cellular mobiles and the remaining 0.60 million are WLL
telephones1. Wireless in Local Loop (WLL) telephones and cellular mobile telephones were unknown in
India a few years ago. Cell phones charges have come down so much that today one can see even a
common man going around with a cell phone in his hand. The private companies are giving various
incentives to attract customers, a situation which is entirely opposite to the conditions prevailing in the
pre reforms era when one had to wait for years to get a telephone connection.
The first step toward deregulation and beginning of liberalization and private sector participation was
the announcement of National Telecom Policy 1994.NTP 1994 , for the first time, allowed
private/foreign players to enter the 'basic' and the 'new cellular mobile section. FDI up to 49% of total
equity was also allowed in these sectors. The policy allowed one private service provider to compete in
basic services with the incumbent DoT in each DoT internal circle. It allowed duopoly in cellular mobile
services in each circle. As part of the implementation of the NTP 94, licenses were issued against license
fees through a bidding process. This policy initiated the setting up of an independent regulator–the
Telecom Regulatory Authority of India (TRAI), which was established in 1997. The main objective of
TRAI is to provide an effective regulatory framework to ensure fair competition while, at the same time,
protect the interest of the consumers.
39
4.3 Liberalization and reforms in Telecom sector since early 1990's
4.3.1 1991-92:
1. On 24th July 1991, Government announced the New Economic Policy.
2. Telecom Manufacturing Equipment license was delicensed in 1991.
3. Automatic foreign collaboration was permitted with 51 per cent equity by the collaborator.
4.3.2 1992-93:
Value added services were opened for private and foreign players on franchise or license basis. These
included cellular mobile phones, radio paging, electronic mail, voice mail, audiotex services, videotex
services, data services using VSAT's, and video conferencing.
4.3.3 1994-95:
1. The Government announced a National Telecom Policy 1994 in September 1994. It opened basic
telecom services to private participation including foreign investments.
2. Foreign equity participation up to 49 per cent was allowed in basic telecom services, radio paging and
cellular mobile. For value added services the foreign equity cap was fixed at 51 per cent.
3. Eight cellular licensees for four metros were finalized.
4.3.4 1996-97:
1. TRAI was set up as an autonomous body to separate the regulatory functions from policy
formulations and operational functions.
2. Coverage of the term "infrastructure" expanded to include telecom to enable the sector to avail of
fiscal incentives such as tax holiday and concessional duties.
40
3. An agreement between Department of Telecommunication (DoT) and financial institutions to

facilitate funding of cellular and basic telecom projects.
4. External Commercial Borrowing (ECB) limits on telecom projects made flexible with an increased
share from 35 per cent to 50 per cent of total project cost.
5. Internet Policy was finalized.
4.3.5 1998-99:
FDI up to 49 per cent of total equity, subject to license, permitted in companies providing Global Mobile
Personal Communication (GMPC) by satellite services.
4.3.6 1999-00:
1. National Telecom Policy 1999 was announced which allowed multiple fixed Services operators and
opened long distance services to private operators.
2. TRAI reconstituted: clear distinction was made between the recommendatory and regulatory functions
of the Authority.
3. DOT/MTNL was permitted to start cellular mobile telephone service.
4. To separate service providing functions from policy and licensing functions, Department of Telecom
Services was set up.
5. A package for migration from fixed license fee to revenue sharing offered to existing cellular and
basic service providers.
6. First phase of re-balancing of tariff structure started. STD and ISD charges were reduced by 23 per
cent on an average.
7. Voice and data segment was opened to full competition and foreign ownership increased to 100 per
cent from 49 per cent previously.
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4.3.7 2000-01:
1. TRAI Act was amended. The Amendment clarified and strengthened the recommendatory power of
TRAI, especially with respect to the need and timing of introduction of new services provider, and in
terms of licenses to a services provider.
2. Department of Telecom Services and Department of Telecom operations corporatized by creating

Bharat Sanchar Nigam Limited.
3. Domestic long distance services opened up without any restriction on the number of operators.
4. Second phase of tariff rationalization started with further reductions in the long distance STD rates by
an average of 13 per cent for different distance slabs and ISD rates by 17 per cent.
5. Internet Service Providers were given approval for setting up of International Gateways for Internet
using satellite as a medium in March 2000.
6. In August 2000, private players were allowed to set up international gateways via the submarine cable
route.
7. The termination of monopoly of VSNL in International Long Distance services was antedated to
March 31, 2002 from March 31, 2004.
4.3.8 2001-02:
1. Communication Convergence Bill, 2001 was introduced in August 2001.
2. Competition was introduced in all services segments. TRAI recommended opening up of market to
full competition and introduction of new services in the telecom sector. The licensing terms and
conditions for Cellular Mobile were simplified to encourage entry for operators in areas without
effective competition.
3. Usage of Voice over Internet Protocol permitted for international telephony service.
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4. The five-year tax holiday and 30 per cent deduction for the next five years available to the
telecommunication sector till 31st March 2000 was reintroduced for the units commencing their
operations on or before 31st March 2003. These concessions were also extended to internet services
providers and broadband networks.
5. Thirteen ISP's were given clearance for commissioning of international gateways for Internet using
satellite medium for 29 gateways.
6. License conditions for Global Mobile Personal Communications by Satellite finalized in November
2001.
7. National Long Distance Service was opened up for unrestricted entry with the announcement of
guidelines for licensing NLD operators. Four companies were issued Letter of Intent (LOI) for National
Long Distance Service of which three licenses have been signed.
8. The basic services were also opened up for competition. 33 Basic Service licenses (31 private and one
each to MTNL and BSNL) were issued up to 31stDecember 2001.
9. Four cellular operators, one each in four metros and thirteen were permitted with 17 fresh licenses
issued to private companies in September/October 2001. The cell phone providers were given freedom
to provide, within their area of operation, all types of mobile services equipment, including circuit
and/or package switches that meet the relevant International Telecommunication Union (ITU)/ Telecom
Engineering Centre (TEC) standards.
10. Wireless in Local Loop (WLL) was introduced for providing telephone connection in urban, semi-
urban and rural areas.
11. Disinvestment of PSU's in the telecom sector was also undertaken during the year. In February 2002,
the disinvestment of VSNL was completed by bringing down the government equity to 26 per cent and
the management of the company was transferred to Tata Group, a strategic partner. During the year, HTL
was also disinvested.
12. Government allowed CDMA technology to enter the Indian market.
43
13. Reliance, MTNL and Tata were issued licenses to provide the CDMA based services in the country.
14. TRAI recommended deregulating regulatory intervention in cellular tariffs, which meant that
operators need no longer have prior approval of the regulator for implementing tariff plans except under
certain conditions.
4.3.9 2002-03
1. International long distance business opened for unrestricted entry.
2. Telephony on internet permitted in April 2002.
3. TRAI finalized the System of Accounting Separation (SAS) providing detailed accounting and
financial system to be maintained by telecom service providers.
4.3.10 2003-04
1. Unified Access Service Licenses regime for basic and cellular services was introduced in October
2003. This regime enabled services providers to offer fixed and mobile services under one license.
Consequently 27 licenses out of 31 licenses converted to Unified Access Service Licenses.
2. Interconnection Usage Charge regime was introduced with the view of providing termination charge
for cellular services and enable introduction of Calling Party Pays regime in voice telephony segment.
3. The Telecommunication Interconnection Usage Charges Regulation 2003 was introduced on 29th
October 2003 which covered arrangements among service providers for payment of Interconnection
Usage Charges for Telecommunication Services and covered Basic Service that includes WLL (M)
services, Cellular Mobile Services, and Long Distance Services (STD/ISD) throughout the territory of
India
4. The Universal Service Obligation fund was introduced as a mechanism for transparent cross
subsidization of universal access in telecom sector. The fund was to be collected through a 5 per cent
levy on the adjusted gross revenue of all telecom operators.
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5. Broadcasting notified as Telecommunication services under Section 2(i)(k) of TRAI Act.
4.3.11 2004-05
1. Budget 2004-05 proposed to lift the ceiling from the existing 49 per cent to 74 per cent as an incentive
to the cellular operators to fall in line with the new unified licensing norm.
2. 'Last Mile' linkages permitted in April 2004 within the local area for ISP's for establishing their own
last mile to their customers.
3. Indoor use of low power equipments in 2.4 GHz band de-licensed from August 2004.
4. Broadband Policy announced on 14th October 2004. In this policy, broadband had been defined as an
"always-on" data connection supporting interactive services including internet access with minimum
download speed of 256 kbps per subscriber.
5. The Telecommunications (Broadcasting and Cable Services) Interconnection Regulation 2004 was
introduced on 10th December 2004.
6. BSNL and MTNL launched broadband services on 14th January 2005.
7. TRAI announced the reduction of Access Deficit Charge (ADC) by 41 per cent on ISD calls and by
61 per cent on STD calls which were applicable from 1st February 2005.
4.3.12 2005-2006
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1. Budget 2005-2006 cleared a hike in FDI ceiling to 74 per cent from the earlier limit of 49 per cent.
100 per cent FDI was permitted in the area of telecom equipment manufacturing and provision of IT
enabled services.
2. Annual license fee for National Long Distance (NLD) as well as International Long Distance (ILD)
licenses reduced to 6 per cent of Adjusted Gross Revenue (AGR) with effect from 1st January 2006.
3. BSNL and MTNL launched the 'One-India Plan' with effect from 1st March 2006 which enable the
customers of BSNL and MTNL to call from one end of India to other at the cost of Rs. 1 per minute, any
time of the day to phone.
4. TRAI fixed Ceiling Tariff for International Bandwidth, Ceiling Tariff for higher capacities reduced by
about 70 per cent and for lower capacity by 35 per cent.
5. Regulation on Quality of Service of Basic and Cellular Mobile Telephone Services 2005 introduced
on 1st July 2005.
6. BSNL announced 33 per cent reduction in call charges for all the countries for international calls.
7. Quality of Service (Code of Practice for Metering and Billing Accuracy) Regulation 2006 introduced
on 21st March 2006.
4.3.13 11th plan (2007-20012)
FDI in Telecom sector has increased in recent years with value of 81.62 billion with share of 10% in
total inflow during January 2000 to June 2005. This is mainly in telecom services and not in telecom
manufacturing sector. Therefore, it is essential to enhance the prospect for inflow of increased funds.
The NTP 1999 sought to promote exports of telecom equipments and services. But till date export of
telecom equipment remains minimal. Most of the state-of-the-art telecom equipments including mobile
phones are imported from abroad. There is thus immense potential for indigenous manufacturing in
India. Certain measures like financial packages, formation of a telecom export promotion council,
46
creation of integrated facilities for telecom equipment through SEZ and encouraging overseas vendors to
set up facilities in India, are required for making India a hub for telecom equipment manufacturing and
attract FDI. The telecom sector has shown robust growth during the past few years. It has also
undergone a substantial change in terms of mobile versus fixed phones and public versus private
participation.
Unit-5 Why Telecom Investment and Expansion??..
Globalization is a central driving force behind the rapid social, political and economic changes that are
reshaping modern society and world order (Dunning & Hamdan, 1997). One of the key elements of
globalization is telecommunication. Telecommunication plays a central role in helping developing
countries participate in the global economy. Telecommunication is pervasive in all aspects of our lives,
from the stereo in your living room to the mobile phone you carry with you. These technological
innovations we have in our lives are often taken for granted and it is unfeasible for us to imagine how
we can function without them. In certain parts of the world these thing are unheard of and the people
who live there have not experienced the numerous benefits of modern telecommunications.
“Telecommunication maybe isn’t the highest priority for developing

countries. The main reason for this is that telecommunication competes with
food, housing, sanitation, health, transport and education. But it is
important to focus on telecommunication investments, because it improves
the other mentioned problems.”
(John Williamson, The Rural Telecom Dilemma)
5.1 Traditional methods of financing telecommunication in developing countries
Funds for the development of infrastructure projects are traditionally obtained from general taxation or
borrowed from multi-lateral and bilateral agencies (Merna & Njiru, 1998). The level of funding
provided from national budget financing will depend on the priorities of the national government and its
total tax resources. Due to low levels of public finance derived from general taxation, most developing
countries rely on borrowing from multi-lateral and bilateral agencies to finance infrastructure
developments. This has made most of the developing countries heavy with debt and is spending a large
portion of their small finances in meeting debt payments, thus making developing countries borrowing
to service debts and not financing infrastructure development projects. The level of finance available for
borrowing the traditional sources has reduced in the recent past (Merna & Njiru, 1998). When
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introducing telecommunication into a country, financing it from state funding is probably the easiest
method to use (ITU, 2002). Traditional methods of public financing and management of infrastructure
projects have failed to keep pace with the rising demand for infrastructure services in most developing
countries. The private sector has participated in infrastructure projects that are financed and managed by
the public sector as consultants and contractors during the implementation phase of infrastructure
development projects.
The main reasons to fund telecommunications infrastructure are the positive externalities that occur
from the services used (World Bank, 1998).
5.1.1 Direct economic benefits
Costs and time saved.

substituting more expensive means of communication and learning.
5.1.2 Social and economic as well as political benefits
Better provision of social services, e.g. education and health.

Decentralization and integration processes.
Integration and empowerment of communities.
Benefits from telecommunications infrastructure are several and can be grouped into three Categories:
1. Human welfare and economic development.
2. Reduction of poverty
3. Improvement of the environment.
Infrastructures such as telecommunications are a vital factor to the activities of households and to
economic production. Providing a service as telecommunications or other infrastructure service to meet
the demand of businesses, households and other users is one of the major challenges of economic
development
Infrastructure represents the wheels of economic activity. Infrastructure services are used in the
production process of nearly every sector. Users demand infrastructure services not only for direct
consumption but also for raising their productivity (Bond, 1997). Adequate quantity and reliability of
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infrastructure such as telecommunication are key factors in the ability to participate and compete in
international trade, even in traditional commodities
5.2 Investing in telecommunication projects – a multiplication effect?
One benefit from what the innovations bring to developing nations is the improvement of the overall
economy (Dunning & Hamdan, 1997). By encouraging the establishment of telecommunication
industries within their countries, not only is their GNP boosted from the production of higher value-
added goods, but also, the economy can progress to that which is predominantly characterized by
secondary or tertiary industries (Dunning & Hamdan, 1997). Should these industries flourish and even
expand, investments by large foreign corporations dealing in the modern communication technologies
may be expected as their confidence in the country's improving economy increase.
5.2.1 Macroeconomic Linkages between Infrastructure Reform and Poverty
Category Benefits Risks

Economic growth More private participation in If economic growth benefits
infrastructure may help growth, mostly the non poor, poverty
and may not be reduced by much and
thereby poverty reduction, by inequality may increase, with a
increasing productivity and possible reduction in social
easing access to capital markets. welfare. Infrastructure reform
In Latin America, a 1 % growth can contribute to broadly based
in per capita GDP leads to a growth.
reduction of the share of the poor
of close to half a percentage
point.
Employment If infrastructure reforms generate Reforms may generate layoffs
economic growth, there should and reductions in wages, at least
ultimately be some employment during the transition period. The
creation, but it may take time. negative impact of layoffs on
poverty can be mitigated through
49
severance packages and other

policies.
Public Expenditures Revenues from reforms (for The poor may be hurt by the
example, privatisation) and the reduction of public subsidies for
phasing out of subsidies generate infrastructure services (there may
fiscal space for other public be cuts in the subsidies for both
programs that may be better connections and consumption).
targeted and more pro-poor.
5.3 What is Information and Communications Technology?
Information and Communications Technology (ICT) is an umbrella term that includes any
communication device or application, encompassing: radio, television, cellular phones, computer and so
on, as well as the various services and applications associated with them, such as videoconferencing and
distance learning.
ICT’s are often spoken of in a particular context, such as ICT’s in education, health care, or libraries
(ITU, 2003). The Organization for Economic Co-operation and Development’s (OECD) definition
makes a distinction between the manufacturing and service dimensions of the ICT. In 1998 OECD
member countries agreed to define the ICT sector as a combination of manufacturing and services
industries that capture, transmit and display data and information electronically. The important factor in
this broad definition is that, as it breaks the traditional dichotomy between manufacturing and services,
activities producing and distributing ICT products can be found everywhere in the economy (OECD,
2002).
The definition OECD made, paves way for understanding the multi-dimensionality of the ICT and its
applicability in helping reduce poverty across various sectors (OECD, 2002). The manufacturing sector
of ICT hardware and software contributes to the economic growth and creates employment in countries
like China, Malaysia and Mexico.
India, on the other hand, has been a beneficiary of global software outsourcing, achieving spectacular
growth in this sector. India exports software to 95 countries around the world and serves as a major
outsourcing hub. The main market for the Indian software has been the USA, and to a lesser degree,
Europe. 185 of the Fortune 500 companies outsourced their software requirements in India alone. ICT
industry generated 7.7 billion USD in 1999 and creating over 180,000 jobs in India in 1998 (UNDP,
2001).
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Since these sectors rarely create direct employment for the very poor. There is no denying of the fact that
ICT has been recognized as an important tool for socioeconomic development. Socio-economic
development was earlier limited to providing services from top-down approaches to the communities
who are less privileged, poor and disadvantaged (Mahmud, 2002).
5.4 The digital divide
According to ITU (2002) the digital divide is a result of socio-economic disparities, and thus it is little
different from other income, health and education divides, linked to poverty. The digital divide, is
therefore often just a symptom of a much more profound and longstanding economic and social division
within and between societies, and which existed prior to the ICT revolution. Lack of information is one
of the major causes for this situation (Jaggi, 2003). Relevant and concerned information, which they
want to know, is missing. Hence, the gap between “information rich and information poor” community
is also increasing. The new millennium has ushered in a world of greater inter-connectivity, accelerating
the flow of free data and information, and shrinking time and national boundaries.
“The information and technology gap and related inequities between industrialized and developing
nations are widening: a new type of poverty -information poverty - looms. Most developing countries,
especially the least developed countries are not sharing in the communications revolution.”
(United Nations, 2000)
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53
54
55
56
57
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In the past, ICT was generally considered as a luxury and was not considered as a viable option for
development policy where other needs, such as building roads, hospitals and providing drinkable water,
etc. were considered more urgent (Pedrelli et al, 2001). However, the digital divide has today become
one of the most prominent considerations in the development divide, and the early judgment is no longer
sustainable, especially when considering the following points:
ICT provides exceptional opportunities to effectively fight against poverty in the developing countries:
for example, ICT can support the poor in business development, foster empowerment of the poor,
facilitate access to education and health, help improve the environment and prevent natural disasters.
Thanks to the huge amount of information easily accessible and hardly controllable by governmental
institutions, it strengthens democracy.
United Nations (UN) considers ICT a priority for the development of poor countries, and many
developing countries agree on the importance of the role that ICT can play in their development.
International initiatives are proliferating. The G8 Dot Force, the UN ICT Task Force and several other
initiatives are aimed at effectively promoting access to ICT in the developing countries.
Exclusion from ICT increases the divide between the developed and developing countries.
Unit-6 What is creative or innovative financing?
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When you are planning for a way to finance a project it is important to do a deep research of the
different specific factors that a country has, and then choose a financial way based on those
circumstances.
6.1 What is financial engineering?
financial engineering are divided in a public and a private sector. The public sector has four mechanisms
for participation and they are direct, indirect, equity and risk. The private sector has three mechanisms
for participation and they are debt, mezzanine and equity.
6.1.1 Public-private financial engineering
Financial
Engineering
Public Private
Direct Indirect Equity Risk Debt Mezzanine Equity
According to Gerald (1998) the word finance was introduced in 1960s. The term financial engineering is
even younger and was introduced during the 1980s. A factor that made it easier to start use financial
engineering was the introduction of computers and communication technology or also known as ICT’s.
This has lowered the costs and time spending in these operations.
Finnerty (1988) defines financial engineering as the development and creative application of financial
technology to solve financial problems and exploit financial opportunities.
”Financial engineering is the use of financial instruments to restructure an existing financial profile
into one having more desirable properties.”
Lawrence Galitz (1995)
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Financial engineering is about employing theoretical finance and computer modelling skills to make
pricing, hedging, trading and portfolio management decisions. When you are using derivative securities
and other methods, financial engineering aims to precisely control the financial risk that an entity takes
on. Methods can be employed to take on unlimited risks under certain events, or completely eliminate
other risks by utilizing combinations of derivative and other securities (Galitz, 1995).
Financial engineering are usually used in these areas:
Investment banking.
Corporate Strategic planning.
Risk management.
Primary and derivative securities valuation.
Swaps and derivatives trading or dealing.
Financial information systems management.
Portfolio management.
Securities trading.
Usually financial engineering are used to reduce the financial risk, a second thing is to restructure cash
flows for better financial management (Galitz, 1995).
Because financial engineering are used to finance projects it can be used to finance telecom projects
around the world, and especially in developing countries. This kind of infrastructure project is according
to Merna & Njiru (2002) important in these countries because they are in need for that.
Infrastructure projects in developing countries bring several improvements of the country, they lead to:
Human welfare and economic development.

Reduction of poverty.
The environment will be improved.
6.2 Financing Strategies
In this section we will present the different strategies involved when financing telecommunication
projects.
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6.2.1 Build-Operate-Transfer (BOT)
The build operate transfer system was according to Merna & Njiru (2002) introduced in the early 1980s
by Targut Ozal who was the Prime Minister in Turkey at that time. The BOT system has also been
referred to Ozal’s formula (Merna & Njiru, 2002). A normal BOT project last approximately 20-30
years.
BOT means that a consortium owns the project for a specific time period. In other words, a franchise is
received by a private entity from the public sector. This involves finance, design, construction, and
operates a facility for a specific period. While the project is operating it is allowed to charge users to
cover the investments. When the time period has exceeded, the ownership will be transferred back to the
public sector. The revenue from the project is used to cover the debts and provide return on equity.
6.2.2 Build-Transfer-Operate (BTO)
Menheere & Pollalis (1996) says that BOT are often used in projects that involve privatization or public
private partnership. BOT and BOO also have this characteristics, but in BTO the ownership of the
facility is directly transferred from the private party when the delivery is done.
According to Ernst & Ngoc-Nga Pham (1994), the completed BOT project is transferred to the
government. Then the government signs a contract with a private company to be able to operate the
facility. During this time the government receives a payment from the operator.
The BTO system was successfully used in Thailand, 1990, when they privatized parts of the telephone
system.
6.2.3 Build-Own-Operate (BOO)
As mentioned in BTO, BOO are used in projects that involve privatization or public private partnership.
When you are using the BOO system, the private party have the ownership of the facility during the
projects whole lifetime. Because the private party runs the facility they get return of their investments.
They are also allowed to sell the facility at any time, at market value. In short terms the private party
build, own and operate the facility.
6.2.4 Build-Lease-Transfer (BLT)
Ernst & Ngoc-Nga Pham (1994) tells that the completed facility is leased to the government agency
when you are using the BLT system. The roll that the government agency has is to assume the operating
risk. The government agency is also responsible that payments are done to the private sector, these
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payments provides a fixed rate of return on equity and amortising of debts. While using the BLT system
the government can shift the financial risk to the private sector.
6.2.5 Fiber-optic cable or satellite
ITU (2004-09-20) defines this strategy as through fiber-optic cable or satellite set up a
telecommunication network in developing countries. Some examples of this method are shown below.
Fiber-optic Link Across the Globe (FLAG)
FLAG cooperate with RASCOM (The Regional African Satellite Communication System) to ensure
connectivity to countries that are land-locked.
South African Far East (SAFE)
Through private financing a telecommunication network are planned to be set up in this area.
AFRILINK
This is a pan-African proposal to set up submarine cables through the entire continent’s coastline.
Project Oxygen
This is according to ITU maybe the most interested fiber-optic cable projects. This fiber-optic cable
network are planned to cover 90 % of the world’s international telecom traffic. This method is like cross
border initiatives, a method of financing telecommunication that will be covered later.
6.2.6 Privatization
According to Ferreira & Khatami (1996) the public ownership during 1970s and 1980s in developing
countries lead to economic instability and structural inefficiencies. When privatization was introduced in
late 1980s the economy has improved in these countries. For instance in Latvia the government sold 60
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% of the telecommunication to private companies, which lead to many bidders that wanted to invest in
the country’s telecommunication, for example Telia, Telekom Finland, France Telecom, Tele Danmark,
OTE (Greece) and Deutsche Telekom. (Ferreira & Khatami, 1996)
According to Merna & Njiru (2002) privatization is the most innovative way of financing infrastructure
projects. The definition of privatization is according to Gayle & Goodrich (1990):
“The process of reducing the roles of government while increasing those of the private sector activities
or asset ownership.”
Merna & Njiru (2002) also say that privatization should be preceded by liberalization because it will
help open up the market to international competition. The privatization shall then be followed by a
deregulation and the main purpose of this is that the privatized enterprises should face market forces.
The main benefits that a privatization results in are the following:
Increased quantity of production.
Improved quality of the output.
Reduced unit cost of production.
In longer terms, expanded opportunities for growth and employment.
Generation of new technologies.
Increased foreign investments.
6.2.7 Acronyms
Merna & Njiru (2002) describes a number of different acronyms that involves in different ways to
finance infrastructure projects, these are:
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BOD Build-operate-deliver
BOL Build-operate-lease.
BOOST Build-own-operate-subsidies-transfer.
BOOT Build-own-operate-transfer.
BRT Build-rent-transfer.
BCC Business-cooperation-contracts.
DBOM Design-build-operate-maintain.
DBFM Design-build-finance-maintain
DBFO Design-build-finance-operate
FBOOT Finance-build-own-operate-transfer.
ROL Refurbish-operate-lease.
ROT Rehabilitate-operate-transfer.
6.3 Financing ways
Here we will present the most common innovative ways to finance telecommunication projects.
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6.3.1 Leasing
According to Sigurd Hansson (1998) there are three different kinds of leasing:
1. Operational leasing – The company that lends out the material are responsible for reparations and
maintains. If new material or products are launched the company upgrade the system to these new
models.
2. Financial leasing – In this case a leasing company will be involved. The country that wants to set up a
telecommunication network in their country give monthly payments to the leasing company. The leasing
company then gives a payment to the supplier which sends the material for the telecommunication
network to the country.
3. The third way is when a sale of a service happens in the same time period when lending out a good.
How leasing works today:
Customer Supplier
Leasing Company
Deeper explanations of the leasing process that are showed in this figure are:
1. The customer decides which supplier they want to buy from; they decide price, delivery and
installation conditions. They also decide that the leasing company will be the buyer.
2. The leasing contract is established between the customer and the leasing company.
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3. The leasing company then buys the equipment and it will be delivered to the customer.
4. The leasing company pays for the equipment to the supplier.
5. When the customer has got the equipment, they will start to pay the leasing company, usually every
month.
6. When the renting time has expired, the customer can continue to rent the equipment, but at this time
to a significant lower price.
The big advantage to lease instead of buying is that the customer does not need to have financial
resources except for the monthly payments. This will lead to that the country can establish a
telecommunication network in a short time period and then pay the leasing company on a monthly basis.
6.3.2 Joint venture loans
If the loan for the investment is very big it could be difficult for one single company to lend the total
sum. One solution to this problem is joint venture loans, which means that two or more companies share
the risks and benefits of the loan.
Copeland, Koller & Murrin (2000) explain that joint venture loans are an effective partnership, but to
make this happen they must be structured. An survey that these authors have made show that when two
company are involved in a joint venture that are evenly split, there is a 60 % chance to success, but if the
joint venture is not evenly split the chance to success is only 31 %. It is also important in this
perspective to have two companies that are evenly strong and also as strong as possible to increase the
chance to success. If one of the companies is weaker than the other it will generate a hinder to successful
management, the main reason for this is that the strong part of the joint venture will dominate in
decision making, which will lead to that the strong company put its own interest above the weaker
company and even the whole joint venture.
Flexibility and autonomy are the main factors for a joint venture to work well. Flexibility is important
because the market and customer needs changes all the time. To facilitate that these factors will be
involved in the joint venture, it is recommended that an independent president are chosen and also do a
full business system.
A joint venture often ends when the predetermined goal has been reached; it is recommended to prepare
for this break up in advance so that all parties that are involved are prepared for that.
6.3.3 Gifts
Gifts to developing countries could come in different forms. It could be a sum of money from example a
foreign telecom operator that wants to invest in new markets. A better method for the telecom operator
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would be to give telecom equipment to the developing country, which would lead to a lock-in effect. The
most common way gifts are given are from help organizations like U.S. Agency for International
Development (USAID) or SIDA, that makes a donations by either give out money for a certain project,
give guarantees or subsides.
6.3.4 Guarantees
When an investor sends money that is aimed for a specific developing country, there could be a risk that
the country uses the money for other projects. To reduce this risk the investor could, according to
Stromberg (2003), give the country some instructions where the money will be spent, in other words set
up guarantees for the investment. These guarantees provides credit enhancement to financing
infrastructure projects which according to Stromberg (2003) leads to economic growth and reducing
poverty.
An effect that the guarantees has, is when they are set it could be easier to get money from other
investors, because they see that it is decided where the money will be invested and they do not risk to
send money to developing countries that will use the money for other projects than has been determined
(Stromberg, 2003).
6.3.5 Telecom subsidies
A definition of a subsidy is according to Cannock (2001) a grant or a monetary gift, usually given from
the government to a specific project. Another form of subsidies is that the government reduces the taxes
for a company that needs assistance; thereby they get more financial resources.
The subsidiary method is good to financing telecommunications projects. One part of the subsidy has
been a gift from the government to the operators. The next part of the money will be paid when the
equipment has been installed. Finally the remaining money will be paid to the operators in semi-annual
installments that will last for several years.
6.3.6 Aid
A definition by Merna & Njiru (2002) of aid is a direct gift of money from a government or the World
Bank. The gift of money could be in different forms for example loans, grants and funds to development
banks. The aid is aimed for developing countries to raise their community and social welfare. The donor
could be involved in the project and decide what shall be done. Aid is usually aimed for two different
sectors.
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Projects aid
This form of aid is often very structured from the donor.
Programme aid
This form of aid finance imports in return for sectoral policy reforms. It can be described in two
different forms.
Bilateral aid
The definition of bilateral aid is money sent from one government to another government. This
aid is aimed to finance a specific project in the country that gets the
money.
Some examples of bilateral aid agencies around the world are UK’s Department for International
Development (DfID), the Overseas Economic Cooperation Fund (OECF) of Japan and finally
Kreditanstalt Fur Wiederaufbau (KFW) in Germany.
Multi-lateral aid
This aid is primarily aimed for infrastructure projects. These projects are financed by multi-
lateral development banks (MDBs). Some examples of these banks are the World Bank Group,
the Asian Development Bank (ADB), the African Development Bank (AfDB) and the Inter-
American Development Bank. These banks drawing funds from several countries and their loans
are usually more favorable than commercial banks.
6.3.7 Cross-border initiatives
A cross-border initiative means that several countries cooperate to build up a common

telecommunication networks. Through the past decades several projects of this type has been successful
in developing countries (ITU, 2004-09-20).
Pan-African Telecommunications Network (PANAFTEL)
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This project was built in the mid 1970s. It involved a cross-border network of radio
links.
The Regional African Satellite Communication System (RASCOM)
This project was established in 1993. The task of the RASCOM project was to harness the satellite
communication for the 40 African countries that was involved.
The SPACECOM Project
This project was launched in 1994 by ITU. This project focused on bringing space technology to rural
development, especially in Kenya, Uganda and Tanzania.
6.3.8 Vendor and supplier financing
According to ITU (2004-09-20), vendor and supplier financing for telecommunication can take two
different forms.
1. Interest rate subsidy. This involves reduction in interest payments of a loan.
2. Loans and guarantees. When this financing method is used the vendor put its own credit at risk.
Pacific Telecommunications Council (2004-10-20) illustrate that vendor and supplier financing could
have a good supportive role in building up telecommunication, but a problem could be that the large
amount of money that is required for these projects, could be difficult to capture through this method.
A problem that ITU (2004-09-20) says about vendor and supplier financing is that this method only
covers the cost of imported equipment, and therefore not other costs like labor and domestic equipment.
Despite this there have been successful telecommunication projects in developing countries that have
used this method, for example in Thailand
6.3.9 High yield dept (junk bonds)
High yield debt also referred to junk bonds means that the private investors are satisfied with a good
return. To be able to receive a good return from a telecom project it is important to invest at an early
stage (ITU, 2003). Ideally for the investor is of course to have high returns and low risk. It is very
difficult to combine these two. Therefore the investor tries to be positioned between these two goals with
a medium return and risk. According to (ITU, 2003) junk bond is a successful tool for financing
telecommunication projects in the future.
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6.3.10 Reverse bid
A definition (Merna & Njiru, 2002) of a reverse action would be that the buyers post their need for a
project and then the suppliers bid to realize the need. The supplier that demands the least amount of
money gets the deal and could start the project.
A connection to this market could be to start with a developing county that are interested in building a
telecommunication network in their country. They spread the information to different suppliers and get
bids from them. Then they decide which offer that are best suitable for them. This could be a good
starting point and thereafter decide which financial tool the country wants to use to invest in the
telecommunication network. (Merna & Njiru, 2002)
6.3.11 Pre-Paid
The pre-paid system was introduced in Germany in the 1920s, but it is a fairly recent concept in the
United States. A definition (Investorwords, 2004-12-02) of pre-paid would be that you pay for access to
a certain product or service in advance. These payments are often done on a monthly basis. A connection
to the telecommunication industry would be that when the telecommunication network is built, the
country has to pay on a monthly basis to access the network.
6.3.12 Options
According to Neftci (2004), options are an instrument of volatility. There are several kinds of options,
the two basic ones are call and put options, which Hull (2003) defines as follow.
Call option
A call option gives the holder the right but not the obligation to buy the underlying asset at a certain date
for a certain price.
Put option
A put option gives the holder the right but not the obligation to sell the underlying asset at a certain date
for a certain price.
Neftci (2004) describes that there are several more options but they usually are divided in two
categories, which are plain vanilla and exotic options. The options in the plain vanilla category are
treated with the Black-Scholes model, which is a model for pricing European options. This model was
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developed 1973 by Fisher Black, Myron Scholes and Robert Merton. The main difference between an
American option and a European option according to Hull (2003) is that the American option could be
exercised at any time during its lifetime and the European option only can be exercised at the end of its
lifetime.
Options can be used in big projects like a telecommunication investment. The advantage that this
method has is that it provides insurance for the investor. The main reason for this according to Hull
(2003) is that the investor has the right but not the obligation to take an action, if there would be big
price movements the investor can take an action on the basis of that.
6.3.13 Self financing
As mentioned in many articles, for example by the Ministry of Communication: Science and Technology
(2004-11-19), a criteria for a successful self financed telecommunication company in a developing
country is that there are already a telecommunication network in the country, that the company owns.
6.3.14 Public Private Partnership
Merna & Njiru (2002) indicate that public private partnership could be divided into three different types
of partnerships. These are sharing, dominant and independent.
Sharing public private partnership
This partnership means that the private and public sector share the risk for the project. If there is any risk
that they together cannot control, the public sector usually takes the responsibility for that risk.
Dominant public private partnership
This kind of partnership is usually financed by a soft loan that the public sector usually is responsible
for. A soft loan is a loan with lower rates than an ordinary bank loan.
Independent public private partnership
This partnership is used in projects with high risks. When this method is used the public sector does
direct financing investments in the project. Principally is a public private partnership a form of
privatization, but with a big difference that the public sector also are involved. The partnership is
involving the government and one or more private sector companies. (Merna & Njiru, 2002)
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6.3.15 Domestic ways of financing telecommunication investments
If a country is not interested in foreign investors for their telecommunication projects, there are some
different options that could be successful.
Private sector investments
According to Kessides (2004), investments from foreign private company could be a big risk for the
developing countries. If the country instead chooses to concentrate on the private sector in the domestic
market they will reduce the risk. Private sector investments have risen from 6.2 billion USD in 1990 to
57.3 billion USD in 1998. In resent years it has reduced a bit.
Public sector investments
This is a method that was used in Pakistan when they upgraded their telecommunication system in 1980.
The public sector in a developing country could be one part of financing a telecommunication network
(Asia Trade Hub, 2004-10-28).
Government-owned telecommunication
According to Hadi Salim (1995) this system leads to that the government has monopoly of the
telecommunication market in the country. As mentioned in the article by Hadi Salim there could be a
problem with government owned telecommunication because the government is suspicious of
technology.
Customers pay for the investments
If a country chooses to use this method they have to make precise calculation of how much the
investments will cost. When this is done they have to continue calculate how many customers and how
much they have to use the telecom services on a monthly basis. When this is done they know how big
the loan would be and they also know how long time it will take to repay it (ITU, 2003).
6.4 Financial risks
When it comes to financial risks that could be involved in telecommunication projects Merna & Njiru
(2002) claims that risks are usually known before because there are always two parties involved that has
opposite viewpoints. The authors define financial risks as:
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“The impact on the financial performance of any entity exposed to risk.”
There are several kinds of financial risks that Merna & Njiru (2002) describes, and here follows a
presentation of them.
Currency risk
This kind of risk is usually seen in cross border flow of funds. When a country that wants to invest in
telecommunication has to deal with foreign currencies, it normally results in some form of currency risk.
A problem that can arise in developing countries is that they have exotic currencies, which means that
they have a currency that not are traded on any existing exchange market, which may result in a more
difficult process. The currency risk could also be a problem for foreign investors and other organizations
that give money support to developing countries, which could result in big losses when the money are
exchanged to a local currency.
Interest rate risk
Interest rate risk is a risk that affects both the borrowing and investing sides directly. This risk is usually
classified in a short and a long time perspective. In the short time perspective the investment and its risk
mainly depend on the money market. In the long time perspective the rate could be paid for example
every 6 month until the loan matures.
Equity risk
The equity is usually connected with the share capital, if the shares rise or fall it will affect the equity.
The risk of equity is connected with warrants and convertible bonds. If a company let investors buy
warrants and bonds on the shares of a company there would be a risk involved, because the company
could both win and lose on the deal, because they do not know if the share price will rise or fall in the
future.
Commercial risk
Commercial risks are related to the completion, operation or input and output of the project and it could
affect the financial performance. A connection to the different related factors are that the first which is
completion, is a risk if the project is not finished when it was supposed to, which will result in more
expenditure. The second, which is operation, could be a risk if, for example a telecommunication does
not work properly or are involved in some legal issues which also result in more expenditures. The third
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and final, is input and outputs. The risk in this case is that a project often are dependent of suppliers, if
the supplier for some reason cannot deliver the required material, the whole project could be affected.
Liquidity risk
Liquidity risk has a connection to commercial risk. If the project does not reach its goals it could result
in a liquidity risk. This risk is usually a result of that a seller is forced to sell under the market price
which will result in lower incomes and volatile liquidity.
Counterparty risk or credit risk
Counterparty risk which is also called credit risk is seen in any financial transaction that involves two
parties. An example could be a developing country that has signed a contract with a financial institution
of borrowing money; this will be enclosed with a risk because it is not for sure that the financial
institution could accomplish the deal at the right time. It could also be in diverse, when the loan is going
to be paid back and the lender cannot accomplish the payments, because of some problems.
Political risk
This kind of risk follows by a publicity guaranteed loan or a loan directly to a foreign government. The
definition of political risk is:
“The exposure to a loss in cross-border lending caused by events that are, at least to some extent, under
the control of the government of the borrowing country.”
(Nagy, 1979)
In other words, a political risk is the risk that the investor could lose the money because of the countries
political structure. Some examples of political risks are tax laws, expropriation of assets, the government
repudiation to sign a contract, inconvertibility of foreign currency. Other factors that may affect the
political risk in a country could be war, terrorism or civil disturbance.
Regulatory risk
Montgomery Research (2004-12-02) defines regulatory risk as the external regulatory actions and
development that can impact the financial and operational performance of a company; this could include
revenue requirement, cost structure and operational processes.
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It is important that companies understand how the regulatory market model works and then try to lessen
the effects of the regulatory risk. Montgomery Research (2004-12- 02) gives the following statement
that companies should follow.
1. Assign probabilities for every potential outcome for each regulatory scenario.
2. Quantify the financial impact for each regulatory scenario to the company.
3. Finally, calculate the expected results and variance for each regulatory risk scenario.
Inflation
Inflation is defined (Investorwords, 2004-12-02) as a sustained rise in the general levels of prices, which
in other words means that the money loosens its value and the price for different projects could reach
unlimited values.
One factor that can contribute to inflation is that the money supply in a specific country increases. There
are a lot of different methods of measuring inflation and here follow a description of some of them.
o Consumer price index
This method compares the prices of products at different time periods. The products that are chosen, are
products that are bought by the typically consumer.
o Producer price index
This method compares the price incomes for different products to a producer at different time periods.
The main difference between this method and the consumer price index is that the taxes that the
consumer pays could vary from the taxes that the producer has to pay.
o Wholesale price index
Here the change of price is measured at the wholesaler.
o Commodity price index
The price change of a selection of commodities is measured.
o GDP deflator
This is measured by the total amount of money spend on GDP. This method is the broadest measure of
price levels. (Investorwords, 2004-12-02)
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A small amount of inflation in a country usually has a positive effect on the economy, but when the
inflation increases it could have dramatically effects on the economy. A British economist called A.W.
Phillips found a relationship between inflation and unemployment. When the inflation is high, the
unemployment is low and vice versa, the Phillips curve is shown in the following figure.
6.4.1 Other typically risks in telecommunication projects
Merna & Njiru (2002) describes some other risks that may affect, for example an investment in
telecommunication.
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Technological risk
This is a risk that could be seen in all technological projects, for example in a telecommunication
network. The risks contain temporarily shut downs of the network for some reasons, it can also be
because of an upgrading of the network.
Operating risk
These risks are involved in commercial risk and it covers these scenarios.
1. The risk that the project cannot run at the predicted efficiency.
2. The risk that the project gets too expensive to run.
3. The project could be delayed, for example the suppliers could not deliver the needed material.
4. Natural disasters may arise that disturb the projects, for example fire and flooding.
High transaction costs
This is a part of operating risk, which contain the risk that the cost of using a network gets too high.
Transaction cost also covers the risk that the business deals are too
6.5 Leverage effects on ways to finance telecommunication
A definition of leverage could be as follow,
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“The ability to control large amounts of a financial asset with a comparatively small amount of
capital.”
(The Handbook of World Stocks, Derivative & Commodity Exchanges, 2004-10-29)
Usually the road to a successful leverage project is that a person/country that wants to invest in a project
spends a minor sum of their budget and loan the rest of the money. This will generate that they have
money left for other investments (The Handbook of World Stocks, Derivative & Commodity Exchanges,
2004-10-29).
A leverage effect can be seen in three different projects:
1. Start-up grants/gifts.
2. Financial snow-ball effect.
3. Creating new investments.

(LOCREGIS, 2004-10-29)
A connection to this segment could be a developing country with a limited amount of money that wants
to invest in telecommunication, therefore creating new investments. To be capable of manage this, is to
take some percentage of their money and then loan the rest to build up the telecommunication network.
Then they will have the remaining money left to upgrade the network or spend in other projects.
According to the International Labor Organization (2004-10-29) there is another view of leverage effects
which are seen when the projects are implemented. This involves factors that arise because of the new
project. Some examples could be that new projects generate new jobs and new business can arise that
has this project as a requirement for their own business, a good example is telecommunication.
According to the World Bank (2004-12-02), new jobs in developing countries will generate poverty
reduction. The new jobs will also generate economic growth which also helps reducing poverty.
6.6 How financial development may promote growth
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6.7 The importance of telecommunication for economic growth

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“A well spread out telecommunication network provides a great impetus to the economic growth in a
country. Considering the significance of its contribution and also the need to integrate with the global
economy, several policy initiatives have been taken by the government.”
(Ministry of Finance, Govt. of India, 2004-11-26)
The Indian economy is on the path of recovery. The gradual opening up of the economy ensured steady
growth even at a time when other countries were in the grip of massive slowdown. India’s move toward
globalisation by progressive reforms, especially in the telecom sector which has been driven by
transparent policies and better market conditions to attract foreign investments, is responsible for the
economic growth in India (Proctor & Olivier, 2002).
Guislain & Qiang (2003) argues that the telecommunication sector includes both the production and
distribution of equipment and the delivery of services (see Figure 12). It is one of the key drivers of
economic growth and plays a vital role in the competitiveness of modern economies. Furthermore, it is
often among the first infrastructure sectors to allow private and foreign provision, and therefore, a trend
setter for other sectors to open up and follow the path of reform.
A study by Contessi (2003) shows informal evidence, that there is positive correlation between GDP per
capita of a country and its endowment of connections.
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Correlation between teledensity and GDP per-capita (178 countries)
An econometric study by Jacobsen (2003) analysed the relationship between telecommunication

development and economic growth. The study showed that there seems to be larger growth effects from
telecommunication development in developing countries than in developed countries, a result that
contradicts earlier findings. The result stems from a larger indirect impact of telecommunications in
other sectors.
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The above figures show the correlations Jacobsen (2003) made. They show that in the period between
1990 and 1999, GDP is strongly correlated with main telephone lines. The relationship between GDP
and personal computers and between GDP and telecommunications investment is also large, while
cellular telephones seem to have somewhat lesser correspondence with GDP.
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6.7.1 Successful developing countries
In this section we will present the data we have collected on the developing countries that have been
successful in developing and expanding communication. The data is gathered from the Internet,
literature and articles.
Financing ways developing countries prefer (42 developing countries)
Strategies developing countries prefer (42 developing countries)
Unit-7 B.S.N.L. as a Telecom Service Provider

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BSNL has installed Quality Telecom Network in the country and now focusing on improving it,
expanding the network, introducing new telecom services with ICT applications in villages and wining
customer's confidence. BSNL is numero uno operator of India in all services in its license area. The
company offers vide ranging & most transparent tariff schemes designed to suite every customer.
7.1 BSNL as an integrated telecom service provider
BSNL being the oldest telecom player, if we take the legacy of DoT before its formation, is a diverse
telecom service provider. It is niche in all verticals of telecom fields and is serving the nation by being
with the nation. All the services provided by the company can be broadly classified as:
Wire Line Services
CDMA WLL Limited Mobility Services
GSM & CDMA Based Full Mobility Services
National Long Distance Services
International Long Distance Services
Leased Lines, D.S.P.T., & I.S.P. Services.
IN Services viz. Prepaid calling card etc.
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To fulfill the telecom service need of the nation, BSNL offers different kinds of products suiting the
different kind of people with different kind of need. These various product offered by BSNL can be
summarized as follows:
1. BSNL Landline:
1.1 Fixed Line Pre-paid (FLPP)

1.2 BSNL PCO
1.3 Phone plus services
1.4 ISDN
2. BSNL Mobile:
2.1 Prepaid and Postpaid

2.2 Unified Messaging
2.3 WAP/ GPRS/ MMS
2.4 3G services
3. BSNL WLL:
3.1 Post-paid fixed mobility

3.2 Post-paid and Pre-paid with full mobility
3.3 BSNL data card, NIC and EVDO
4. BSNL Internet:
4.1 PSTN dial up access

4.2 ISDN dial up access
4.3 Leased line access
4.4 Direct Internet Access (DIAS)
4.5 Account free Internet dial up access based on CLI
4.6 BROADBAND connection
4.7 Wi-Fi
4.8 SANCHARNET CARD
4.9 Wi-Max
4.10 WAP & GPRS
4.11 Co-location service
4.12 Web-hosting
4.13 SMS & Bulk SMS
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5. BSNL Managed Network Services
6. MPLS BASED VPN SERVICE
7. Leased Line :
7.1 Managed Leased Line Service(MLLN)

7.2 Access link Services
8. Intelligent Network Services (IN)
9. Audio Conferencing
10. Video Conferencing
11. BSNL Web Conferencing
12. Fleet Management Solution
13. Inet
14. EPABX
15. Data Communication
15.1 HVNET
15.2 RABMN
15.3 INMARSAT
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7.1.1 New Initiatives
WiMAX: Tender Invited for 1000 BTS at Rural Block HQs covering 25000 village
communities centers.
IPTV: Launched in Three Cities viz. Bangalore, Pune & Kolkata. Agreement signed with
Franchisees for another 50 Cities
VOIP: EOI under consideration
3G Services: Have been launched in Feb-2009 in select cities and now pan India roll-out is
on the card.
New Generation N/W: Is being deployed to meet future technology compatibility.
DTH Services: Planning’s to launch this service is on the card.
7.1.2 Developmental Plans (2008-09)
Expansion of 13.5 m GSM lines.
Expansion of 3m Broadband.
Expansion of 2 m WLL (CDMA) lines
Introduction of 200K IP Transit Switch.
Addition of 1206 K TDM TAX
Addition of 200 IDRs Satellite System for Inaccessible Stations.
BSNL has set up a separate international business division to explore telecom opportunities abroad.
Moving aggressively on its overseas expansion plans, BSNL chairman Mr Kuldeep Goyal had said the
company would look at valuable buyout opportunities based on due diligence of the target company.
The PSU had already received in-principle board approval to enter the global market and bidding for
Tunisia was one such step. The North African Tunisian country is set to issue new licenses for fixed line
and basic mobile services. The licences, initially for 15 years, include national and international long-
distance services.
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As per the records found from the company sources, the company’s presence in different categories of
services are as follows:
Basic Telephone (Bfone)

Total Number of connections as on 30.09.08 3,01,22,269
WLL (Tarang)
Total Number of connections as on 30.09.08 46,96,641
Village Public Telephones
Total Number of Telephones as on 30.09.08 5,22,120
Public Telephones (Local, STD and Highway)

Total Number of Public Telephones as on 30.09.08 19,31,182
STD Stations
Number of STD Stations as on 30.09.08 33,206
Transmission Systems as on 30.09.08

Transmission Systems
Digital
(Route kms) (Route kms)
Coaxial 6,024
Microwave 50,430
UHF 45,130
Optical Fiber 5,60,086
Satellite Based Services (as on 30.09.08)

MCPC-VSATs 82
IDR Systems (2 Mb/ 8 Mb) 99/38
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Mobile Services
(As on 28.02.2009)
• Total number of connections - 46,684,049
• District Headquarters covered - 618(All covered)
• Total number of villages covered - 2,90,975

• Total number of Town/cities covered - 19,971
• National Highway covered (Km) - 55,896(out of 60,519)
• State Highway covered (Km) - 74,930(out of 1,240,77)
• Railway route covered (Km) - 42,454(outof 54,731
Telex/Telegraph Offices
Departmental Telegraph Offices 961
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Telecom Centers 716

Combined Offices 44,754
Bureau-Fax Centers 1427
7.2 Growth Plan
BSNL's future plan include a fast expansion programme of increasing the present 34 million lines to
twice that number by 2005 and some 120 million lines by 2010.
The shift in demand from voice to data domination, and from wireline to wireless, has revolutionized the
very nature of the network. BSNL has already set in place several measures that should enable it to
evolve into a fully integrated multi-operator by 2005 and its incumbent status, size, infrastructure and
human resource should certainly, give it a distinct advantage.
Consolidation of the network and maintaining high quality of service comparable to International
standards is the key aim of the Growth Plan. Objective of the plan are:
The telephone connection shall be provided on demand and it shall be sustained.
The Network shall be made fully digital. All the technologically obsolete analog exchanges will be
replaced with digital exchanges.
To provide digital transmission links up to all SDCAs.
Digital connectivity shall be made available to all the exchanges by 2007.
Extensive use of Optical fiber System in the local, Junction and long distance network so as to make
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available sufficient bandwidth for the spread of Internet and Information technology.
ISDN services shall be extended to all the district headquarters, subject to demand.
To provide Intelligent Network Services, progressively all over the country (major cities have already
been covered).
To set up Internet Nodes progressively up to District headquarters level.
Upgrading existing STD/ISD PCOs to full fledged Public Tele-Info Centers (PTIC) for supporting
Multi media capability and Internet Access.
Replacement of life expired, analogue coaxial and radio systems.
Introduction of Wireless technology (Supporting Internet Access) and optical fiber technology in
subscriber loop.
Introduction of latest telecom services like National directory enquiry, computerization etc.
Cellular Mobile Service 'Cell One' of BSNL was launched on 19th October 2002 . The scheme will
cover 4 million customers in two phases. Phase-I will cover about 1.5 million customers covering
about 1000 cities during 2002-03, which will be expanded to 4 million in phase-II.
BSNL has decided to lease out its passive infrastructure that includes towers mainly, to other telecom
companies in semi- urban areas in the country. BSNL has more towers in tier-II and -III cities, So it has
decided to lease out those towers with unutilized capacity to the operators." The agreement would be on
bilateral basis. Aimed at generating more revenue and fully utilizing the huge tower base, BSNL plans to
cash in on its pan-India presence. It operates all over India, except Delhi and Mumbai. The PSU plans to
lease out its Ground Based Towers in circles such as Andaman and Nicobar, Andhra Pradesh Assam,
Bihar, Gujarat, Chhatisgarh, Haryana, Himachal Pradesh, Jammu & Kashmir, Jharkhand, Karnataka,
Kerala, Maharashtra, Madhya Pradesh, North East, Orissa, Punjab, Rajasthan, Uttar Pradesh (East and
West), Uttranchal and West Bengal. BSNL has over 60,000 towers and the most of them are in semi-
urban areas where private operators have small footprint. According to the industry analysts, erecting
one cell site costs about Rs 30 lakh, which takes the most of the cost and time for any operator.
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State-owned BSNL has floated a tender for 93 million lines. BSNL executives say the total value of the
contract could be about Rs 40,000 crore. Off these, about 21 million lines are reserved for third
generation (3G) services.
The tender details have been sent to global network majors, including Ericsson, Nokia Siemens,
Motorola, Nortel, Alcatel Lucent, Huawei and ZTE. The bids of all companies will be opened on July
16-2008. The BSNL contract is split into three parts of 25 million each for the North, South and West
Zones and 18 million for the East Zone. The tender conditions also stipulate that one company cannot be
awarded more than two zones; this implies that the maximum order than equipment major can bag is for
50 million lines. In a bid to infuse additional competition, BSNL has divided the tender into four
components, 2G lines, 3G lines, infrastructure and operating and business support systems (OSS &
BSS). This implies, companies can bid individually for any of the four components, or a single company
can also bid for all the components. About 30% of the contract size, which is equivalent to 31 million
lines, could be reserved for state-owned ITI. The reservation for ITI is likely to be outside this tender, if
this be the case, the actual size of the orders could be 124 million lines
7.3 Projects Recently Implemented / Under Development
• National Internet Backbone of BSNL

•
• Voice over IP
•
• Broadband Services - ADSL & High Speed Internet
•
• Managed Leased Line Network (MLLN)
•
• Access Network - LMDS, DLCs, RLC etc.
•
• Internet Exchange Points - IXP & Internet Data Centers (IDC)
•
• E-Commerce
7.3.1 Information Technology

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With the convergence of technologies, catalyzed by the global IT revolution the world is witnessing
change as never before in recorded history. In the realm of telecommunication, the change and the pace
of it are more pronounced - from basic telephony to voice, video and data services, and from bandwidth
on demand to virtual private networks, IT is making the entire plethora of BSNL's telecom services
expand. And, being rapidly implemented as the backbone for running customer-friendly services.
FRS (Fault Repair System), DQ (Directory Enquiry), IVRS (Interactive Voice Response System) and
accounting and billing systems are already operational at BSNL.
DOTSOFT , an integrated commercial & FRS package being inducted countrywide, to provide single
window convenience.
Telephone Directory on CD ROM and on the internet.
Infrastructure, technology and expertise for full service support to e-commerce enterprises.
7.4 Social Commitment
BSNL is committed to provide quality Telecom Services at affordable price to the citizens of the
remotest part of the Country. BSNL is making all effort to ensure that the main objectives of the new
Telecom Policy 1999 (salient points indicated below) are achieved.
Access to telecommunications is of utmost importance for achievement of the country's social and
economic goals. Availability of affordable and effective communications for the citizens is at the core of
the vision and goal of the new Telecom policy 1999.
Strive to provide a balance between the provision of universal service to all uncovered areas, including
the rural areas, and the provision of high-level services capable of meeting the needs of the country's
economy.
Encourage development of telecommunication facilities in remote, hilly and tribal areas of the country;
Transform in a time bound manner, the telecommunications sector to a greater competitive environment
in both urban and rural areas providing equal opportunities and level playing field for all players.
95
7.5 Summary of financial statement
96
The BSNL board has cleared the company’s proposed $10-billion listing. If BSNL does manage to raise
Rs40,000 crore by selling a 10% stake, the telco would be valued at Rs4,00,000 crore (around $100
billion). This will catapult BSNL into the league of top telcos in the world in terms of market cap.
Incidentally, the market valuation of Bharti Airtel is just around $37 billion. Industry analysts had
estimated the BSNL to be valued at over Rs4,00,000 crore. The plan was to divest 10 per cent through
the IPO. The valuation of India's largest telecom company was estimated by analysts to stand at over
Rs4,00,000 crore, larger than the combined market capitalization of Bharti Airtel Rs1,16, 342 crore and
Reliance Communications (RCom) at Rs1,19,125 respectively the second- and third largest telecom
companies.
According to analysts, the $37-45 billion valuation is a fair one. BSNL has about 81 million subscribers,
10 million more than the country’s largest private operator, Bharti Airtel, which is valued just over $38
billion. However, a top BSNL official said that this was only the book value of the company and did not
include its asset value. "If we include the asset value, BSNL's valuation is much higher. In financial
97
yerar 2008-09, the company would invest about Rs15,000 crore to expand its mobile and broadband
networks. The company has also committed to invest about Rs60,000 crore by 2010 to expand its
telecom infrastructure and operations
Unit-8 Telecom Trends and High Growth Drivers

8.1 General Outlook of communication services
Communication services between people will continue to evolve as per their growing needs
Richer communication stimulates all three drivers for growth:- new subscribers, services &
traffic
In 2009 global data revenues will reach $189 billion of which 50% will be ‘richer
communication’ services
Price pressure on voice services accelerates need for new revenues
98
99
As voice becomes a commodity, service providers need new killer apps to boost ARPU and generate
revenue across all customer segments.
To deliver this, wireless operators need a well-balanced bundle of high-quality and attractive value-
added services, one of the keys to success in today's highly competitive telecommunications market.
100
han
India is seeing phenomenal growth in wireless market and touching the 37% tele-density at the end of
March-2009 on the basis of unprecedented growth in wireless customers. Now the wireless market is on
the growth trajectories of the business cycle in India, and there is significant portion of the population is
still not having the access to the service, the great growth is ahead in this sector.
I
101
2/3
of the
World Population are not connecte
4G, Broadband Wireless and WiMAX technologies attracted nearly 1.5 million new subscribers last
year, according to Maravedis, an analyst specializing in several sectors within telecoms. And quarter-on-
quarter growth reached a highly respectable 21%.
"Total BWA/WiMAX revenues for 2008 totaled US$1.82 billion, compared with US$898.78 million in
2007 - a 102% annual revenue increase despite the economic downturn that began affecting operator
revenues in Q308."
102
To say that India offers potential is a complete under-statement. Approximately 70% of Indian
households have no access whatsoever to fixed lines. Enter wireless, enter broadband, enter WiMAX, to
mention just a few to tap the untapped potential which is extra-ordinarily high.
103
The WiMAX network will enable BSNL to offer enterprise customers high- bandwidth data
communications services such as MPLS, VPN, leased line, and Internet access, as well as VoIP,
telemedicine, e-education, e-governance, and e-commerce in remote areas
Internet access is still the big broadband driver in India, with wireless broadband becoming the clear
option owing to economics and ease of deployment
104
Different access technologies are available for implementation but all needs project feasibility on
revenue and profit terms. As India GDP will grow faster, per capita income will be increased and
purchasing power of the Indian customer will be increased, and feasibility of high end premium product
like fiber, VDSL2, LTE, HSPA, WCDMA, MBMS will be successfully launched which will change the
pattern of Indian economy significantly. These technologies have tremendous potential to bring
revolutionary effects.
Now the companies are focusing on low cost services to access the customers in rural India, and
implemented the access technologies like ADSL, ADSL2+, Fixed WiMAX, EDGE, GSM, CDMA2000,
EVDO to access the broad rural market of India.
105
Unit-9 Cost Efficient Operations and Rural Telecom Infrastructure Convergence
Reaching and profitably serving low-income users is a big challenge for the mobile industry in emerging
markets.
“Service providers must focus on tight marketing-operational alignment, optimized network costs,
flexible pricing and strong distribution networks.”
Consulting firm Ovum's latest report outlines three aspects that operators must consider in serving low
ARPU users.
A close connection between marketing and network operations is crucial to profitability in emerging
markets, while different markets require different approaches and considerations. "A number of
emerging market operators face significant operational challenges at least partly due to a disconnect
between marketing and network operations. For example, several African operators are being warned by
regulators to tone down their marketing, as the pace at which they are building network capacity cannot
meet with the heavy flow of new customers," says Angel Dobardziev, Ovum's Emerging Markets
Practice Leader.
In the more sparse rural areas, such disconnect is more likely to produce the opposite challenge, which is
an under-utilised network as a result of poor choice of coverage or inept marketing: "Successful
operators bring marketing and network operations close together in targeting rural areas. With 70% of
India's population in rural areas, for instance, a profitable rollout strategy there should focus on covering
the most attractive rural communities first. Only then can a service provider focus on driving up
profitability through locally-focused promotions, public access phones and PCs to demonstrate the value
of the services and aggregate demand," says Angel Dobardziev.
106
9.1 Optimized network operations
Service providers must pay particular focus on four key areas when it comes to optimizing their
networks for low Average Revenue Per Users (ARPU). They are: network design and rollout; base
station equipment and site costs; backhaul and transmission; operational/business support systems (OSS
and BSS).
When designing network coverage for low ARPU areas, operators must take the opposite approach to
what is happening in mature markets, where switching at the edge of the network is shifting towards the
core, partly because backhaul is becoming cheap and plentiful.
In low ARPU markets, the first principle is to have as few cell sites as possible. Each additional site
generates incremental costs for equipment, site, security, transmission and power. More importantly,
service providers must adopt distributed network architectures, with base station clustering and local call
switching.
107
Does “Best of Breed” OSS adequately address the challenges of OSS in emerging markets? The Yankee
Group commented in “Unified OSS architecture is the critical underpinning for automating the telecom
service delivery factory”, a commissioned work conducted by Yankee Group Research on behalf of
Clarity International, that: "With carriers focusing more on reducing opex and capex, a unified
OSS solution provides a compelling value proposition that ensures long-term viability. Unified OSS
removes some of the bottlenecks associated with best-of-breed OSS solutions.
108
9.2 Price to optimize network utilization
Transparency and simplicity in pricing are essential for low ARPU users. Angel Dobardziev explains:
"operators must price their services to ensure optimum network utilization and profitability, in the same
way that budget airlines generate their profits by ensuring higher aircraft utilization."
The research suggests service providers should consider dealer commissions another key lever in
optimizing subscriber acquisition and retention costs in order to ensure low ARPU customers remain
profitable. "Some emerging market operators in Asia and Africa have managed to reduce their dealer
commissions to US$1, and even to agree that commissions would not be paid if the subscriber left the
network within a certain period. This is an approach that operators need to consider for the next wave of
low ARPU users, particularly those based in remote rural areas," says Dobardziev.
9.3 Shared access is a bridge to personal connectivity
An effective local distribution network is one of the most critical components of a service provider's
marketing efforts for low ARPU users. Carefully optimized selection, incentives and promotional
support for the network of agents and airtime resellers are an essential element of an operator's
marketing strategy. Typically, these users earn small sums of money frequently (often daily), and as a
result top up their phones by small amounts more frequently.
To these users, getting the phone initially is less a challenge than topping it up regularly, locally and in
small enough amounts that they can afford. If there isn't an agent nearby to serve rural users locally,
operators will be missing out on significant revenues.
Meanwhile, service providers need to weave shared-access voice and data services into their marketing
strategies, such as BSNL’s Village Public Telephone, Bharti Airtel's Public Call Offices and BSNL’s
Rural broadband package to Common Service Centre.
109
Flexibility in design keeps the scope of improvement and expansion. The operator should innovate in
their retail outlet to comprise the existing capability to serve the current services and if needed could
adopt the future changes in service offerings, that reduces the cost and expedite the sales process of
future services.
110
A comprehensive service delivery platform of B.S.N.L. to streamline and adopt the

rapid changes in telecom operations.
Unified OSS focuses on simplification through pre-integration, consolidation of operational data and
centralised workflow spanning end-to-end operational processes; from SLA management to field-force
logistics. Frost and Sullivan in “Market Insight featuring OBCE Trends” agree that: "This pre-integrated
approach streamlines the rollout of an OSS deployment and yields greater out-of-the-box functionality.
It avoids costly one-off, technology dependent solutions."
111
Today, there is a strong need to accept the challenges of rural communication coverage in emerging
markets and win those challenges by concrete efforts of intelligent solutions, lying in wireless
technologies.
wireless networks can be deployed rapidly. A GSM network, for example, can be deployed and offering
services within a matter of weeks, compared to the time needed to deploy a wireline network. And
wireless is extremely cost effective. With the highly competitive nature of the global wireless market,
particularly in GSM, infrastructure costs are very low. Handset and terminal costs are also low - and are
likely to fall further. The Ultra Low Cost Handset initiative driven by the GSM Association is targeting
the sub-US$20 handset, opening up the market to low-income users.
Personal computer penetration levels in India have to be around 15 million throughout the country.
WiMAX is the key to mass communication. There is huge potential for broadband wireless Internet and
Voice-over-Internet Protocol (VoIP) services in India because there are still more than 600,000 villages
with no basic communication means. It has to be said that one major obstacle looms in the way of
widespread WiMAX rollout.
Licence holders need to have at least 20 MHz of spectrum to support wide-scale deployments and to
build profitable businesses, but most currently have 12 MHz or less. Urgent and radical measures are
required. Government agencies are now in discussion with telecoms companies. If the national
Department of Defence releases some of its spectrum to civilian operators, there could be more spectrum
available.
9.4 India's WiMAX subscribers to top 13 million by 2013
Deployment of 3G and WiMAX streams will generate a reasonable user base over the next five-year
period. While the global economy is lying dormant, demand for telecommunications services in India
continues to fuel significant growth in the sector. According to research firms Maravedis and Tonse that
in 2008, approximately 10,000 BWA/WiMAX base station sectors were deployed in total. Currently
there are about 300,000 BWA/WiMAX subscribers already using these services.
112
“In the next six years India has the potential to become one of the top broadband wireless markets on
the planet. The resulting ecosystem and opportunities will make India a dream destination for vendors
and investors.” Tonse Telecom CEO, Sridhar Pai.
For the severely under-served Indian broadband market, demand for wireless broadband connectivity
continues across all sectors: retail, SOHO, SMEs and large enterprises alike.
India is expected to see the world's lowest end-to-end cost for WiMAX services, with costs driven down
faster than in any other market. Computer penetration is still very low and the Indian telecom sector
operates in a volume-driven market and innovative business models such as public-private partnerships
will emerge, together with low cost devices and a vibrant ecosystem.
B.S.N.L. was initially a wire line operator and later came into wireless market. Wire-line business is a
capital intensive field with long break-even time. Its operational margins are being hit by higher cost of
its operation. With the implementation of 4G, WiMax technology and by going wireless it can improve
on margin front and expand its business rapidly. Prior presence in rural market, can give it an edge to
launch its operations rapidly, using these new technology, and being a niche player in all front.
113
Unit-10 The Role of Public & Private Players in Indian Telecom Secotor
NTP-99 laid down a clear roadmap for future reforms, contemplating the opening up of all the segments
of the telecom sector for private sector participation. It clearly recognized the need for strengthening the
regulatory regime as well as restructuring the departmental telecom services to that of a public sector
corporation so as to separate the licensing and policy functions of the Government from that of being an
operator.
In this process, B.S.N.L. formed from DoT being a public sector telecom operator. After this a number
of private players have been emerged and invested heavily in the Indian telecom sector. We can name
few major operators as Airtel, Vodafone, Reliance, Idea, Tata Teleservice. Both public and private
players have contributed significantly in the Indian telecom growth.
Here we take the case of largest public sector telecom operator, B.S.N.L. and lagest private sector
telecom operator, Airtel, for the comparison of their performance in telecom sector.
114
From the above graph we can see that private players are playing a significant role in the churning out
the customer base in Indian wireless market. Airtel has largest subscriber among all players and
B.S.N.L. is at the forth place in customer market share. Airtel has added 31.94m customer in 2008-09 in
comparison to B.S.N.L’s 12.3m, around 2.5 times more.
Airtel being a private player is outpacing the public sector enterprises, and thus fulfilling the objectives
of NTP-99. B.S.N.L. Customer Market Share percentage is shrinking year by year, due to private
players aggressive growth.
115
10.1 Airtel as a private telecom service provider
116
10.1.1 Airtel Performance Indicator
117
10.1.2 Airtel Segment investment and contribution
118
The fierce competition between the operators in India is dragging the ARPU to the lower side which is
affecting the bottom level of companies financial. To subsidize the effect, the operators have to churn
out the customers rapidly.
Airtel has maintained his financial growth despite lowering ARPU with increased volume of customers.
Airtel is beating all the expectation and has been evolved as a strong player in Indian telecom arena. It is
showing the example for the others to follow.
119
10.2 Performance parameters of BSNL
10.2.1 FINANCIAL PARAMETERS
1. Billed /Del/Month (Basic services)(upto March 2008) : Rs.357.53

2. Billed /Cell/Month (Cellular) (upto March 2008) : Rs.281.12
10.2.2 MARKET SHARE (Based on Figures of Private Operators provided by ERU Cell of DOT)
1. Fixed : (BSNL/(PSU+PVT.) = 31297816/39209432 ( 79.82%)
2. GSM : ” = 36683137/199182293 (18.41%)
3. WLL : ” =4579023/70117895 (6.53%)
4. OVERALL MARKET SHARE):

(BSNL/(PSU+PVT.)) =72559976/308509620 (23.51%)
B.S.N.L. lowering ARPU is affecting the financials of the company and year on year its margins of
profit is shrinking and very dismal growth in revenue front. All these are due to slow growth in
customer addition, and poor operational efficiency.
120
Billed Amount (Pre-paid + Post-paid)
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122
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123
ARPU (Pre-paid + Post-paid)

Previous to previous Month Previous Month Current Month
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400
350
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100
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124
Average Revenue per DEL per month (Rs.) February 2009
Achievement ARPU in
Target Current Variation Variation Descending order
Name of the Curr. yr. Last Yr. from last from last
Unit Yr. 28.02.09 28.02.08 year (Rs.) year (%)
A&N 491 369.88 439.75 -69.87 -15.89 CHENNAI 438.18
A.P. 416 317.44 372.01 -54.57 -14.67 CALCUTTA 410.53
ASSAM 448 280.07 376.41 -96.34 -25.59 A&N 369.88
BIHAR 385 287.72 380.86 -93.14 -24.45 MAHARASHTRA 366.89
JHARKHAND 459 338.93 390.94 -52.00 -13.30 U.P.(WEST) 358.27
GUJARAT 400 306.06 349.08 -43.02 -12.32 KARNATAKA 352.12
HARYANA 388 307.48 349.00 -41.52 -11.90 JHARKHAND 338.93
H.P. 304 226.96 266.74 -39.78 -14.91 J. & K. 337.42
J. & K. 542 337.42 423.19 -85.76 -20.27 UTTRANCHAL 322.72
KARNATAKA 512 352.12 438.51 -86.39 -19.70 A.P. 317.44
KERALA 350 269.93 326.06 -56.13 -17.21 TAMIL-NADU 315.88
M.P. 334 256.67 292.15 -35.47 -12.14 CHHATTISGARH 307.73
CHHATTISGARH 396 307.73 344.88 -37.14 -10.77 HARYANA 307.48
MAHARASHTRA 435 366.89 397.75 -30.86 -7.76 GUJARAT 306.06
N.E.-I 410 244.28 361.38 -117.10 -32.40 BIHAR 287.72
N.E.-II 494 159.19 399.32 -240.13 -60.14 ASSAM 280.07
ORISSA 356 220.29 275.89 -55.60 -20.15 KERALA 269.93
PUNJAB 332 260.27 300.20 -39.93 -13.30 PUNJAB 260.27
RAJASTHAN 373 244.46 316.76 -72.30 -22.83 M.P. 256.67
TAMIL-NADU 434 315.88 402.95 -87.07 -21.61 RAJASTHAN 244.46
U.P.(EAST) 301 227.94 230.96 -3.02 -1.31 N.E.-I 244.28
U.P.(WEST) 451 358.27 412.18 -53.91 -13.08 U.P.(EAST) 227.94
UTTRANCHAL 425 322.72 372.19 -49.47 -13.29 H.P. 226.96
WEST BENGAL 320 208.75 267.03 -58.28 -21.83 ORISSA 220.29
CALCUTTA 499 410.53 449.48 -38.95 -8.66 WEST BENGAL 208.75
CHENNAI 577 438.18 531.76 -93.57 -17.60 N.E.-II 159.19
Total 407 304.68 361.00 -56.32 -15.60 Total 304.68
125
Status of Collection Efficiency Descending Order as on February 2009

Target ---> 99.00% Target ---> 97.00% Target ---> 90.00%
Circle 6th Month Circle 3rd Month Circle 2nd Month

CHENNAI 98.79 N.E.-II 154.08 CHENNAI 96.57
KERALA 98.74 CHENNAI 97.42 GUJARAT 95.37
TAMIL-NADU 96.62 KERALA 96.97 KERALA 94.88
KARNATAKA 96.45 GUJARAT 96.26 TAMIL-NADU 92.39
PUNJAB 96.39 PUNJAB 94.92 PUNJAB 91.52
A.P. 95.84 TAMIL-NADU 94.58 KARNATAKA 91.43
GUJARAT 95.13 KARNATAKA 94.57 CALCUTTA 91.35
UTTRANCHAL 94.66 A.P. 93.82 MAHARASHTRA 91.19
RAJASTHAN 94.04 MAHARASHTRA 93.48 A.P. 91.08
H.P. 93.42 U.P.(WEST) 93.28 RAJASTHAN 90.88
MAHARASHTRA 93.30 CALCUTTA 92.57 H.P. 90.46
WEST BENGAL 92.75 UTTRANCHAL 91.33 UTTRANCHAL 88.85
CALCUTTA 92.61 HARYANA 89.67 HARYANA 86.03
J. & K. 91.49 RAJASTHAN 88.45 U.P.(WEST) 85.75
U.P.(WEST) 91.47 H.P. 88.03 ORISSA 83.58
HARYANA 90.90 ORISSA 87.89 A&N 81.77
ORISSA 90.43 J. & K. 85.10 M.P. 81.71
M.P. 89.77 M.P. 84.89 CHHATTISGARH 81.27
A&N 89.28 A&N 84.71 WEST BENGAL 77.71
CHHATTISGARH 87.92 WEST BENGAL 83.50 U.P.(EAST) 73.75
U.P.(EAST) 84.31 CHHATTISGARH 81.96 ASSAM 73.36
ASSAM 84.17 U.P.(EAST) 76.73 J. & K. 73.35
JHARKHAND 81.77 N.E.-I 70.67 N.E.-I 59.02
N.E.-I 72.21 ASSAM 69.06 JHARKHAND 56.59
BIHAR 64.71 BIHAR 68.07 N.E.-II 40.76
N.E.-II 60.42 JHARKHAND 63.55 BIHAR 27.79
Total 93.62 Total 91.36 Total 88.69
Collection Efficiency of top 3 circles as on 28.2.2009
126
6th Month 3rd Month Target

Target -> 99% -> 97% 2nd Month Target-> 90%
CIRCLE C.E. (%) CIRCLE C.E. (%) CIRCLE C.E. (%)
Chennai 98.79 Chennai 97.42 Chennai 96.57
Kerala 98.74 Kerala 96.97 Gujarat 95.37
Tamilnadu 96.62 Gujarat 96.26 Kerala 94.88
Collection Efficiency of lowest 3 circles as on 28.2.09
6th Month 3rd Month Target

Target -> 99% -> 97% 2nd Month Target-> 90%
CIRCLE C.E. (%) CIRCLE C.E. (%) CIRCLE C.E. (%)
NE-I 72.21 Assam 69.06 Jharkhand 56.59
Bihar 64.71 Bihar 68.07 NE-II 40.76
NE-II 60.42 Jharkhand 63.55 Bihar 27.79
As per Auditor General of India report, the total arrears of revenue is over Rs4030.51 Crore at the
end of June-2007 in respect of telephone and telegraph services which will have adverse impact on
the financial health of commercial undertaking like B.S.N.L..
127
128
Indian Telecom market is a big cake and both public and private can share it. Both have to come
forwarded to fulfill the aspiration of India’s telecom services need and a great impact of this will
lead India to the new sunny horizon of prosperity.
Its financing need is too big that government can’t alone do the magic. Magic lies in public-private
partnership, and this is evolving the better picture of India.
129
Unit-11 Telecom Investment opportunities and Potential In India
11.1 Opportunities
India is the fifth largest Telecom services market in the world; US$23 billion revenues in FY 2007.
Industry grew by about 22% in FY 2007 over FY 2006, 290 million subscribers - 39 million fixed lines
and 251 million wireless - (February 2008). The telecom subscriber base has grown at about 40% p.a.
over the last 4 years. Wireless segment subscriber base grew at 62% p.a. .
The Indian telecom market has both public and private sector companies participating. Public sector has
over 27% subscriber market share, down from over 90% in 2000 & Private companies have added
subscribers at a CAGR of 80% since 2000. Mobile operators have deployed both CDMA (62 million
users) and GSM (189 million users) wireless networks (February 2008). Value added service features
constitute about 10% of revenue (2% in 2001).
In India 74% to 100% FDI is permitted for various telecom services. FIPB approval is required for
foreign investment exceeding 49% in all telecom services. 100% FDI is permitted in telecom equipment
manufacturing
India has a telecom policy that aims to encourage private and foreign investment.
Highlights are
An independent regulator – the Telecom Regulatory Authority of India (TRAI).
Revenue-share model for licenses issued by the Government for telecom services in India.
Unified access licenses are available for providing telecom services on a pan-India basis in both,
GSM & CDMA technologies.
Government has simplified NLD and ILD license norms and lowered entry barriers.
New entrants given 3 years to set up infrastructure.
Entry fee and net worth requirements have been reduced.
Policy on Mobile Number Portability (MNP) & 3G to be announced shortly.
Policy on Active Infrastructure Sharing to be announced shortly.
Universal Access Service License (UASL) recently issued to 5 new players.
130
India is expected to be among the fastest growing telecom markets in the world, projected growth of
27% p.a. to reach 500 million subscribers by March 2010. Over 8 million new users are added every
month – mostly in wireless
11.2 Potential
Favourable demographics and socio-economic factors leading to high growth:
o Growth of disposable income combined with changes in lifestyle
Increasing affordability - low tariffs, easy payment plans and low-cost handset
Increased coverage and availability of mobile services
Investment opportunity of over US$76 billion across many areas:
Network infrastructure to increase service coverage
Roll-out of additional network for 2G, 3G, WIMAX etc.
Applications/software for voice, data and broadcasting services
Devices like the mobile handset, set top box, modem, gaming console, and consumer premise
equipments etc.
Nokia, Siemens, Alcatel, Lucent, Elcoteq, LG, Ericsson are all investing in India
131
11.3 Investment Facilitation Agencies
11.3.1 Foreign Investment Promotion Board (FIPB)
The FIPB is a specially empowered board chaired by the Secretary, Ministry of Finance (MoF), set up
specifically for expediting the approval process for foreign investment proposals. There are no
prescribed application forms for applying to FIPB, except in the case of purely technical collaborations.
Proposals for FDI may be sent to the FIPB unit, Department of Economic Affairs, Ministry of Finance
or through any of India’s diplomatic missions abroad. The government has introduced a mailbox facility
for accepting FDI proposals through the Internet and providing an acknowledgement number for these,
with the condition that a hard copy should be received in original before the proposal is considered by
the government.
11.3.2 Foreign Investment Implementation Authority (FIIA)
The Government of India has set up FIIA in the Ministry of Industry and Commerce to facilitate quick
translation of FDI approval and implementation. The organisation also provides a proactive one-stop,
after-care service to foreign investors by helping them obtain the necessary approvals, sort out
operational problems and meet various government agencies to find solutions to problems and maximize
opportunities through the partnership approach.
FIIA, in accordance with its mandate, assumes the following role:
• U nderstands and addresses concerns of investors

• U nderstands and addresses concerns of approving authorities
• Initiates multi-agency consultation
• Refers matters not resolved at the FIA level to higher levels on a quarterly basis, including cases of
project slippage on account of implementation bottlenecks
11.3.3 Investment Comision (IC)
The three-member Investment Commission, set up in the Ministry of Finance in December 2004 by the
Government of India, has Mr. Ratan Tata as Chairman and Mr. Deepak Parekh and Dr. Ashok Ganguly
as members. The Investment Commission advises the Government of India on changes in policy and
procedures that will enhance investment in India, recommends projects and investment proposals that
should be fast tracked/mentored and promotes India as an investment destination.
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11.3.4 Secretariat for Industrial Assistance (SIA)
The SIA, functioning with the Department of Industrial Policy and Promotion, Ministry of Commerce
and Industry, acts as a gateway to industrial investment in India. It provides a single-window clearance
for entrepreneurial assistance and facilitates the processing of investors’ applications requiring
government approval.
11.3.5 India Brand Equity Foundation (IBEF)
IBEF collects, collates and disseminates comprehensive information on India. The website,
www.ibef.org has been developed as a single-window resource for in-depth information and insight on
India. IBEF also produces a wide range of well-researched publications focused on India’s economic
and business advantages.
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Unit-12 Methodology
This chapter will cover the methods we have used in this project. We will describe chosen methods, how
the work has been carried out to answer our purpose, data collection methods. Additionally,
methodology problems that have come up during the process will be presented. Motivations and
justifications for all adopted methods will also be given.
12.1 The road to answering our purpose
The problem formulation process has been iterative, from looking at one problem from a certain view to
another. We began to look for the Indian telecom reforms for fulfilling the communication needs of
Indian people, in the perspective of the vision seen by the government of India, and effect of these
reforms on the socio-economic growth. We have found the relations that showed a connection between
telecommunication and poverty reduction thus making it more interesting for us to investigate the
relationship between telecommunication and how to finance it more innovative.
To be able to do this we have searched for information in literature and articles that reflects this topic,
which has helped us getting a theoretic foundation.
The empirical material of this project consists of survey data collected by different research firms, World
bank report, and government of India economic reports, have been taken into consideration as a
secondary data to bring out some conclusions.
The telecom vendor’s presentations on the growth trends and future turnings have been taken to analyze
and find out the area of investment for complementing the purpose of financing.
Public company, BSNL and private company Airtel, financials available in the public domain have been
taken into consideration to analyze the success of public-private route of investment in India.
How much the telecom investment opportunities in India is, to find out this, we have searched and
analyze the government of India’s public domain information and statistics.
We have gone through many telecom manuals, telecom analyst ‘s views & consulting agencies papers in
internet domain to collect the data related to telecom growth figures, estimate figures, future trend,
financing trend, revenue figures, investment figures etc.
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12.2 Data collection methods
Data can be collected in different ways depending on if it is primary- or secondary data that is to be
collected. To achieve the data necessary to accomplish the purpose of this project mainly secondary data
has been collected through mainly internet domains, government’s reports and literature on the subject,
articles in newspaper and magazines etc.
12.2.2 Secondary data
Problems can however occur, as it can be difficult to find relevant material. It can also be difficult to
value the quality and usefulness of the found material. Example of secondary data are information that
are documented in books, articles, tape recordings and information that are available in other electronic
forms, like internet.
.
The secondary data in this project are government of India telecom growth figures, investment estimate,
social and economic indicators, estimates of consulting firms, World bank reports, companies financials,
Telecom statistics of different research analysts.
12.3 Source critique
When you are using secondary data it is important that you have a critical behavior to the literature. The
main reason for this is that many articles are written by personal reflections. To avoid this kind of
information our ambition is to have as much scientific literature as possible. But we have also used other
sources to learn more about this subject.
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Unit-13 Analysis
Access to modern communications is a basic requirement for economic growth and social harmony. As
an example, so important are communications deemed that the Indian Government, in drawing up a list
of the ten key goals for national growth, put communications on a par with water and energy in terms of
importance.
That access to communications is an essential precursor for economic activity and growth is not in
dispute. In studies carried out by the International Telecommunications Union (ITU) it was found that
just the simple provision of a public pay telephone box in a remote village which previously had no
communications with the outside world stimulated economic activity, increased employment and created
new wealth.
Unfortunately, some twenty five years after the Maitland Report for the United Nations identified the
importance of ensuring universal access to communications, the problem has remained largely
unresolved. In many regions of the world, such as Africa, India, China and South America, there are still
large numbers of people who do not have this access: indeed there are probably hundreds of millions of
people who have not even seen or used a telephone. This gap between the telecommunications “haves”
who have easy access to services such as the Internet and the telecommunications “have nots” who do
not, has been dubbed the “digital divide” and until comparatively recently no viable solutions to
bridging this divide presented themselves.
13.1 The benefits of wireless
The reason that so many people remain unconnected to any kind of communications network is simple.
The cost and effort required to deploy traditional copper or fibre cable networks to remote rural areas
would be astronomical and would take many decades. The lack of existing infrastructure, particularly
electrical power, makes such a task almost impossible.
With wireless technology these problems are easily resolved. Wireless networks have the capability to
cover large areas, regardless of the type of terrain, without the need to lay cables. Wireless base stations
can be self-powered by a variety of methods. And there is no need to provide an individual wired
connection to each household, anyone within the coverage area of the base station with a suitable
terminal can gain access to modern digital voice and data communications services.
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Most importantly, wireless networks can be deployed rapidly. A GSM network, for example, can be
deployed and offering services within a matter of weeks, compared to the time needed to deploy a
wireline network. And wireless is extremely cost effective. With the highly competitive nature of the
global wireless market, particularly in GSM, infrastructure costs are very low. Handset and terminal
costs are also low - and are likely to fall further. The Ultra Low Cost Handset initiative driven by the
GSM Association is targeting the sub-US$20 handset, opening up the market to low-income users.
Wireless has proved its case beyond doubt. In the 25 years since the first cellular phone call was made,
the global cellular market has grown to almost three billion, representing around half of the world’s
population. And growth continues apace. Developments in wireless technology have produced an
evolution from analogue cellular, to digital cellular with the advent of GSM, and now the wireless world
is moving towards IP (Internet Protocol).
13.2 Delivering service to customers
A number of key elements need to be in place for operators to provide communications to the “have-
nots.” Most importantly, wireless services must be affordable as incomes are usually low in lesser
developed markets. Low-cost handsets are essential and, as has already been indicated, this is being
addressed by the global wireless industry through the Ultra Low Cost Handset initiative. Similarly,
operators must be able to deploy their networks cost-effectively, and operational costs must be kept to a
minimum.
Often the business plans which work for operators in mature markets are not appropriate and
considerable “thinking outside the box” is required. Operators such as Bharti Telecom in India, where
average revenue per user (ARPU) is less than US$5 a month and falling, have set the pace with
innovative ideas such as electronic topping up.
And yet operators in lesser developed markets must also look to the future. In the early days of market
growth, basic handsets offering simple voice and text messaging will meet the communications demands
of their customers but very rapidly these demands will change. Subscribers will no longer be satisfied
with basic communications: they will be looking for more advanced data and multimedia services. A
further development will be the demand for personalisation, which is already occurring in mature
markets.
The mobile phone has become the world’s most ubiquitous personal item. Many people would rather
leave home without their wallet than without phone. With such a strong connection it is inevitable that
the owners of mobile phones want to personalise them for their own individual requirements, not just in
regard to simple things such as ring tones and wallpaper, but beyond that with applications such as
personal service menus which cover all the applications and services which they need to fit with their
individual lifestyles.
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Operators in mature markets are already responding to this shift in demand and are offering an
increasing range of services and applications which the end user can adapt and modify to his or her
requirements. The demand for personalisation will soon be a factor which operators in lesser developed
markets will have to address.
The big question for all operators is which wireless technology from the ever-growing range on offer is
most appropriate for the delivery of advanced services and applications.
13.3 Technology choices
The reality is that in order to meet the demands of their customers for an ever-widening range of
advanced services, operators will need to deploy a mix of wireless technologies, each having its own
specific applications.
The most ubiquitous wireless technology is cellular radio which over the last fifteen years has undergone
a transformation. From its introduction in 1991 GSM has evolved from delivering voice and basic text
messaging through GPRS, which first introduced packet switching, to 3G/UMTS, which offers the first
truly capable data communications capability. The next evolution will be to HSDPA and HSUPA which
will deliver wire line data throughput speeds in both the uplink and downlink.
Germany is one of the countries leading the evolution to High Speed Packet Access (HSPA), the term
used to describe the implementation of both HSDPA and HSUPA. T-Mobile is deploying Siemens HSPA
technology to deliver high speed data services to its customers in Germany and Austria. Vodafone in
Germany is also introducing mobile broadband services at DSL speeds using Siemens HSPA solutions.
The service, dubbed “UMTS Broadband,” will initially be offered in Dusseldorf, Frankfurt, Hanover and
Munich. Both the T-Mobile and Vodafone services will deliver download speeds of 1.8mb/s, a
significant improvement on the 384kb/s currently available.
Cellular technologies offer many benefits to operators looking to deliver personalised services to their
customers. Above all cellular provides the key benefit of mobility, that ability to make and receive calls
wherever you are and whenever you want. Another key benefit is global roaming which extends
mobility from the user’s home network to any other GSM/3G network worldwide. Today, for example,
GSM users can use their phone in more than 130 countries. And, of course, the global market place
behind GSM and the technologies that build on GSM ensure the availability of a massive range of cost-
effective mobile phones.
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13.4 Enter WiMAX
Cellular alone, however, may not be the answer to delivering the right service mix and operators need to
look at other wireless technologies as well. The alternative wireless technology attracting the most
interest these days is WiMAX (Worldwide Interoperability for Microwave Access).
WiMAX is a standards-based wireless technology for providing high-speed, last-mile broadband

connectivity to homes and businesses and for mobile wireless networks. WiMAX is based on the IEEE
802.16-2004 specification for wireless high-speed Internet access promoted by the WiMAX Forum.
WiMAX offers a wireless alternative to cable and DSL broadband access. It can be deployed as a
wireless “last mile” solution for fixed and mobile operators planning to deliver wireless DSL services to
rural and remote areas where providing services by cable or fibre is difficult or uneconomic. The
WiMAX specifications have now been evolved to support nomadic users and a new standard is being
defined for mobile WiMAX users.
Operators need to evaluate their technical options as the best solution will nearly always be a mix of
different technologies which together deliver flexible solutions which meet user’s needs.
13.5 Looking to the future
The global wireless industry is constantly looking to the future, working to develop the next generation
of wireless technology. As developing a new radio interface can take up to ten years it is obvious that,
even as 3G reaches maturity and alternative solutions such as WiMAX become more widely deployed,
work is already ongoing to create the next generation.
Although there is still much detailed R&D still to be carried out, the overall picture of what will come
beyond 3G in the 2010/2012 timeframe is already clearly outlined.
Within the next few years mobile networks will move away from having a core network accessed
through a single air interface. Instead mobile networks will have multiple wireless accesses connected
via a unified multimedia IP network. The access networks connected to the common core will include
3G, WLAN, WiMAX, GSM/GPRS/EDGE, as well as fixed networks such as ISDN and DSL.
This flexible approach will enable operators to use combinations of different access technologies to
deliver a service mix which will be unique for each customer. And all this without burdening the user
with any details of the technologies involved – intelligence in the network and devices will hide these
complexities from the consumer. Already operators are planning to use a mix of cellular and WiMAX
technologies to deliver services and this trend will accelerate as the wireless world moves towards its
future vision.
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13.6 Streamlining Telco’s process efficiency
Most operators in emerging markets must contend with comparatively low ARPU. The estimated ARPU
in India is around US$8 per month; only slightly lower than Indonesia, the Philippines, Malaysia,
Thailand and China and around a tenth that of some Western European operators. This low ARPU is off-
set by potential for customer growth. For operators in emerging markets the key is in accessing their
large, often rural populations that typically have low tele-density, thus supporting business models based
on rapid growth and high customer subscription. For example, India covers 3 million km2 and 70% of
the 1.1 billion population lives in rural areas with tele-density of around 2%. While the opportunity for
customer growth is clear, automation and intelligent management of manual activities, leading to
operational efficiency, are critically important when maintaining services over such a geographical
extent.
Some operators in Asia are achieving ratios of staff to subscribers that are almost half that of
counterparts in Western Europe and North America; one Indian operator is achieving a ratio of 1:1750.
This is being achieved initially through rapid growth in subscribers but to sustain this and turn it into
operational efficiency operators look to their OSS to automate and manage the end-to-end operational
processes.
Operators in Eastern Europe and CIS are challenging their legacy platforms as they experience demand
for broadband services. OSS Observer (Emerging Markets Outlook, February 2008) forecasts that
residential broadband will grow faster than revenue, at a CAGR of 27%, as the service is still relatively
new, and ARPUs are low.
Simply put, the legacy OSS cannot efficiently, rapidly and reliably deliver the order-to-cash process,
despite network availability and a consumer base demanding higher value services. Many operators are
replacing legacy with new OSS, often delivering many functions simultaneously.
Operators in emerging markets are using Unified OSS to achieve end-to-end process efficiency and
automation without facing the costs and time-scales of “Best of Breed” OSS.
13.7 Growing pains
In emerging markets, an OSS must take the strain of a rapidly expanding customer base, as this off-sets
low ARPU. Expansion can be extremely rapid; some operators in emerging markets achieve tens of
millions of subscribers within a few years, monthly growth of one million subscribers being fairly
common. Where the subscriber base already exists, as in Eastern Europe, the OSS must support
consumer demands to rapidly transition from low to high revenue services.
Operators in emerging markets need OSS that helps them “go live” with services quickly and manage
the transition from low to high revenue services. This rapid increase in subscriber numbers or service
revenue is often essential for the business plan. This is doubly important because operators in emerging
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markets have often invested heavily in infrastructure and strive for high utilization through customer
growth to balance costs. One emerging market operator estimates that the right choice of OSS saved
around US$200 million in life-time integration costs and delivered sophisticated OSS functionality two
years earlier, when compared to “Best of Breed” OSS. Within seven months of starting up, they were
the country’s largest mobile operator.
Subscribers in emerging markets are technology-literate and competition is relentless, throughout this
intense growth period. Once again taking this February's OSS Observer as the source, competition is a
major reason why India has some of the lowest mobile rates in the world, at two cents per minute. The
need to defend market share and capture new subscribers drives innovation in service offerings.
In addition to coping with demands of growth, the OSS for emerging markets must reduce time-to-
market for new products. Demands for 12-15 new products and features per year for mobile service
providers in emerging markets are not unheard of and are being supported by Unified OSS today.
13.8 Next-generation technologies
For many developing countries, next-generation technologies are not a long-term aim, but a starting
point, since they can solve many problems facing operators. Various operators in emerging markets are
building broadband optic fibre networks, completely bypassing the copper lines still used in many
developed countries. In just a few years, India-based Reliance Communications has become the world’s
largest IP-enabled optic fibre-cable network with 230,000 km now laid. Compared to copper cable,
optical fibre provides far more bandwidth, while being cost comparable and less subject to theft.
Instead of deploying copper or fibre, many countries are deploying wireless coverage to provide an
instant broadband service. Wireless broadband is an excellent means of reaching rural or transient
populations and coverage “black spots”. Unlike copper cable, wireless broadband equipment can be
secured against theft and removes much of the cost of laying and maintaining hundreds of kilometres of
infrastructure.
One shared characteristic of most emerging markets is that they are a hive of innovation and
experimentation. In India 3G and CDMA2000 are currently capturing public interest, but this may be
challenged by WiMAX and technologies such as PLC which continue to exploit niche opportunities.
Operators in emerging markets should be wary of equipment vendors "giving away" their equipment and
technology-aligned management solutions. Instead they should consider longer term use of flexible,
multi-technology and multi-vendor OSS platforms, providing holistic network management, future-
proofing for evolution and customer centric perspectives, as is provided by Unified OSS.
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13.9 Public-Private Investment
India has had the most success attracting more private investment in infrastructure in 2006 than any
other developing country. Long-standing policies in most other South Asian countries are beginning to
bear fruit as well. Nevertheless, delivering the infrastructure services needed to sustain and accelerate
growth in South Asia remains a major challenge. Estimates suggest that closing the gap in service
provision and meeting future needs will require infrastructure investment in the range of 7–8 percent of
GDP a year. The private sector can do more to help close the region’s infrastructure service deficit. But
first, the region’s governments will need to close the infrastructure policy deficit, manifested in many
sectors in distorted pricing, poor governance and accountability, and weak financial and operational
performance.
Telecommunications accounted for 64 percent of investment commitments to infrastructure projects with

private participation in South Asia in 2001–06, a big increase over its 39 percent share in 1996–2000.
This large and growing role of telecommunications is much like the overall trend for developing
countries. But the trend in South Asia is somewhat more extreme. India has seen the most dramatic
growth in private investment in telecommunications.
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India has attracted most of the investment commitments to infrastructure projects with private
participation in the region. This is not surprising, as India is by far the region’s largest economy. But it
has also made the broadest and most sustained efforts to attract investment. Thanks to the success of its
reforms in transport and telecommunications, India attracted more investment commitments to
infrastructure projects with private participation in 2006 than any other developing country. Indeed,
commitments in India were nearly twice those in its nearest rival, Brazil, and well ahead of those in
China.
Estimates from a World Bank study suggest that annual GDP growth of 7.5 percent would lead to annual
investment needs of about 5 percent of GDP to meet the increased demand for infrastructure services
along with another 2 percent of GDP for capital replacement.
India is in the global arena for increased foreign investment - both through the Equity markets - termed
Foreign Institutional Investment (FII) and Foreign Direct Investment (FDI). While its size and growth
potential make India attractive as a market, the most compelling reason for investors to be in India is
that it provides a high return on investment. India is a free-market democracy with a legal and regulatory
framework that rewards free enterprise, entrepreneurship and risk taking.
Over 300 million Indians (63 million households) are expected to have a household income of over
US$6,000 by 2015 (over US$30,000 in PPP* terms). India is experiencing a rapid growth in consumer
spending. The economic reforms since the early nineties have unleashed a new entrepreneurial spirit
creating a vibrant economy supported by rising per capita income. Fast-growing disposable incomes,
increased availability and use of consumer finance and credit cards complement the keenness of the
average Indian to adapt to and assimilate global trends. This has led to the creation of a rapidly growing
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consumer base and one of the world’s largest markets for manufactured goods and services. Growth in
key sectors like infrastructure, services and manufacturing continues at about 10-12% p.a.
13.10 World telecoms and IT outlook

FROM THE ECONOMIST INTELLIGENCE UNIT
Global IT spending will continue to outpace global economic growth over the five years to 2011 as
companies continue to upgrade their corporate networks worldwide. Primary drivers will include the
increased demand from small and medium-sized enterprises, particularly in Asia; continued network
equipment and service upgrades across the business sector; and steady demand from both the corporate
sector and consumers for innovative, converged electronic devices with Internet access.
Sales growth of the PC will slow over the forecast period. From strong double-digit figures of the past
few years, global PC shipments will grow by just 4.3% per annum between 2007 and 2011, according to
IDC, the US IT consultancy. This growth will be driven by emerging markets and Western Europe where
penetration levels are lower.
Purchasing and owning a mobile phone will continue to be a worldwide obsession, but the rate of
growth will moderate from nearly 10% this year to 5% in 2010, according to Pyramid Research, a US
telecom consultancy. Average revenue per subscriber will decline in the period, as operators compete
more aggressively for customers on price.
Worldwide demand for broadband internet connections will grow in double-digits the next five years for
the world’s sixty largest economies to 585m subscribers by 2011. Revenues from broadband services
will leap from US$137bn this year to US$207bn in 2011, accounting for nearly 40% of total fixed line
revenue worldwide, according to Pyramid.
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Price competition will remain keen in the years ahead. The sector’s ability to keep costs low through
global sourcing as well as ruthless attention to supply-chain efficiencies and economies of scale should,
however, stem severe profit erosion for the most efficient players. On the demand side, the increased
popularity of on-demand, online services —as opposed to traditional software with its endless upgrades
– will offer continued opportunities for innovative start-ups. Web 2.0 initiatives, which create a platform
for collaborative, online work environments, will gain traction in a wider circle of industries.
The IT and telecom sectors’ drive to innovate will continue to be backed by its strong commitment to
research and development (R&D). As a result, companies will continue to launch tempting new products
for both the business and consumer market. Some will be tied to global issues, such as the environment.
Rising concerns about the impact of air travel, for example, will convince more managers to trade in
their carry-on luggage for the latest video conferencing systems. The vast majority will be web-linked
products and services, ranging from internet radios to Internet Protocol TV (IPTV) and mobile phones
equipped for banking, TV and social networking. Sales of these goods will dampen the growth in
demand for the traditional PC, as traditional PC-based tasks move to smaller, net-enabled devices. At the
same time, there will be increased reliance on network availability and dependability.
The mobile phone – and its uses – will be transformed by the higher capabilities of the latest handsets
which are now rolling out around the world. Third generation (3G) phones, which have high-speed
internet connections, already outnumber conventional handsets in Japan and are growing quickly in
other developed economies. By early 2007, the Japanese were more likely to be using their phone than
their PC to connect to the internet. According to Pyramid Research, sales of 3G phones or phones with
high-speed net connections will account for 35% of all the world’s mobile phone subscriptions by 2011,
from about 11% in 2006. The growth in revenues from data downloads (video, music included) for
mobiles, according to Pyramid, will be more than three times that of mobile voice revenue over the
forecast period, and is expected to hit US$224bn in 2011.
This growth will be driven by more than the purchase of the latest music video. According to Celent, a
US-based consulting firm, 35% of online banking households will be using mobile banking in 2010, up
from 1% now. Forecasts for mobile TV are varied, but telecom service providers are taking the plunge
nonetheless. In the first quarter of 2007, Sprint Nextel, the third largest US mobile service provider,
signed a deal with ABC to offer full episodes of major prime-time shows streamed directly to
subscribers mobile phones. Customers opting for a US$20/month data plan will be able to watch the
four most recent episodes of their favourite shows for free.
Deals like these underline the rapidly changing environment for telecom service operators. Fixed-line
telecoms revenue, according to Pyramid, will remain flat over the next five years, with income from
broadband and other internet services making up for the rapidly declining sales of fixed line voice
service. This will drop from US$339bn this year to US$273bn in 2011 as more customers move to
mobile phone use only – even inside their house – or internet telephony.
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By contrast, global mobile phone service revenues, according to Pyramid, will jump from US$734bn to
US$875bn in the same period, with mobile phone revenues outstripping fixed-line voice revenues by
more than 320% in 2011. In addition to the sheer convenience of the mobile phone for customers in
wealthy nations, the handset has taken on a surprisingly strong role in the developing world. That is
because the fixed-line infrastructure in many poorer countries remains woefully undeveloped due to
inefficiency, under-investment, high levels of government regulation or all three.
Given the relative ease of setting up a mobile phone network, developing countries will continue to
show the fastest growth rates of mobile phone subscriptions globally. Africa, for example, recorded a
46% increase in mobile customers in 2006, according to Wireless, a telecoms consultancy, and growth is
expected to remain in double digits for the next two years. The Economist Intelligence Unit forecasts
that India will see the number of mobile subscriptions rise by an annual average of 27.5% over the next
five years to reach 390m by 2011. Even so, our forecasts show that India’s penetration will still be just
33% by the end of the forecast period, well below that of other major emerging markets such as China
(46%) Brazil (69%) and Russia (111%).
The research shows clear digital divide between rich and poor will remain for the next five years at least.
Even with the strong growth rates forecast, the penetration of mobile phones in the Middle East and
Africa will reach only 54% by the end of the forecast period, and 39% for Asia, excluding Japan.
However, the main risks to this forecast are on the upside. The number of subscribers could rise faster as
economic growth accelerates, competition continues to drive down prices and new service packages are
offered. In South Africa, this scenario is already playing out – three players MTN, Vodacom and Cell C
battled so hard for customers that mobile penetration hit 75% in 2006.
The leading economies of the developed world – Japan, Europe and North America – will account for
the lion’s share of IT spending globally over the next five years, but there will be some reduction in their
domination of the sector. According to the EIU forecasts, these two regions and Japan will account for
83% of IT spending in 2007 but this will slip to 79% in 2011.
The buoyant economies of India and China will be the major reason for this erosion. Asia, excluding
Japan, will handsomely outpace the developed world in IT spending over the next five years. We
forecast that growth in purchases of IT equipment, software and services in Asia, excluding Japan, will
run at about 8-9%, well above the rate of worldwide growth for the forecast period. China and India
alone will account for more than 55% of the IT spending in the region.
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Unit-14 Findings, Conclusions, and Recommendations
Access to modern communications is a basic requirement for economic growth and social harmony. The
reason that so many people remain unconnected to any kind of communications network is simple. The
cost and effort required to deploy traditional copper or fibre cable networks to remote rural areas would
be astronomical and would take many decades. The lack of existing infrastructure, particularly electrical
power, makes such a task almost impossible.
Wireless is extremely cost effective. With the highly competitive nature of the global wireless market,
particularly in GSM, infrastructure costs are very low.
Despite the ubiquity of GSM and other cellular technologies, there remain many millions of people who
do not have access to communications. Wireless offers a solution to this problem, and over the next few
years access to communications will become the norm rather than the exception. Those communications
will initially be basic voice but, driven by demand from customers, operators will rapidly evolve their
service offerings to deliver a true, personalised, communications experience to customers worldwide.
Operators need to evaluate their technical options as the best solution will nearly always be a mix of
different technologies which together deliver flexible solutions which meet user’s needs.
Unified OSS can deploy faster and with lower risk than “Best of Breed” OSS solutions, avoiding
integration and data synchronization costs. It helps operators in emerging markets achieve RoI on their
infrastructure investments sooner and, through simplicity and flexibility, allows operators to engage their
subscribers with innovative products over evolving networks. Its single data-model exploits
relationships between network, service, customer, SLA and field-engineer in managing the customer
experience. Unified OSS is proven to help operators in emerging markets enjoy business benefits of
sophisticated OSS solutions.
The most innovative way a country or company can finance telecommunication is to find the right
combination of financing ways and strategies, to have the knowledge of which ways to choose from is a
key in finding the optimal combination for a country or company. The main advantage by using a
combination of strategies and financing ways, instead of onesingle way, is that the risks will be reduced,
which is an innovative way of financing telecommunication. This will attract more investors, because
they will get better security on their investments, this is very important. A crucial factor for the country
is to lower all possible risks, like political risk, currency risk and inflation which will reduce the risks for
the investors even more.
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It is also important that the developing countries try to finance locally, which will, for example reduce
the currency risk, and also involve the private sector. By involving the private sector together with the
public sector, the risks reduce and make the telecommunication projects safer to invest in.
Research shows that increased FDI leads to increased economic growth. FDI does not only contribute to
capital accumulation, but it also seems to act as a vehicle for technology transfers and hence to foster
growth by increasing total factor productivity.
Traditional ways to finance telecommunication might not be the most efficient way to reduce
poverty because of the risk that traditional ways stand for. Instead, by using innovative ways the
risks will be reduced which leads to poverty reduction.
In India, public-private partnership has been proved boon for the telecom industry, and
government should focus on this with creating the conducing environment of investment. The
companies should focus on the future technology like NGN, WiMax, GSM, CDMA etc. rather than
wire line, providing voice services, enhancing value added services, concentrating to volume
growth despite lowering ARPU, expanding rapidly and keeping the project costs low with
increased operating efficiency using unified OSS.
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Unit-15 References
15.1 Internet
BSNL Corporate site: http://bsnl.co.in

National Portal of India: http://india.gov.in
The Parliament of India: http://www.parliamentofindia.nic.in
Ministry of Communications and Information Technology: http://www.moc.gov.in
Department of Telecommunication: http://www.dot.gov.in
Private Investment Promotion in Indian Telecom: http://www.dot.gov.in/osp/osp.htm
Telecom Regulatory Authority of India: http://www.trai.gov.in
Telecom Engineering Center: http://www.tec.gov.in
Wireless Planning & Coordination Wing : http://www.wpc.dot.gov.in
Telecommunications Consultants of India Limited : http://www.tcil-india.com
Directory of Indian Ministries and Departments : http://www.nic.in
Ministry of Information Technology : http://www.mit.gov.in
Ministry of Finance : http://www.finmin.nic.in
Secretariat of Industrial Assistance : http://www.indmin.nic.in
Department of Commerce : http://www.commin.nic.in
Ministry of External Affairs : http://www.meadev.nic.in
Reserve Bank of India : http://www.rbi.org.in
Securities and Exchange Board of India : http://www.sebi.gov.in
Confederation of Indian Industry : http://www.ciionline.org
Associated Chambers of Commerce : http://www.assocham.org
Federation of Indian Chambers of Commerce and Industry : http://www.bisnetindia.com
Asia-Pacific Telecommunity (APT) : http://www.aptsec.org
Ameritrade Education Centre: http://www.ameritrade.com
Asia-Pacific Economic Cooperation: http://www1.apecsec.org.sg
Asia Trade Hub: http://www.asiatradehub.com
Bashir, Abdel-Hameed M. (1999), "Foreign Direct Investment and Economic Growth In Some MENA
Countries": http://www.sba.luc.edu/orgs/meea/volume1/bashir.html
Bond, Patrik (1997), “Privatisation, participation and protest in the restructuring of municipal
services”: http://www.thewaterpage.com/ppp_debate1.htm
Bond, Patrik (1998), “Development aspects of municipal infrastructure delivery”:
http://www.local.gov.za/DCD/policydocs/whitepaper/cl2pat.htm
Burr, Chandler (2000), "Grameen Village Phone, Its Current Status and Future Prospects":
http://www.ilo.org/public/english/employment/ent/papers/grameen.htm
Economist: http://www.economist.com
Ericsson: http://www.ericsson.com
European Commission: http://europa.eu.int.
Eurotunnel: http://www.eurotunnel.com
149
International Association of Financial Engineers: http://www.iafe.org

International Finance Corporation: http://www.ifc.org
International Labour Organisation: http://www.ilo.org
International Telecommunication Union: http://www.itu.org
Investorwords: http://www.investorwords.com
Kuritzkes, Andy: http://fic.wharton.upenn.edu/fic/0402.pdf
Methods and Data - Quantlets: http://www.quantlet.com
LOCREGIS: http://www.locregis.net
Millenium Development Goals, http://www.developmentgoals.org
Ministry of Communication - Science and Technology: http://www.mcst.gov.mv
Ministry of Finance, Govt. of India: http://indiabudget.nic.in/es2001-02/chapt2002/chap94.pdf
Montgomery Research: http://www.utilitiesproject.com
OECD: http://www.oecd.org
OECD(2002),"Measuring the Information economy":
http://www.oecd.org/dataoecd/16/14/1835738.pdf
Pacific Telecommunications Council: http://web.ptc.org
Telecomweb: http://www.telecomweb.com
The Handbook of World Stocks, Derivative & Commodity Exchanges:
http://www.exchange-handbook.co.uk.
The World Bank Institute: http://www.worldbank.org/wbi
The World Bank Group: http://www.worldbank.org
UNDP (2001), "Creating a Development Dynamic. Final Report of the Digital Opportunity Initiative":
http://www.opt-init.org/framework/pages/es.html
UN, http://www.un.org
World Bank: http://www.worldbank.org
World Bank (2000a), "Internet Economic Toolkit for African Policy Makers":
http://www.infodev.org/projects/internet/010toolkit/afpt1.pdf
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15.2 Articles
TRAI (March 20, 2006), Recommendations on Issues relating to Broadcasting and Distribution of TV
channels.
Economic Survey, Annual Reports of the Department of Telecommunications, Ministry of

Communications and Technology and the Telecom Regulatory Authority of India (TRAI)–various
issues.
Business Standard: August 22, 2007
Panagariya, Arvind (2004). "India in the 1980s and 1990s: A Triumph of Reforms".
"That old Gandhi magic", The Economist, November 27, 1997.
Ahluwalia, MS. 2001, "State level performance under economic reforms in India" Working Paper No.
96, Center for Research on Economic Development and Policy Reform, Stanford University
Department of Telecommunications, Annual Report 2002-2003, Ministry of Communication and

Information Technology, New Delhi
Department of Telecommunications "Indian Telecommunication Statistics: Policy Framework, Status

and Trends", Economic Research Unit (Statistics Wing), Ministry of Communications, New Delhi.
Bell, Clive & Rich, Robert (1994), "Rural poverty and agricultural performance in post-independence
India", Oxford Bulletin of Economics and Statistics.
Berthelemy, Jean-Claude & Varoudakis, Aristomene (1996), "Economic Growth, Convergence Clubs
and the Role of Financial Development", Oxford Economic Papers.
Bosworth, Barry P. & Collins, Susan M. (1999), "Capital Flows to DevelopingEconomies:

Implications for Saving and Investment", Brookings Institution.
Carkovic, Maria & Levine, Ross (2002), "Does Foreign Direct Investment Accelerate Economic
Growth?", University of Minnesota.
Gerald, Joe (1998), “Defining Financial Engineering”, Financial Engineering News.
Ernst, M. & Ngoc-Nga Pham, N. (1994), Financing infrastructure in developing economies: Benefits",
East Asian Executive Reports.
151
Isaksson, Anders & Levin, Jörgen (1999), "Financial Development, Economic Growth and Poverty
Eradication", Swedish International Development Cooperation Agency (SIDA).
Jacobsen, Karen F. (2003), "Telecommunications Development and Economic Growth in Developing

Countries", Chr. Michelsen Institute.
Levine, Ross (1997), "Financial Development and Economic Growth: Views and Agenda", The
Journal of Finance.
Pedrelli, Maurizio et al (2001), "Developing countries and the ICT revolution", European Parliament
- Directorate General for Research.
Sridhar, Kala S. & Sridhar, Varadharajan (2004), "Telecommunications Infrastructure and Economic
Growth: Evidence from Developing Countries", National Institute of Public Finance and Policy: India.
152
15.4 Literature
Ferreira, David & Khatami, Kamran (1996). Financing Private Infrastructure in Developing
Countries, Washington DC: World Bank.
Kayani, Rogati & Dymond, Andrew (1997), Options for Rural Telecommunications Development,
Washington DC: World Bank.
Merna, Tony & Njiru, Cyrus (2002), Financing Infrastructure Projects, Bodmin: Thomas Telford
Limited.
Neftci, Salih N (2004), Principles of Financial Engineering, London: Elsevier Inc.
Qiang, Christine Z.-W. (2003), Contribution of Information and Communication Technologies to

Growth, Herndon: World Bank.
United Nations Development Programme (2000), Human Development Report, New York: Oxford
University Press.
Dossani, R. (Ed.) 2002, Telecommunications reform in India. Quorom Books.
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Unit-16 Explanation Of Words
In this chapter we will try and explain words that we have used during this project.
3G
3G is the third generation of telecommunication hardware standards and general technology for mobile
networking, superseding 2.5G. It is based on the International Telecommunication Union (ITU) family
of standards under the IMT-2000.
AD C ( Access De fi ci t Ch ar ges)
Access Deficit Charge (ADC), is the amount payable by the service provider at the caller's end to the
service provider at the receiving end for accessing services rendered by the latter in domestic long
distance telephony. This would be the means to subsidize the below cost tariffs, i.e. rental/local call
charges.
AD SL ( Asym me tr ic D igit al S ub scri be r L ines )
Is a form of DSL, a data communications technology that enables faster data transmission over copper
telephone lines than a conventional voiceband modem can provide. The distinguishing characteristic of
ADSL over other forms of DSL is that the volume of data flow is greater in one direction than the other,
i.e. it is asymmetric.
AGR (Adjusted Gross Revenue)
The amount of annual income that a person or company has after various adjustments for income or
corporation tax purposes.
ARPU (Average Revenue Per User)
Average revenue per user (sometimes average revenue per unit) usually abbreviated to ARPU is a
measure used primarily by consumer communications and networking companies, it is the total revenue
divided by the number of subscribers.
Basic Telephone Service
Mean the collection, carriage, transmission and delivery of voice or non-voice messages over the
Licensee’s Public Switched Telephone Network (PSTN) and includes provision of all types of services
except those which require separate licence.
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Bharat Nirman
Bharat Nirman will be a time-bound business plan for action in rural infrastructure for the next four
years. Under Bharat Nirman, action is proposed in the areas of irrigation, road, rural housing, rural water
supply, rural electrification and rural telecommunication connectivity.
BTS (Base Transceiver System)
A base transceiver station (BTS) is a piece of equipment that facilitates wireless communication
between user equipment (UE) and a network. UEs are devices like mobile phones (handsets), WLL
phones, computers with wireless internet connectivity, WiFi and WiMAX gadgets etc. The network can
be that of any of the wireless communication technologies like GSM, CDMA, WLL, WAN, WiFi,
WiMAX etc. BTS is also referred to as the radio base station (RBS), node B (in 3G Networks) or,
simply, the base station (BS). For discussion of the LTE standard the abbreviation eNB for enhanced
node B is widely used.
BWA (Broadband Wireless Access)
Broadband Wireless Access (BWA) systems utilize base stations to provide broadband voice, data, and
video to businesses or homes. It offers an alternative to the wired "last-mile" access links.
Broadband Wireless Access (BWA) technologies provide broadband data access bay wireless means to
consumer and business markets. The most common example of BWA is wireless LAN, but efforts are
intensively continuing to deliver ubiquitous broadband network access by deploying adequate radio
technologies like Metropolitan Area Networks, 3G and wireless LAN which can even be combined in
one single device to ensure seamless operation.
CAGR
Compounded Annual Growth Rate: is the average annual growth rate calculated over a period (either
forecast or historical)
CDMA (Code division multiple access)
Code division multiple access (CDMA) is a channel access method utilized by various radio
communication technologies. It should not be confused with the mobile phone standards called
cdmaOne and CDMA2000 (which are often referred to as simply "CDMA"), which use CDMA as an
underlying channel access method.
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CEWiT (Centre of Excellence in Wireless Technology)

Centre of Excellence in Wireless Technology is public-private initiative to develop indigenous world-
class Next Generation wireless technology in India. It is a research organisation established by the
Indian government’s Dept. of Information Technology in partnership with the Indian telecom industry.
The Telecommunication Network research group at IIT Madras is playing a key role in incubating
CEWiT.
CII
The Confederation of Indian Industry: Founded in 1895, CII is an Indian business association, with a
direct membership of over 5,300 companies from the private as well as public sectors, including SMEs
and MNCs and indirect membership of over 80,000 companies from around 300 national and regional
sectoral associations.
CMIE
The Centre for Monitoring Indian Economy: is an independent economic organization which
specializes in monitoring and researching the Indian economy
CMTS (Cellular Mobile Telephone Service)

Means Telecommunication Service provided by means of a telecommunication system for the
conveyance of messages through the agency of wireless telegraphy where every message that is
conveyed thereby has been, or is to be, conveyed by means of a telecommunication system which is
designed or adapted to be capable of being used while in motion. The Cellular Mobile Telephone
Service refers to transmission of voice or non-voice messages over licensee’s network in real time only.
This Service does not cover broadcasting of any messages voice or non-voice; however, Cell Broadcast
is permitted only to the subscribers of the service.
CP P ( Ca ll ing P ar ty P ay)
Calling Party Pays (CPP) is the arrangement in which the mobile subscriber does not pay for incoming
calls. Instead, the calling party pays for those calls.
Creative financing
Is where the seller provides the financing for the purchase of a property. It is the use of one of several
methods that enable a seller to dispose the good quickly without requiring the buyer to qualify for and
obtain financing at a lending institution. A part of creative financing is microfinance.
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CUG (Closed User Group)
Closed User Groups are groups of mobile telephone subscribers who can only make calls and receive
calls from members within the group. Any other calls would be rejected.
Da rk F ib er
In fiber optic communications, dark fiber or unlit fiber (or fibre) refers to unused fibers, available for
use.
DEL (Direct Exchange Line)

Means a telephone connection between the subscriber’s terminal equipment and the terminal
exchange.E1 level means a primary PCM bandwidth of 2.048 Mb/s.
DOT (Department of Telecom)
The Department of Telecommunications is part of the Ministry of Communications and Information

Technology in the executive branch of the Government of India.
DTH (Direct to Home)
DTH is defined as the reception of satellite programmes with a personal dish in an individual home.
DTS (Department of Telecommunication Services)
The service-providing sector of DoT was split up and called Department of Telecom Services (DTS).
DTS was later corporatized and renamed Bharat Sanchar Nigam Limited (BSNL).
Emerging markets
It is a financial market of a developing country, usually a small market with short operating history.
Factory outlet
Also called an outlet shop, is a shop supposedly selling goods direct from the factory at a discount.
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FBG (Financial Bank Guarantee)
An indemnity letter in which the bank commits itself to pay a certain sum if a third party fails to perform
or if any other form of default occurs. One use is when a bank wants a carrier to release a shipment
which it has financed but the original bills of lading are not yet available for surrender to the carrier.
FD I (For ei gn D irect In ves tm en t )

in its classic form is defined as a company from one country making a physical investment into building
a factory in another country. It is the establishment of an enterprise by a foreigner.
FICCI
Federation of Indian Chambers of Commerce and Industry: Set up in 1927, it is a business association
with over 1,500 corporate members
Financial engineering
Is a process by which quantitative methods are used to design financial transactions and the financial
structure of an organization in order to maximize the organization’s effectiveness.
FIPB (FOREIGN INVESTMENT PROMOTION BOARD )
Has been set up by the government of India in order to increase the flow of foreign direct investments
into the country. By doing this, Foreign Investment Promotion Board (FIPB) has been able to give a
major boost to the Indian economy.
GDP (Gross Domestic Product)
Is the total market value of all goods and services produced in a country in a given year, equal to total
consumer, investment and government spending, plus the value of exports, minus the value of imports.
GNI (Gross national income)
Gross national income (GNI) comprises the total value produced within a country (i.e. its gross domestic
product), together with its income received from other countries (notably interest and dividends), less
similar payments made to other countries.
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GNP (Gross national product)
Is the value of all final goods and services produced within a nation in a given year, plus income earned
by its citizens abroad, minus income earned by foreigners from domestic production.
GSM (Groupe Spécial Mobile)
GSM (Global System for Mobile communications: originally from Groupe Spécial Mobile) is the most
popular standard for mobile phones in the world.
GSS (Gramin Sanchar Sewak Scheme )
The Grameen Sanchar Sewak (GSS) scheme, an ambitious pilot project to introduce rural mobile
services kick started by Bharat Sanchar Nigam Lmited (BSNL) and the Department of Posts in 2002, is
ready to be regularized and go national, after a resounding triumph in the Indian state West Bengal.
HDI (Human Development Index)
Is a summary composite index that measures a country's average achievements in three basic aspects of
human development: longevity, knowledge, and a decent standard of living. Longevity is measured by
life expectancy at birth; knowledge is measured by a combination of the adult literacy rate and the
combined primary, secondary, and tertiary gross enrolment ratio; and standard of living by GDP per
capita (PPP USD).
HPI-1 (Human Poverty Index)
Poverty has traditionally been measured as a lack of income, but this is far too narrow a definition.
Human poverty is a concept that captures the many dimensions of poverty that exists in both poor and
rich countries; it is the denial of choices and opportunities for living a life one has reason to value. The
HPI-1, human poverty index for developing countries, measures human deprivations in the same three
aspects of human development as the HDI (longevity, knowledge and a decent standard of living).
ICT
Information and Communications Technology - or technologies (ICT) is an umbrella term that includes
all technologies for the manipulation and communication of information.
ILD (International Long Distance)

Access to the outside of the country by a service provider.
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Infrastructure Provider (S)
Means a person or persons providing inactive elements of the telecom network including dark
fibers, right of way, duct space, towers, etc. as well as those who provide end to end
bandwidth to other service providers
IN Services
The Intelligent Network, typically stated as its acronym IN, is a network architecture intended both for
fixed as well as mobile telecom networks. It allows operators to differentiate themselves by providing
value-added services in addition to the standard telecom services such as PSTN, ISDN and GSM
services on mobile phones.
In IN, the intelligence is provided by network nodes owned by telecom operators, as opposed to
solutions based on intelligence in the telephone equipment, or in Internet servers provided by any part.
IN is based on the Signaling System #7 (SS7) protocol between telephone network switching centers
and other network nodes owned by network operators.
International Long Distance Telecommunication Service
Means telecommunication services originating within India and terminating outside India and vice
versa.
Internet Broadband
Broadband Internet access, often shortened to just broadband, is high data rate Internet access—typically
contrasted with dial-up access over a 56k modem.
Although various minimum bandwidths have been used in definitions of broadband, ranging up from
64 kbit/s up to 1.0 Mbit/s, the 2006 OECD report is typical by defining broadband as having download
data transfer rates equal to or faster than 256 kbit/s, while the United States FCC, as of 2008, defines
broadband as anything above 768 kbit/s. The trend is to raise the threshold of the broadband definition
as the marketplace rolls out faster services.
Data rates are defined in terms of maximum download because several common consumer broadband
technologies such as ADSL are "asymmetric"—supporting much slower maximum upload data rate than
download.
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IPTV
An IPTV (Internet Protocol Television) service (or technology) is the new convergence service ( or
technology) of the telecommunications and broadcasting through QoS controlled Broadband
Convergence IP Network including wire and wireless for the managed, controlled and secured delivery
of a considerable number of multimedia contents such as Video, Audio, data and applications processed
by platform to a customer via Television, PDA, Cellular, and Mobile TV terminal with STB module or
similar device.
ISD (International Subscriber Dialing)

Means facility for direct connectivity between an end user in India with another end user in another
country by means of direct dialing through licensed networks.
ISP (Internet Service Providers)

An Internet service provider (ISP, also called Internet access provider, or IAP) is a company that offers
its customers access to the Internet. The ISP connects to its customers using a data transmission
technology appropriate for delivering Internet Protocol datagrams, such as dial-up, DSL, cable modem
or dedicated high-speed interconnects.
ISUP
Means Integrated Service Digital Network (ISDN) User Part
ITES
Given the proximity of BPO to the information technology industry, it is also categorized as an
information technology enabled service or ITES. Business process outsourcing (BPO) is a form of
outsourcing that involves the contracting of the operations and responsibilities of a specific business
functions (or processes) to a third-party service provider.
ITU
The International Telecommunication Union is the second-oldest international organization still in

existence (the oldest being the Rhine Commission), established to standardize and regulate international
radio and telecommunications. It was founded as the International Telegraph Union in Paris on 17 May
1865. Its main tasks include standardization, allocation of the radio spectrum, and organizing
interconnection arrangements between different countries to allow international phone calls — in which
regard it performs for telecommunications a similar function to what the UPU performs for postal
services. It is one of the specialized agencies of the United Nations, and has its headquarters in Geneva,
Switzerland, next to the main United Nations campus.
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IU C (I nte rcon nec ti on Us ag e C ha rg es)
It is the charge levied by the telecom company to whom a call is being terminated to.
Local component
Is a factor that you can find locally in an area. For example, in a certain city you can find more capital,
people that has a higher education, more labor and so on. It is what you can find as local condition and
make it to your advantage.
Leased Circuits
Means telecommunication facilities leased to subscribers or service providers to provide for technology
transparent transmission capacity between network termination points which the user can control as part
of the leased circuit provision.
MARR (Multi Access Radio Relay)
Access technology used to provide V.P.T. in rural India.
Microfinance
Is the provision of a broad range of financial services such as deposits, loans, payment services, money
transfers, and insurance to poor and low-income households and their micro enterprises.
MPLS-VPN
MPLS VPN is a family of methods for harnessing the power of Multiprotocol Label Switching (MPLS)
to create Virtual Private Networks (VPNs). MPLS is well suited to the task as it provides traffic isolation
and differentiation without substantial overhead.
National Long Distance
National Long Distance Service means picking up, carriage and delivery of switched bearer
telecommunication service over a long distance network i.e., a network connecting different Short
Distance Charging Areas (SDCAs).
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NGN (Next Generation Networking)
Iis a broad term to describe some key architectural evolutions in telecommunication core and access
networks that will be deployed over the next 5–10 years. The general idea behind NGN is that one
network transports all information and services (voice, data, and all sorts of media such as video) by
encapsulating these into packets, like it is on the Internet. NGNs are commonly built around the Internet
Protocol, and therefore the term "all-IP" is also sometimes used to describe the transformation towards
NGN.
NII (National Information Infrastructure)

The National Information Infrastructure (NII) was the product of the High Performance Computing and
Communication Act of 1991. It was a telecommunications policy buzzword, which was popularized
during the Clinton Administration under the leadership of Vice-President Al Gore. It was a proposed,
advanced, seamless web of public and private communications networks, interactive services,
interoperable hardware and software, computers, databases, and consumer electronics to put vast
amounts of information at users' fingertips.
NII includes more than just the physical facilities (more than the cameras, scanners, keyboards,
telephones, fax machines, computers, switches, compact disks, video and audio tape, cable, wire,
satellites, optical fiber transmission lines, microwave nets, switches, televisions, monitors, and printers)
used to transmit, store, process, and display voice, data, and images; it encompasses a wide range of
interactive functions, user-tailored services, and multimedia databases that are interconnected in a
technology-neutral manner that will favor no one industry over any other.
NI XI ( Na ti on al I nt er ne t E xch an ge of In dia )
The National Internet Exchange of India is the neutral meeting point of the ISPs in India. Its main
purpose is to facilitate exchange of domestic Internet traffic between the peering ISP members. This
enables more efficient use of international bandwidth, saving foreign exchange. It also improves the
Quality of Services for the customers of member ISPs, by avoiding multiple international hops and thus
reducing latency.
NLDO (National Long Distance Operator)
means the telecom operator providing the required digital capacity to carry long distance
telecommunication service within the scope of LICENSE for National Long Distance Service, which
may include various types of tele services defined by ITU, such as voice, data, fax, text, video, and multi
media etc.
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NRI- Non Resident Indian
A non-resident Indian (NRI) is an Indian citizen who has migrated to another country, a person of Indian
origin who is born outside India, or a person of Indian origin who resides outside India. Other terms with
the same meaning are overseas Indian and expatriate Indian. In common usage, this often includes
Indian born individuals (and also people of other nations with Indian blood) who have taken the
citizenship of other countries
NT P 19 99
The New Telecom Policy, 1999 (NTP-99) was approved on 26th March, 1999, to become effective from
1st April, 1999. NTP-99 laid down a clear roadmap for future reforms, contemplating the opening up of
all the segments of the telecom sector for private sector participation.
OECD
The Organisation for Economic Co-operation and Development (OECD) (in French: Organisation de
coopération et de développement économiques, OCDE) is an international organisation of 30 countries
that accept the principles of representative democracy and free-market economy. Most OECD members
are high-income economies with a high HDI and are regarded as developed countries.
It originated in 1948 as the Organisation for European Economic Co-operation (OEEC), led by Robert
Marjolin of France, to help administer the Marshall Plan for the reconstruction of Europe after World
War II. Later, its membership was extended to non-European states. In 1961, it was reformed into the
Organisation for Economic Co-operation and Development by the Convention on the Organisation for
Economic Co-operation and Development.
OFC (Optical fiber cable)
An optical fiber cable is a cable containing one or more optical fibers. The optical fiber elements are
typically individually coated with plastic layers and contained in a protective tube suitable for the
environment where the cable will be deployed.
Open Network Architecture (ONA)
Open network architecture (ONA) is the overall design of a communication carrier's basic network
facilities and services to permit all users of the basic network to interconnect to specific basic network
functions and interfaces on an unbundled, equal-access basis.
The ONA concept consists of three integral components:
>Basic serving arrangements (BSAs)
>Basic service elements (BSEs)
>Complementary network services
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PC O
A Public call office (PCO) is a telephone facility located in a public place in India.
Point of Presence (PoP)
A point-of-presence (POP) is an artificial demarcation point or interface point between communications

entities. A point of presence was a location where a long-distance carrier could terminate services and
provide connections into a local telephone network. An Internet point of presence is an access point to
the Internet. It is a physical location that houses servers, routers, ATM switches and digital/analog call
aggregators. It may be either part of the facilities of a telecommunications provider that the Internet
service provider (ISP) rents or a location separate from the telecommunications provider. ISPs typically
have multiple POPs, sometimes numbering in the thousands. POPs are also located at Internet exchange
points and colocation centres.
Point of Presence (POP) (as applicable to BSO)
Means setting up of switching centre and transmission centre of appropriate capacity by Basic
Telephone Service Provider at the SDCA level to provide, on demand, service of prescribed quality and
grade of service in a non-discriminatory manner.
Point of Presence (POP) (as applicable to NLDO)
Means setting up of switching center and transmission center of appropriate capacities by National Long
Distance Service Provider at the LDCC level to provide on demand inter-circle long distance services of
prescribed quality and grade of service in a non-discriminatory manner.
Point of Presence (POP) (as applicable to ILDO)
Means setting up of switching center and transmission center of appropriate capacity by the Licensee to
provide on demand, service of prescribed quality and grade of service in a non-discriminatory manner.
Point of Interconnection (POI)
Means a mutually agreed upon point of demarcation (based on TRAI determinations/regulations) where
the exchange of traffic between the two Parties takes place.
Pre-Paid Phone Card
Is a card you purchase in advance (for a set price) and use to make short or long distance phone calls.
These cards are usually sold in USD amounts or by number of minutes.
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Private Sector Company

Means a company in which 51% or more of the subscribed and paid up equity is owned and controlled by a
private entity.
Pro-poor growth
Compares changes in the incomes of poor people with respect to changes in the incomes of the non-
poor. Growth is "pro-poor" if the incomes of poor people grow faster than those of the population as a
whole, i.e. inequality declines.
PPP
Public-private partnership (PPP) describes a government service or private business venture which is
funded and operated through a partnership of government and one or more private sector companies.
These schemes are sometimes referred to as PPP or P3.
PSTN
Means the Public Switched Telephone Network.
Public Sector Company (PSU)

Public Sector Undertaking a company (majority) owned, managed and run by the Government of India.
QOS
Means Quality of Service.
R&D
The phrase research and development (also R and D or, more often, R&D), according to the
Organization for Economic Co-operation and Development, refers to "creative work undertaken on a
systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and
society, and the use of this stock of knowledge to devise new applications.
SACFA (Standing Advisory Committee on Radio Frequency Allocation)
SACFA makes the recommendations on major frequency allocation issues, formulation of the frequency
allocation plan, making recommendations on the various issues related to International Telecom Union
(ITU), to sort out problems referred to the committee by various wireless users, citing clearance of all
wireless installations in the country etc.
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SEZ
A Special Economic Zone (SEZ) is a geographical region that has economic laws that are more liberal
than a country's typical economic laws.
Steady State Growth
Is traditional economic theory that growth rates of different countries would converge towards a natural
rate.
TDSAT (Telecommunications Dispute Settlement and Appellate Tribunal )
By the Amendment Act an Appellate Tribunal known as the “Telecom Disputes Settlement & Appellate
Tribunal” has been set up under Section 14 of the Telecom Regulatory Authority of India Act, 1997 by
TRAI (Amendment) Act, 2000 (hereinafter called the “Act”) to adjudicate disputes and dispose of
appeals with a view to protect the interests of service providers and consumers of the telecom sector and
to promote and ensure orderly growth of the telecom sector.
Tele-density
Is main lines per 100 inhabitants.
Telec om mu nica ti on Tari ff Ord er ( TT O) 1 99 9
The Telecommunication Tariff Order, 1999 (TTO ’99) envisaged rebalancing of tariffs wherein an
increase in the rentals was coupled with a reduction in call charges for STD and ISD. The increase in
rentals and the reduction in STD/ ISD call charges required for a rebalancing of tariffs were found to be
too sharp to be implemented in one phase. Therefore, the implementation of tariff re-balancing was
specified in three phases. The first phase was implemented on 1st April, 1999. The second phase was
scheduled to be implemented with effect from 1st April, 2000.
TRAI (Telecom Regulatory Authority of India)
The Telecommunications Regulatory Authority of India (Hindi: भारतीय दरूसंचार ििििमयक पाििकरण)
or TRAI (established 1997) is the independent regulator established by the Government of India to
regulate the telecommunications business in India.
167
UAS (Unified Access Services )
TRAI issued its “Consultation Paper on Unified Access Services Licensing (UASL)” for basic and
cellular services on 16 July 2003. On 27 October 2003, it produced a blueprint for a UASL regime that
called for a single licence for “basic service operators” BSO and cellular carriers. On 11 November
2003, the government endorsed this plan. As a result, both BSO and cellular carriers gained the freedom
to offer basic and/or cellular mobile services using any technology.
UN
The United Nations (UN) is an international organization whose stated aims are to facilitate cooperation
in international law, international security, economic development, social progress, human rights, and
achieving world peace. The UN was founded in 1945 after World War II to replace the League of
Nations, to stop wars between countries, and to provide a platform for dialogue.
There are currently 192 member states, including nearly every recognized independent state in the
world. From its headquarters on international territory in New York City, the UN and its specialized
agencies decide on substantive and administrative issues in regular meetings held throughout the year.
UNDP
The United Nations Development Programme (UNDP) is the United Nations' global development
network. The UNDP is an executive board within the United Nations General Assembly. The UNDP
Administrator is the third highest ranking member of the United Nations after the United Nations
Secretary-General and Deputy Secretary-General.
Headquartered in New York City, the UNDP is funded entirely by voluntary contributions from member
nations. The organization has country offices in 166 countries, where it works with local governments to
meet development challenges and develop local capacity. Additionally, the UNDP works internationally
to help countries achieve the Millennium Development Goals (MDGs).
USAID
The United States Agency for International Development (USAID) is the United States federal
government organization responsible for most non-military foreign aid. An independent federal agency,
it receives overall foreign policy guidance from the United States Secretary of State and seeks to "extend
a helping hand to those people overseas struggling to make a better life, recover from a disaster or
striving to live in a free and democratic country.
USAID advances U.S. foreign policy objectives by supporting economic growth, agriculture and trade;
health; democracy, conflict prevention, and humanitarian assistance. It provides assistance in Sub-
Saharan Africa; Asia and the Near East, Latin America and the Caribbean, Europe, and Eurasia. USAID
168
is organized around three main pillars: Economic Growth, Agriculture, and Trade; Global Health;
Democracy, Conflict, and Humanitarian Assistance.
USL (Universal Service Levy )
Universal Service Levy (USL), is a percentage of the revenue earned by the operators under various
licenses.
USOF (Universal Service Obligation Fund )
The Indian Telegraph (Amendment) Act, 2003 giving statutory status to the Universal Service
Obligation Fund (USOF) was passed in December 2003. The Fund is to be utilized exclusively for
meeting the Universal Service Obligation by providing access to telegraph services to people in the rural
and remote areas at affordable and reasonable prices. The USO Fund was established with the
fundamental objective of providing access to ‘basic’ telegraph services. Subsequently, an Act has been
passed on 29.12.2006 as the Indian Telegraph (Amendment) Act 2006 to amend the Indian Telegraph
Act, 1885 to enable provision of all types of telegraph services.
VAS(Value-Added Services)
Means such services as may be available over a Telecommunications System in addition to Voice
Telephony or Data Services, and specifically those services listed as "Value-Added Services" in the
Regulations or Orders.
VoIP
Voice over Internet Protocol (VoIP) is a general term for a family of transmission technologies for
delivery of voice communications over IP networks such as the Internet or other packet-switched
networks. Other terms frequently encountered and synonymous with VoIP are IP telephony, Internet
telephony, voice over broadband (VoBB), broadband telephony, and broadband phone.
VSAT (A Very Small Aperture Terminal)
Is a two-way satellite ground station with a dish antenna that is smaller than 3 meters. Most VSAT
antennas range from 75 cm to 1.2 m. Data rates typically range from narrowband[vague] up to 4 Mbit/s.
VSATs access satellites in geosynchronous orbit to relay data from small remote earth stations
(terminals) to other terminals (in mesh configurations) or master earth station "hubs" (in star
configurations). g VSATs are most commonly used to transmit narrowband data (point of sale
transactions such as credit card, polling or RFID data; or SCADA), or broadband data (for the provision
of Satellite Internet access to remote locations, VoIP or video). VSATs are also used for transportable,
on-the-move (utilising phased array antennas) or mobile maritime communications.
169
VPT( Vil lag e Pu blic Tel ep ho ne )

Telephone connections provided in rural villages.
Wire-line
In the United States, the pair of wires from the central switch office to a subscriber's home is called a
subscriber loop. It is typically powered by -48V direct current (DC) and backed up by a large bank of
batteries (connected in series) in the central office, resulting in continuation of service during most
commercial power outages. The services provided on this pair of wire are called wire-line services.
Wi Ma x
WiMAX, meaning ‘Worldwide Interoperability for Microwave Access’, is a telecommunications
technology that provides wireless transmission of data using a variety of transmission modes, from
point-to-multipoint links to portable and fully mobile internet access. The technology provides up to
3 Mbit/s broadband speeds without the need for cables. The technology is based on the IEEE 802.16
standard (also called Broadband Wireless Access). The name "WiMAX" was created by the
WiMAX Forum, which was formed in June 2001 to promote conformity and interoperability of the
standard. The forum describes WiMAX as "a standards-based technology enabling the delivery of
last mile wireless broadband access as an alternative to cable and DSL".
WLL(Wireless in Local Loop)

WLL-M is a communication system that connects customers to the landline network using radio
frequency signals instead of conventional copper wires, for the full or part connection between the
subscriber and the exchange
WPC ( Wireless Planning & Co-ordination (WPC) Wing)
Wing of the Ministry of Communications, created in 1952, is the National Radio Regulatory Authority
responsible for Frequency Spectrum Management, including licensing and caters for the needs of all
wireless users (Government and Private) in the country. WPC is divided into major sections like
Licensing and Regulation (LR), New Technology Group (NTG) and Standing Advisory Committee on
Radio Frequency Allocation (SACFA).
170
Unit-17 Appendix
17.1 Basic Information of Indian economy and social structure
171
17.2 Financial Statement of BSNL
172
173
174
175
176
177
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a
telecom service provider of India
178
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a
telecom service provider of India
17.3 Financial Performance of Airtel
179
17.4 World telecoms and technology industry

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Telephone main lines (m) 931.4 980.7 1,028.6 1,073.0 1,114.1 1,150.1 1,174.5 1,186.7 1,200.4 1,217.0
per 100 people 19.5 20.4 21.1 21.8 22.5 23.0 23.2 23.3 23.3 23.5
Mobile subscribers (m) 1,071.2 1,289.0 1,587.6 1,954.1 2,247.3 2,482.6 2,668.0 2,824.8 2,970.1 3,113.9
per 100 people 22.5 26.8 32.6 39.8 45.3 49.6 52.8 55.4 57.8 60.0
Internet users (m) 543.1 648.5 762.8 841.1 926.2 1,030.6 1,143.1 1,258.2 1,376.8 1,503.0
per 100 people 11.4 13.5 15.7 17.1 18.7 20.6 22.6 24.7 26.8 29.0
Broadband subscriber lines 68.5 107.8 159.9 217.1 284.3 351.3 415.0 475.3 532.6 585.9
per 100 people 1.4 2.2 3.3 4.4 5.7 7.0 8.2 9.3 10.4 11.3
Personal computers (per 1000 people) 126.2 144.4 159.5 175.1 198.3 212.1 225.7 239.5 252.9 265.7
(a) 60 countries covered by the Economist Intelligence Unit’s industry service.
Source: Economist Intelligence Unit.
180
17.5 Tele-density Picture In India
181
17.6 Economic and social indicators of India
Demography
Unit Value
Population (Million) 1,065
Urban population (% to total) 28
Birth rate (Per 1,000) 25
Death rate (Per 1,000) 8
(Per 1,000 live
Infant mortality rate 68
births)
Life expectancy (Years) 65.4
Labor force (Million) 427
National Income
Unit Value
Gross Domestic Product (GDP) (US$ Bn) 652
Share in GDP
Agriculture (%) 24
Industry (%) 25
Manufacturing (%) 17
Services (%) 51
Net National Product (US$ Bn) 579
Per capita NNP (US$) 530
Per capita PPP (US$) 2,880
Gross Domestic Savings (% to GDP) 28
Gross Domestic Capital formation
(% to GDP) 26
Agriculture
182
Unit Value
Production
Foodgrains (Mn tonnes) 206.4
Rice (Mn tonnes) 88
Wheat (Mn tonnes) 73
Sugar* (Mn tonnes) 13
Tea (Mn tonnes) 0.8
Tobacco (Mn tonnes) 1
Oilseed (Mn tonnes) 25
Cotton (Mn tonnes) 17
Fruits (Mn tonnes) 48
Vegetables (Mn tonnes) 90
Fertiliser Consumption
per hectare of arable land (kg.) 94
*Centrifugal sugar expressed in raw value
Infrastructure & communications

Unit Value
Electricity production (Bn kwh) 587
Electricity consumption Per capita (kwh) 538
Rail route (km) 63,140
Air passengers carried (Mn) 22.3
Motor vehicles (per 1,000 people) 10
TV sets (per 1,000 people) 83
Telephone main lines (per 1,000 people) 41
Cellular Mobile subscribers (per 1,000 people) 55
Personal computers (per 1,000 people) 7
Internet Users (per 1,000 people) 16
Researchers in R & D (per Mn people) 120
R & D Expenditure (% to GDP) 0.85
External Sector & Exchange rate
183
Unit Value
Exports ($ Bn) 79
As % of world exports (%) 0.8
Exports of commercial services ($ Bn 25
Imports ($ Bn) 107
Forex reserves† ($ Bn) 143
Exchange rate† (Rs./ per US$) 44.00
† Pertains to September 30, 2005
Inflation, Banking & Capital market
Unit Value
Consumer prices (Ave. % ’04-05) 3.8
Domestic credit by
Banking sector (% to GDP) 31
Commercial bank
Lending rate (%) 10.5
Total Insurance density ($) 16
Total Insurance penetration (% to GDP) 3
FDI inflows ($ Bn) 5.5
Listed domestic companies (No.) 5,644
Market capitalisation ($ Bn on 28/7/05) 450
External debt
Unit Value
Total Debt outstanding ($ Bn) 113.6
Debt service ratio (%) 18.3
Social sector indicators
184
Unit Value
Gross enrolment ratio in primary schools (%) 99
Adult literacy (%) 61
Labour cost per worker in manufacturing ($ per year) 1,800
Education expenditure (Public) ( % to GDP) 3.7
(per 1,000
Physicians 0.5
population)
Health expenditure (Public) (% to GDP) 1.5
Health expenditure per capita ($) 8
Conventional contraceptive users (Mn) 16.5
Overall pill users (Mn) 8.2
Poverty
Unit Value
Population below poverty line (%) 26.1
Note: Data generally relate to the latest available period, 2004-05
Source: Statistical Outline of India 2004-05, Economic Survey of India 04-05, CMIE, TSMG.
185
186
187
188
189
17.7 Sector Distribution of Investment Commitments to Infrastructure Projects
190
17.8 Auditor General of India Report on Outstanding Billed Amount in Telecom
191
192
193
Declaration
194
I here by declare that the project report entitled “Descriptive qualitative approach towards the
financing needs of Indian telecom sector and different innovative ways to finance its growth with a
case study of B.S.N.L., a telecom service provider of India.” submitted in partial fulfillment of the
requirements for the degree of Masters of business Administration to Sikkim-Manipal University, India,
is my original work and not submitted for the award of any other degree, diploma, fellowship, or any
other similar title or prizes.
Place: (Neeraj Kumar Singh)
Date: Reg. No:520751161
Examiner’s Certification
195
The project report of Mr Neeraj Kumar Singh, titled “Descriptive qualitative approach towards
the financing needs of Indian telecom sector and different innovative ways to finance its growth
with a case study of B.S.N.L., a telecom service provider of India.” is approved and is acceptable
in quality and form.
Internal Examiner External Examiners
(Srikanta Ghosh)
M.B.A. (Finance & Marketing)
University study centre certificate
196
This is to certify that the project entitled “Descriptive qualitative approach towards the financing
needs of Indian telecom sector and different innovative ways to finance its growth with a case study
of B.S.N.L., a telecom service provider of India.” submitted in partial fulfillment of the
requirements for the degree of ‘Masters of Business Administration’ of Sikkim-Manipal University
of Health, Medical and technological sciences by Mr. Neeraj Kumar Singh, has been worked
under my supervision and guidance and that no part of this report has been submitted for the
award of any other degree, diploma, fellowship or other similar titles or prizes and that the work
has not been published in any journal or Magazine.
Reg.No.:520751161 Certified
(Srikanta Ghosh)
M.B.A.( Finance & Marketing )
197
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service
provider of India
Project Examination Marks Statement for MBA IV Semester (Revised)

University: Sikkim Manipal University Status:
Date of Examination: Learning Centre Code:0249

Roll. Name Internal Evaluator External Evaluator Grand
No. Total
Marks
Neeraj Kumar Singh
520751161
Synopsis Methodolog Analysis Project VIVA Total Synopsis Methodolog Analysis Project VIVA Total 200 Marks
y + Report internal y + Report external
Findings evaluator’s Findings evaluator’s
marks marks
05 10 marks 25 25 35 100 marks 05 10 marks 25 25 35 100 marks
marks marks marks marks marks marks marks marks
IE1 IE2 IE3 IE4 IE5 IE= IE1+ EE1 EE2 EE3 EE4 EE5 EE= EE1+
IE2 + IE3 EE2 +EE3
+ IE4 + + EE4 +
IE5 EE5
We here by certify that the project examination has been conducted on the date as indicated above and the information given above has been verified
and found correct.
1) Internal Examination Signature with Date 2) External Examiner Signature with Date
Name: Srikanta Ghosh Name:
Centre In Charge stamp with signature

198

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Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance

University Centre Address

Title of the project report

By- Neeraj Kumar Singh (Roll No-520751161)

Sikkim-Manipal university of Health, Medical and technological sciences,

The objective of the project can be summarized as follows-

(Neeraj Kumar Singh)

2. Bharat Sanchar Nigam Limited (Company Profile) ………………………………………….9

3. Indian Telecom Sector at a Glance ……………………………………………………………15

10.1 Airtel as a private telecom service provider……………………………………………115

Unit-1 Executive Summary of the Project

Unit-2 Bharat Sanchar Nigam Limited (Company Profile)

2.2 Vision, Mission & Objectives

To become the largest telecom Service Provider in Asia.

• To be the Lead Telecom Services Provider.

• To facilitate R & D activity in the country.

2.3 Organization Chart of BSNL

(Note: 1 US $ = 40.02 INR as on 31-03-2008)

2.5.1 Gross Investment in Fixed Assets

2.5.2 Cumulative Capital Outlay

Unit-3 Indian Telecom Sector at a Glance

3.1 Status of Telecom Sector

3.1.1 Telecom Regulatory Authority of India (TRAI)

3.1.2 New Telecom Policy 1999

Key features of the NTP 99 include:

· National long distance services opened to private operators.

· International Long Distance Services opened to private sectors.

· Department of Telecommunication Services (DTS) corporatised in 2001.

· Spectrum Management made transparent and more efficient.

3.1.3 National Long Distance

Highlights - NLD Guidelines

· Unlimited entry for carrying both inter-circle and intra-circle calls.

· Licence period would be for 20 years and extendable by 10 years.

3.1.4 International Long Distance

3.1.5 Universal Service Obligation Fund

3.1.6 Unified Access Services

3.1.7 Internet Service Providers (ISPs)

3.1.8 Interconnection Usage Charges

3.1.9 Broadband Policy 2004

3.1.10 Tariff Changes

3.1.11 Foreign Direct Investment (FDI)

· Radio Paging Service

FDI upto 100% permitted in respect of the following telecom services: -

· Infrastructure Providers providing dark fibre (IP Category I);

· Electronic Mail; and

The above would be subject to the following conditions: -

In manufacturing sector 100% FDI is permitted under automatic route.

3.1.12 Investment Opportunities and Incentives

· Telecom services projects extended a number of incentives:

· Amortization of license fee

· Enhanced limit of external commercial borrowings

· Rebate on subscription to shares/debentures.

· Scope for tax exemption on financing through venture capital

3.1.13 Network Expansion

3.1.14 Trend in Tele-density

3.1.15 Rural Telephony

· An expanding Indian economy with increased focus on the services sector

· Population mix moving favorably towards a younger age profile

· Urbanization with increasing incomes

3.1.17 Research & Development

· Secure Information Infrastructure that is vital for country’s security.

· Capacity Building through Knowledge for a sustained growth.

· Support Planned Predictive Growth for stability.

· Reduce Rural Urban Digital Divide to reach out to masses.