Indias Telecom Sector

Telecom Industry in India
Corporate Catalyst India A report on Indian Telecom Industry
INDEX
SECTION CONTENTS PAGE NO.

1. Industry Overview 3
1.1 Background 3
1.2 Segment wise Status 6
1.3 Manufacture of Telecom Equipment 9
2. Policy & Initiatives 11
2.1 Regulatory Framework 11

2.2 Government Initiatives 11
2.3 Foreign Direct Investment Policy 12
3. Competition Overview 15
3.1 Major Players 15
4. Challenges and Opportunities 21
4.1 Opportunities 21
1. INDUSTRY OVERVIEW
1.1 Background
The Indian Telecommunications network with 203 million connections is the third
largest in the world and the second largest among the emerging economies of Asia.
Today, it is the fastest growing market in the world. The telecommunication sector
continued to register significant success during the year and has emerged as one of the
key sectors responsible for India’s resurgent India’s economic growth.
• Telecom sector accounts for 1 percent of India’s GDP. Likely to double in 2-

3 years
• Telecom services contribute 30 percent to India’s total service tax revenue
• The Indian telecom sector gives direct employment to more than 4,00,000
people, compared to about 6,00,000 people in China
• Not just the enabler of software, BPO and ITeS companies, it is also the
lifeline of a fast growing E-commerce space
• State-of-the-art telecom infrastructure has led to the rise of cities like Mysore,
Mangalore, Jaipur, Ahmedabad, Kochi on the software services map
• This has helped spread the benefits of a booming Indian economy to beyond
metros and large cities, and wealth creation is happening in tier-2 cities
1.1.1 Growth
The sector, which was growing in the range of 20 to 25 per cent up to the year 2002-03,
has moved to a higher growth path of an average rate of 40-45 per cent during the last
two years.
Indian Telecom Subscriber Annual Growth Rate
45 42.4
40 40
35
30 29
24.725.2 27.7
25 22 24.7 24
20 22 21.9 21.2
15 17 18
15
10
5
0
91-92
92-93
93-94
94-95
95-96
96-97
97-98
98-99
99-00
2001
'2002
2003
2004
2005
2006
Source: Telecom Regulatory Authority of India

This rapid growth has been possible due to various proactive and positive decisions of
the Government and contribution of both by the public and the private sector. The
rapid strides in the telecom sector have been facilitated by liberal policies of the
Government that provide easy market access for telecom equipment and a fair regulatory
framework for offering telecom services to the Indian consumers at affordable prices.
1.1.2 Teldensity
The telecom sector has shown robust growth during the past few years. From a
teledensity of mere 0.5 per cent in the year 1989, it has grown to double digit in the
year 2005.
India's Growing Teledensity
25
22
20
Per cent
15
11.4
10
3.6
5 0.8 1.1 1.6 2.3 5.1
0.5 0.6
0
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007*
* 2007 Figure Targeted
Buoyed by the better-than-expected teledensity in 2005 (11.4 per cent against 8.6 per
cent in 2004) due to the mobile boom in India, Department of Telecommunications
(DoT) has revised the upwards the target of 22 per cent teledensity by 2007.
1.1.3 Wireline Vs Wireless
It has also undergone a substantial change in terms of mobile versus fixed phones and
public versus private participation. The number of telephones has increased from 44.97
million on March 2002 to 203 million by February 2007. The preference for use of
wireless phones has also been predominant in the sector. Wireless subscribers increased
from 6.68 million on March 2002 to 162.53 million on February 2007.
India's Growing telecom subscribers
120 112
100
Million Units
80 69.19
50.53
60
38.29 41.33 40.92 41.42 41.03 40.23 40.39
40 26.15
32.67
15.92
20 6.43
12.69 9.46
0.25 0.61
0
March’02 March’03 March’04 March’05 March’06 Feb-07
Fixed lines CDMA GSM

Source: Telecom Regulatory Authority of India (TRAI)
This is confirmed from the rising share of wireless phones, which increased from 14.85
per cent (6.68 million telephones) in March 2002 to 78.8 per cent (149.59 million
telephones) in December 2006. At present, the mobile subscriber additions in India is
more than 6 million mark, the highest in the world.
The share of private sector in the number of telephones has increased from 15.12 per
cent (6.80 million telephones) in March 2002 to 65.0 per cent (123.44 million telephones)
in December 2006.
Changing market composition: Public

Vs Private
Percentage Share
100%
15.12 20.96
80% 39.27 52.38
57.01
60%
40% 84.88 79.04
60.73 47.62
20% 42.99
0%
2002 2003 2004 2005 2006
PSUs Private
Participation of the private entities in the telecom sector is rapidly increasing rate there
by presenting the enormous growth opportunities. There is a clear distinction between
the Global Satellite Mobile Communication (GSM) and Code Division Multiple Access
(CDMA) technologies used and the graph below shows the divide between the two.
Technology-wise Wireless Market

Share (QE Dec 2006)
CDMA,
(44.19
million)
30%
GSM,
(105.43
million)
70%
1.2 Segment wise Status
1.2.1 Wireline Services
With increasing penetration of the wire less services, the wireline services in the country
is becoming stagnant. The total subscriber base of Wireline that was 38.29 million on
March 2002 registered a negligible growth to reach 40.3 million as on December 2006.
Distribution of Market Share Of Urban and Rural
Wireline Subscriber as on December 31, 2006
9% 8%
83%
BSNL M T NL O ther P r ivate O per ator s
On the other hand, Broadband demand has picked up and promises to stabilise fixed
line growth which is 1.92 million at present and is growing at 0.1 million per month.
Mahanagar Telephone Nigam Limited (MTNL) is one of the first in the world to deploy
the Asymmetric Digital Subscriber Line (ADSL2+) network. Internet Protocol
Television (IPTV) services have started in Delhi and Mumbai on MPEG-4 Part-10
(H.264) based Content Delivery platform.
1.2.2 GSM Sector
In terms of the Global System

for Mobile Communication
(GSM) subscriber base this
now places India third after
China and Russia. China had
401.7 million GSM subscribers
in November 06, Russia 152.2 million. The total GSM subscriber base in India
crossed the 100 million mark to touch 105.43 billion in December 2006.
Private operators have 75 per cent subscribers whereas Public sector Operators (BSNL
& MTNL) have 25 per cent subscribers in the GSM segment.
Number of Public Sector Units (PSUs) licensee are 23 where are number of operational
private operator licensee are 70. Department of Telecommunications has issued 22 new
licensees to private operators in Dec, 06 and these new licenses have not commenced
their services till now.
1.2.3 CDMA Services
CDMA technology was introduced in India as a limited mobility solution. The

introduction of CDMA services has created competition, lowered tariffs and offered
many citizens access to communication services for the first time. The subscriber base
that was merely 1.1 million by the end of 2002, has grown to 44.79 million in the quarter
ending December 2006.
Reliance Communication (former

Reliance Infocomm) has the highest
subscriber base with 60 per cent
market share followed by Tata Tele
Services Limited with 33 per cent
market share, while other players in
CDMA Technology have the
remaining 7 per cent.
1.2.4 Internet Services
Internet services were launched in India on August 15, 1995. In November 1998 the
government opened up the sector to private operators. A liberal licensing regime was put
in place to increase Internet penetration across the country. Though a large number of
Internet Service Providers (ISPs) has been licensed (389) to operate Internet service
today, just the top 20 ISPs service 98 per cent of subscribers.
Growing telecom subscribers
10
8.6
9
8 7.05
7
Million Units
6 5.55
5 4.55
3.64
4 3.23
3 2.03
2 1.32
1 0.18
0
March’02 March’03 March’04 March’05 March’06 Dec.’06
Internet subscribers Broadband subscribers

Similarly, while internet telephony is permitted to 128 ISPs, only 32 actually provide the
service. The slow growth of internet and broadband will make the target of 18 million
internet subscribers and 9 million broadband connections by 2007 tough to achieve.
The growth of IP telephony or grey market is also a serious concern. Government loses
revenue, while unlicensed operation by certain operators violates the law and depletes
licensed operators market share.
New services like IP-TV and IP-Telephony are becoming popular with the demand likely
to increase in coming years. The scope of services under existing ISP license conditions
are unclear.
Internet Subscriber Base in per cent as on December 31, 2006
1.26
1.57 5.45
5.33
6.29
6.96 44.42
9.39
19.32
BSNL MTNL
Sify Bharti Airtel
Reliance Communications VSNL
YOU Telecom Hathway Cable & Datacom
Others
Internet subscribers stood at 8.6 million for the quarter ending 31st December 2006,
registering an increase of 6.00 per cent. The growth trend during the quarter is positive
as compared with last quarter where it was 5.02 per cent. The total Internet subscribers
increased from 6.7 million at the end of December 2005 to 8.6 million at the end of
December 2006 registering a growth of 28.03 per cent.
Bharat Sanchar Nigam Ltd (BSNL) has retained its top position and reported a
subscriber base of 38.12 Lakhs Internet subscribers against 3.55 million during the last
quarter. Mahanagar Telephone Nigam Limited (MTNL) has retained second position
with a subscriber’s base of 1.66 million. Sify Limited is third with a base of 8,06,000
subscriber
1.3 Manufacture of Telecom Equipment
Rising demand for a wide range of telecom equipment, particularly in the area of mobile
telecommunication, has provided excellent opportunities to domestic and foreign
investors in the manufacturing sector. The last two years saw many renowned telecom
companies setting up their manufacturing base in India. Ericsson has set up GSM Radio
Base Station Manufacturing facility in Jaipur. Elcoteq has set up handset manufacturing
facilities in Bangalore. Nokia set up its manufacturing plant in Chennai. LG Electronics
set up plant of manufacturing GSM mobile phones near Pune.
Ericsson recently launched their R&D Centre in Chennai. Flextronics has set up an SEZ
in Chennai. Motorola is likely to go into production in the first quarter of 2007. Other
major companies like Foxconn, Aspcom, Solectron etc have decided to set up their
manufacturing bases in India. The aim is for US$ 2 billion FDI in manufacturing,
doubling the production in 2007 and quadrupling it in 2010. Target has been set for
achieving exports of 6 times from present level of 0.5 billion in 2010.
The Government has already set up Telecom Equipment and Services Export
Promotion Forum and Telecom Testing and Security Certification Centre (TETC). A
large number of companies like Alcatel, Cisco have also shown interest in setting up
their R&D centers in India. With above initiatives India is expected to be a
manufacturing hub for the telecom equipment.
2 POLICY AND INITIATIVES
2.1 Regulatory Framework
The Telecom Regulatory Authority of India (TRAI) was set up in March 1997 as a
regulator for Telecom sector. The TRAI’s functions are recommendatory, regulatory and
tariff setting in telecom sector.
Telecom Disputes Settlement and Appellate Tribunal (TDSAT) came into existence in
May, 2000. TDSAT has been empowered 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
• hear and dispose of appeal against any direction, decision or order of TRAI
Tariffs for telecommunication services have evolved from a regime where tariffs were
determined by Telecom Regulatory Authority of India to a regime where tariffs are
largely under forbearance. TRAI intervenes by regulating the tariffs for only those
services, the markets of which are not competitive.
Universal Service Obligation Fund (USOF) exclusively for meeting the Universal Service
Obligation was established in April, 2002. The Universal Service Levy is presently 5 per
cent 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. Indian Telegraph Act has been amended in October’2006 to provide support for all
telegraph services including mobile and broadband to bridge the digital divide.
With the introduction of the Unified Access Licensing Regime, operators can offer
telecom access services to consumers in a technology neutral manner, subject to fulfilling
certain conditions. Introduction of this regime has also broken the legal/regulatory
impasse between the cellular and basic service providers. Issuance of Intra-Circle
Merger and Acquisition Guidelines provide investors an opportunity to take stakes in
existing telecom operations.
2.2 Government Initiatives
The Government has taken the following main initiatives for the growth of the Telecom
Sector:
• All telecom services have been opened up for free competition for unprecedented
growth
• 217 (Information Technology Agreement) ITA-I items are at zero Customs Duty.
Specified capital goods and all inputs required to manufacture ITA-I, items are at
zero Customs Duty
• Availability of low cost mobile handsets
• The international Long Distance Services (ILDS) opened with effect from April
2002. Calling Party Pays (CPP) regime was implemented with effect from 1st May
2003
• Guidelines for Unified Access Service License regime were issued in November
2003, 27 licenses out of 31 Basic Service Licenses were converted to Unified Access
Service Licenses
• In April 2004, license fee for Unified Access Service Providers (UAS) was reduced
by 2 per cent
• License fee for infrastructure Provider-II reduced from 15 per cent to 6 per cent of
the Adjusted Gross Revenue and spectrum charges between 2 to 4 per cent in June
2004
• Entry fee for NLD licenses was reduced to Rs. 2.5 Crore from Rs. 100 Crore. Entry
fee for ILD reduced to Rs. 2.5 Crore from Rs. 25 Crore
• Lease line charges have been reduced to make the bandwidth available at competitive
prices to facilitate growth in IT enabled services
• One India plan i.e. single tariff of Re. 1/- per minute to anywhere in India was
introduced from 1st March 2006 by the Public Sector Undertakings. This tariff was
emulated by most of the private service providers also. This scheme has led to death
of distance in telecommunication and is going to be instrumental in promoting
National Integration further
• The robust telecom network has also facilitated the expansion of BPO industry that
is having 500,000 employees now and adding 400 employees per day.
• Annual license fee for National Long Distance (NLD), International Long Distance
(ILD), Infrastructure Provider-II, VSAT commercial and Internet Service Provider
(ISP) with internet telephony (restricted) licenses was reduced to 6 per cent of
Adjusted Gross Revenue (AGR) with effort from Jan 2006.
• The Government’s policy is neutral on use of technology by telecom service
providers subject to availability of scarce resources such as spectrum etc.
• Licence Fees 6-10 per cent of Adjusted Gross Revenue (AGR)
2.3 Foreign Direct Investment Policy
Foreign Direct Investment (FDI) was permitted in the telecom sector beginning with the
telecom manufacturing segment in 1991 - when India embarked on economic
liberalisation. FDI is defined as investment made by non-residents in the equity capital of
a company. For the telecom sector, FDI includes investment made by Non-Resident
Indians (NRIs), Overseas Corporate Bodies (OCBs), foreign entities, Foreign
Institutional Investors (FIIs), American Depository Receipts (ADRs)/Global Depository
Receipts (GDRs) etc.
Present FDI Policy for the Telecom sector:

• In Basic, Cellular Mobile, National Long Distance, International Long Distance,
Value Added Services and Global Mobile Personal Communications by Satellite,
FDI is limited to 49 per cent (under automatic route) subject to grant of licence
from the Department of Telecommunications and adherence by the companies
(who are investing and the companies in which investment is being made) to the
licence conditions for foreign equity cap and lock-in period for transfer and
addition of equity and other license provisions.
• Foreign Direct Investment up to 74 per cent permitted, subject to licensing and
security requirements for the following:
- Internet Service (with gateways)
- Infrastructure Providers (Category II)
- Radio Paging Service
• FDI up to 100 per cent permitted in respect to the following telecom services:
- ISPs not providing gateways (Both for satellite and submarine cables)
- Infrastructure Providers providing dark fibre (IP Category I)
- Electronic Mail
- Voice Mail
The above is subject to the following conditions:

- FDI up to 100 per cent is allowed subject to the condition that such companies
would divest 26 per cent of their equity in favour of Indian public within 5 years,
if these companies are 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 per cent shall be considered by Foreign
Investment Promotion Board (FIPB) on a case-to-case basis.
• In the manufacturing sector 100 per cent FDI is permitted under the automatic
route.
• In Basic, Cellular Mobile, paging and Value Added service, and Global Mobile
Personal Communications by Satellite, FDI is permitted up to 49 per cent (under
automatic route) subject to grant of license from Department of
Telecommunications
• Foreign direct investment up to 74 per cent permitted, subject to licensing and
security requirements for the Internet Service (with gateways), Infrastructure
Providers (category-II), Radio Paging Service
• FDI up to 100 per cent permitted in respect of
- ISPs not providing gateways (both for satellite and submarine cables),
- Infrastructure Providers providing dark fibre (IP Category I);
- Electronic Mail; and
- Voice Mail
• FDI up to 49 per cent is also permitted in an investment company, set up for making
investment in the telecom companies licensed to operate telecom services.
Investment by these investment companies in a telecom service company is treated
as part of domestic equity and is not set of against the foreign equity cap.
• Manufacturing - 100 per cent FDI is permitted under automatic route.
• FDI is subject to the following conditions
• FDI up to 100 per cent is allowed subject to the conditions that such companies
would divest 26 per cent of their equity in favour of Indian public in 5 years, if these
companies are 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 per cent shall be considered by FIPB on case to case
basis.
3. COMPETITION OVERVIEW
3.1 Major Players
There are three types of players in telecom services:

• State owned companies (BSNL and MTNL)
• Private Indian owned companies (Reliance Infocomm, Tata Teleservices,)
• Foreign invested companies (Hutchison-Essar, Bharti Tele-Ventures, Escotel, Idea
Cellular, BPL Mobile, Spice Communications)
Bharat Sanchar Nigam Limited (BSNL)
Name Bharat Sanchar Nigam Limited (BSNL)

Year of Establishment 2000
Company Profile Bharat Sanchar Nigam Ltd. is World's 7th largest
Telecommunications Company providing comprehensive
range of telecom services in India: 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.
Sales/Revenues/Turnover USD 8 billion (Turnover)
Global Presence/ Marketing It has a network of over 45 million lines covering 5000
Network towns with over 35 million telephone connections.
Acquisitions / Strategic Alliances
Future Prospect BSNL plans to expand its customer base from present 47
millions lines to 125 million lines and infrastructure
investment plan to the tune of Rs. 733 crores (US$ 16.67
million) in the next three years.
Mahanagar Telephone Nigam Limited (MTNL)
Name Mahanagar Telephone Nigam Limited (MTNL)

Company Profile MTNL was set up by the Government of India to upgrade
the quality of telecom services, expand the telecom
network, introduce new services and to raise revenue for
telecom development needs of India.s key metros. MTNL
with a market share of about 13% of the National telecom
Network has a customer base of 5.92 million. The Govt. of
India currently holds 56.25% stake in the company.
Sales/Revenues/Turnover USD 2.47 billion (Revenue)
Global Presence/ Marketing It has a customer base of 5.92 million
Network
Acquisitions / Strategic Alliances MTNL has formed a Joint Venture company in Nepal by
the name of United Telecom Ltd. (UTL) in collaboration
with Telecom Consultants India Limited (TCIL) in 2001
for providing WLL based basic services in Nepal.
MTNL has set up its 100% subsidiary .Mahanagar

Telephone Mauritius Limited. (MTML) in Mauritius, for
providing basic, mobile and international long distance
services in 2004.
MTNL-STPI IT Services Ltd. is a 50:50 Joint Venture

between Software Technology Parks of India (STPI) and
Mahanagar Telephone Nigam Limited, (MTNL). The JV
formed in 2006.
MTNL has restructured Millenium Telecom Ltd. (MTL) as

a Joint Venture company of MTNL and BSNL with 51%
and 49% equity participation respectively. The company
will now be entering into new business stream of
international long distance operations and will be executing
a project of submarine cable system, both east and west
from India
Future Prospect With the increased economic activity due to liberalization,
growth of lines is expected to be around 400,000 a year.
MTNL is also making its entry in the field of M-commerce
too, which will enable the customers to transact business
with the help of his mobile phone or similar hand held
devices. MTNL is adding nearly 450 more Base
Transceiver Stations (BTS) in Delhi and Mumbai.
Videsh Sanchar Nigam Limited (VSNL)
Name Videsh Sanchar Nigam Limited (VSNL)

Company Profile The Videsh Sanchar Nigam Limited (VSNL) - a wholly
Government owned corporation. The company operates a
network of earth stations, switches, submarine cable
systems, and value added service nodes to provide a range
of basic and value added services and has a dedicated work
force of about 2000 employees. VSNL's main gateway
centers are located at Mumbai, New Delhi, Kolkata and
Chennai.
Sales/Revenues/Turnover USD 1.084 billion (Revenue)
Global Presence/ Marketing The company has 52 subsidiaries in 21 countries as well as
Network operations across four continents.
Acquisitions / Strategic Alliances VSNL acquired Nasdaq-listed Teleglobe International
Holdings Ltd for $239 million in 2005
Videsh Sanchar Nigam Ltd acquired Tyco Global Network,

submarine cable system, for USD 130 million in 2005
Future Prospect The company plans to expand its wholesale voices services
across the EU, to effectively enable enterprise customers
and retail voice carriers to connect to India. VSNL is
adding its capacity to meet the overwhelming demand for
connectivity to India in the wholesale voice services
domain. The company is also offering flexible agreements
and charging methods to meet the growing demands of the
wholesale voice market
Bharti
Name Bharti
Company Profile Bharti Tele-Ventures Limited was incorporated on July 7,

1995 for promoting investments in telecommunications
services. Its subsidiaries operate telecom services across
India. Bharti’s operations are broadly handled by two
companies: the Mobility group and the Infotel group.
Sales/Revenues/Turnover Rs. 1.73 billion (Turnover)

Global Presence/ Marketing The mobile business provides mobile & fixed wireless
Network services using GSM technology across 23 telecom circles
while the Airtel Telemedia Services business offers
broadband & telephone services in 94 cities.
Acquisitions / Strategic Alliances Bharti Telecom and British Telecom formed a 51%:49%
joint venture, Bharti BT Internet for providing Internet
services, in 1998
Bharti Tele-Ventures acquired an effective 32.36% equity

interest in Bharti Mobile (formerly JT Mobiles), the cellular
services provider in Karnataka and Andhra Pradesh circles
in 1999
Bharti Telesonic entered into a joint venture, Bharti

Aquanet, With SingTel for establishing a submarine cable
landing station at Chennai in 2001
A 50:50 joint venture between Bharti and SingTel, to

undertake the largest infrastructure project between
Singapore and Indian companies in 2001
Future Prospect Bharti Airtel company is planning to set up 3000 more
towers as part of enhancing their rural coverage and will
now focus on rural and semi-urban areas.
Reliance Communication
Name Reliance Communications

Company Profile Reliance Telecom's cellular services are available in 340
towns within its eight-circle footprint. Reliance Infocomm
also offered for the first time in India, mobile data services
though its R-World mobile portal. This portal leverages the
data capability of the CDMA 1X network. Reliance
Infocomm offers a complete range of telecom services
covering mobile and fixed line telephony including
broadband, national and international long distance
services, data services and a wide range of value added
services and applications aimed at enhancing productivity
of enterprises and individuals.
Sales/Revenues/Turnover USD 767 million (Revenue)
Global Presence/ Marketing Reliance Communications has IP-enabled connectivity
Network infrastructure comprising over 150,000 kilometers of fiber-
optic cable systems in India, the US, Europe, Middle East,
and the Asia Pacific region.
Acquisitions / Strategic Alliances International wholesale telecommunications service
provider, FLAG Telecom amalgamates with Reliance
Gateway, a wholly owned subsidiary of Reliance Infocomm
in 2004
Reliance Communication acquired a US based Yipes

Holdings, Inc. ("Yipes"), the leading provider of managed
Ethernet services in 2007
Future Prospect The company plans to concentrate on mobile content
services other than voice. It also plans to spend Rs 5 billion
every year for the next three years. This CAPEX will be
used for network expansion of its CDMA business to over
4,500 towns from the present 2,000 towns and expansion
of its GSM operations. The company also plans to launch
international data roaming facility in Canada, followed by
Latin America and then to Asian countries like Japan, South
Korea, China and other countries.
Tata Teleservices
Name Tata Teleservices

Company Profile Tata Teleservices is a part of the $12 billion Tata Group,
which has 93 companies, over 200,000 employees and more
than 2.3 million shareholders. Tata Teleservices’ bouquet of
telephony services includes Mobile services, Wireless
Desktop Phones, Public Booth Telephony and Wireline
services. Other services include value added services like
voice portal, roaming, post-paid Internet services, 3-way
conferencing, group calling, Wi-Fi Internet, USB Modem,
data cards, calling card services and enterprise services.
Sales/Revenues/Turnover
Global Presence/ Marketing Tata Teleservices has presence in across 19 circles that
Network includes Andhra Pradesh, Chennai, Gujarat, Karnataka,
Delhi, Maharashtra, Mumbai, Tamil Nadu, Orissa, Bihar,
Rajasthan, Punjab, Haryana, Himachal Pradesh, Uttar
Pradesh (E), Uttar Pradesh (W), Kerala, Kolkata, Madhya
Pradesh and West Bengal.
Acquisitions / Strategic Alliances Tata Teleservices has acquired Hughes Tele.com (India)
Limited [now renamed Tata Teleservices (Maharashtra)
Limited] in 2002
Future Prospect The company is also expanding its footprint, and has paid
Rs. 4.17 billion ($90 million) to DoT for 11 new licenses
under the IUC (interconnect usage charges) regime.
Vodafone
Name Vodafone
Year of Establishment Acquired majority stake in Hutch Essar in India, by buying
out complete stake of Hutch in 2007, Essar is still minority
stakeholder in company
Company Profile Vodafone Essar in India is a subsidiary of Vodafone Group
Plc and commenced operations in 1994 when its
predecessor Hutchison Telecom acquired the cellular
licence for Mumbai. Vodafone Essar now has operations
in 16 circles covering 86% of India's mobile customer base,
with over 45.78 million customers. Vodafone Essar, under
the Hutch brand, has been named the 'Most Respected
Telecom Company', the 'Best Mobile Service in the country'
and the 'Most Creative and Most Effective Advertiser of

the Year'.
Sales/Revenues/Turnover USD 69,378.08 million (Revenue)
Global Presence/ Marketing It has operations in 25 countries across 5 continents and 40
Network partner networks with over 200 million customers
worldwide.
Acquisitions / Strategic Alliances
Future Prospect Vodafone Essar is expecting to touch over 35 million
customers across 400,000 shops and thousand of hutch’s
own employees along with employees of its business
associates.
Idea
Name Idea
Company Profile Idea Cellular is part of the Aditya Birla Group, which is
India's first truly multinational corporation. Aditya Birla
Nuvo Ltd. holds 35.7 per cent, Birla TMT Holdings Ltd.
44.9 per cent, Grasim 7.5 per cent, and Hindalco 10.1 per
cent in Idea.
Sales/Revenues/Turnover Rs. 24,005.50 million (Sales Turnover)
Global Presence/ Marketing Has a customer base of over 17 million, IDEA Cellular has
Network operations in Delhi, Maharashtra, Goa, Gujarat, Andhra
Pradesh, Madhya Pradesh, Chattisgarh, Uttaranchal,
Haryana, UP-West, Himachal Pradesh and Kerala.
Acquisitions / Strategic Alliances Merged with Tata Cellular Limited in 2001, thereby
acquiring original license for the Andhra Pradesh Circle
Acquired RPG Cellular Limited and consequently the

license for the Madhya Pradesh (including Chattisgarh)
Circlein 2001
In 2004 acquired Escotel, incumbent cellular service

provider in Haryana, UP(W) & Kerala and new licensee in
HP
Acquired Escorts Telecommunications Limited

(subsequently renamed as Idea Telecommunications
Limited) in 2006
Merger of seven subsidiaries with Idea Cellular Limited in

2007
Future Prospect Idea also plans to enter rural and neglected circles as a
strategy to gain subscribers. Other advancements in the
telecom industry will help it cut costs - use of e-mail to
send bills to customers; sharing cell sites; smaller base
transmission stations that will mean lesser infrastructure
requirements and expenses and independent tower
operators. Along with its plan to go for a national long
distance licence, it will also look at international long
distance in the near future.
Market Share of Wireless Operators

(QE Dec 2006)
TTSL IDEA
Others
10% 8%
Hutch 7%
16%
Bharti
21%
BSNL
18% Reliance
20%
4. CHALLENGES AND OPPORTUNITIES
4.1 Opportunities
The telecom sector has been one of the fastest growing sectors in the Indian economy in
the past 4 years. This has been witnessed due to strong competition that has brought
down tariffs as well as simplification of policy environment that has promoted healthy
competition among various players. Due to this reason, telecom density in the country
has risen to over 12 per cent at the end of January 2006, from 3.6 per cent in March
2001.
The mobile sector alone has been growing rapidly and has emerged as the fastest
growing market in the whole worlds. Currently of a size nearing 70 million (GSM and
CDMA), this sector is expected to reach a size of nearly 200 million subscribers by
financial year 2008.
5.28 million mobile subscribers additions were registered in July 2006, compared to 4.78
million in June and 4.25 million in May. More than 200 million subscribers addition is
expected by July 2007
The government has eased the rules regarding inter circle and intra circle mergers. This
has led to a slew of mergers and acquisitions in the recent past. Also as the sector is
moving closer to maturity, further consolidation is a reality and this will lead to the
survival of more profitable players in this segment
In order to further promote the use of Internet in the country the government is taking
proactive steps to develop this sector with the help of the various players in this
segment. For this purpose, the use of broadband technology is being mooted and this
will go a long way in improving the productivity of the Indian economy as well as turn
out to be the next big opportunity for telecom companies after the mobile
communications segment
Non-voice services and VAS are the gold mines. The big takeoff is expected with the
rollout of 3G services in early 2007, once the spectrum issues are sorted out.
Internet users base fast reaching near the English speaking population base. Local
language and content required for further growth
Infrastructure equipment cost is down to a fraction of what prevailed just a few years
ago. Operators can plan better expansion plan now
Increased viability for the operators to expand to semi-urban and rural markets, hence,
accelerate growth further
It’s not without reason that India is tipped to be the world’s third-larges economy by
2050! No wonder if it happens much earlier
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.
At a time when global telecom majors are struggling to cope with their losses and the
rollout of 3G networks, which has been a non-starter for close to a year now; India, with
its telecom success story, represents an attractive and lucrative destination for
investment.

Indias Telecom Sector

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Telecom Industry in India

Corporate Catalyst India A report on Indian Telecom Industry

SECTION CONTENTS PAGE NO.

2. Policy & Initiatives 11

2.1 Regulatory Framework 11

3.1 Major Players 15

4. Challenges and Opportunities 21

• Telecom sector accounts for 1 percent of India’s GDP. Likely to double in 2-

Indian Telecom Subscriber Annual Growth Rate

Source: Telecom Regulatory Authority of India

1.1.3 Wireline Vs Wireless

India's Growing telecom subscribers

Fixed lines CDMA GSM

Changing market composition: Public

Source: Telecom Regulatory Authority of India (TRAI)

Technology-wise Wireless Market

1.2 Segment wise Status

1.2.1 Wireline Services

BSNL M T NL O ther P r ivate O per ator s

1.2.2 GSM Sector

In terms of the Global System

Source: Telecom Regulatory Authority of India

1.2.3 CDMA Services

CDMA technology was introduced in India as a limited mobility solution. The

Reliance Communication (former

Source: Telecom Regulatory Authority of India

1.2.4 Internet Services

Internet subscribers Broadband subscribers

1.3 Manufacture of Telecom Equipment

2 POLICY AND INITIATIVES

2.1 Regulatory Framework

• between a licensor and a licensee

2.2 Government Initiatives

2.3 Foreign Direct Investment Policy

Present FDI Policy for the Telecom sector:

The above is subject to the following conditions:

3.1 Major Players

There are three types of players in telecom services:

Bharat Sanchar Nigam Limited (BSNL)

Name Bharat Sanchar Nigam Limited (BSNL)

Mahanagar Telephone Nigam Limited (MTNL)

Name Mahanagar Telephone Nigam Limited (MTNL)

MTNL has set up its 100% subsidiary .Mahanagar

MTNL-STPI IT Services Ltd. is a 50:50 Joint Venture

MTNL has restructured Millenium Telecom Ltd. (MTL) as

Videsh Sanchar Nigam Limited (VSNL)

Name Videsh Sanchar Nigam Limited (VSNL)

Videsh Sanchar Nigam Ltd acquired Tyco Global Network,

Company Profile Bharti Tele-Ventures Limited was incorporated on July 7,

Sales/Revenues/Turnover Rs. 1.73 billion (Turnover)

Bharti Tele-Ventures acquired an effective 32.36% equity

Bharti Telesonic entered into a joint venture, Bharti

A 50:50 joint venture between Bharti and SingTel, to

Name Reliance Communications

Reliance Communication acquired a US based Yipes

Name Tata Teleservices

and the 'Most Creative and Most Effective Advertiser of

Acquired RPG Cellular Limited and consequently the

In 2004 acquired Escotel, incumbent cellular service

Acquired Escorts Telecommunications Limited

Merger of seven subsidiaries with Idea Cellular Limited in

Market Share of Wireless Operators