1.

1 INTRODUCTION TO SUBJECT

1.1.1 Indian Telecommunications:

It has been zooming up the growth curve at a feverish pace, emerging as one of the key
sectors responsible for India's resurgent economic growth. It is the fastest growing
telecommunication market in the world, and with 353.66 million telephone connections (at
the end of September 2008, include both the wire line as well as the wireless subscribers) is
the third largest telecom market. Simultaneously, overall tele-density has increased to 30.64
percent. While the subscriber base for wireless services has increased to 315.31 million. The
subscriber base of the wire line service has declined to 38.35 million from 38.92 million at
the end of September 2008.

The stupendous growth of the telecommunication companies in

India over the last fifteen years can be attributed to the liberal government of India, economic
policy. The economic renaissance affected in the early 1990s brought around a paradigm shift
on the overall business scenario of India. The telecommunication companies in India went
through a huge make-over during the implementation of the open-market policy of India. The
erstwhile closed market policy was replaced by a more liberal form of economic policy. A
whole new form of Indian Telecommunication Policy was drafted to compliment the change
effected in the economic policy of India. The amendment affected the new
telecommunication policy of India made huge changes with respect to investments and entry
of Foreign Direct Investments (FDI) and Foreign Institution Investors (FII) respectively, into
the virgin Indian telecommunication market. This resulted entry of private, domestic and
foreign telecommunication companies in India. The economic contribution made by these
newly formed telecommunication companies of India is really mentioned worthy and this
industry witnessed highest growth after the Indian Information Technology industry. The
robust growth of Indian economy after the economic liberalization in the 1990s induced
massive change in the telecom policy and new draft was framed and implemented by the
'Telecom Regulatory Authority of India' (TRAI) and 'Department of Telecommunication'
(DOT), under the Ministry of Telecommunication government of India.
1.1.2 Evolution of the Industry:

The important milestones achieved by the telecommunication industry have been shown in
the following table:

Table 1.1: Important Milestones of Telecommunication Industry

Year Important Milestones

1851 First operational land lines were laid by the government near Calcutta (seat of British
power)

1881 Telephone service introduced in India

1883 Merger with the postal system
1923 Formation of Indian Radio Telegraph Company (IRT)
1932 Merger of ETC and IRT into the Indian Radio and Cable Communication Company
(IRCC)

1947 Nationalization of all foreign telecommunication companies to form the Posts,

Telephone and Telegraph (PTT)

1985 Department of Telecommunications (DOT) established, an exclusive provider of

domestic and long-distance service that would be its own regulator (separate from the
postal system)

1986 Conversion of DOT into two wholly government-owned companies: the Videsh
Sanchar Nigam Limited (VSNL) for international telecommunications and Mahanagar
Telephone Nigam Limited (MTNL) for service in metropolitan areas.

1997 Telecom Regulatory Authority of India created.

1999 Cellular Services are launched in India. New National Telecom Policy is adopted.

2000 DoT becomes a corporation, BSNL

1.1.3 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)

BSNL

On October 1, 2000 the Department of Telecom Operations, Government of India became a

corporation and was renamed Bharat Sanchar Nigam Limited (BSNL). BSNL is now India’s
leading telecommunications company and the largest public sector undertaking. It has a
network of over 45 million lines covering 5000 towns with over 35 million telephone
connections. The state-controlled BSNL operates basic, cellular (GSM and CDMA) mobile,
Internet and long distance services throughout India (except Delhi and Mumbai). BSNL will
be expanding the network in line with the Tenth Five-Year Plan (1992-97). The aim is to
provide a telephone density of 9.9 per hundred by March 2007. BSNL, which became the
third operator of GSM mobile services in most circles, is now planning to overtake Bharti to
become the largest GSM operator in the country. BSNL is also the largest operator in the
Internet market, with a share of 21 per cent of the entire subscriber base.

BHARTI

Established in 1985, Bharti has been a pioneering force in the telecom sector with many firsts
and innovations to its credit, ranging from being the first mobile service in Delhi, first private
basic telephone service provider in the country, first Indian company to provide
comprehensive telecom services outside India in Seychelles and first private sector service
provider to launch National Long Distance Services in India. 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, which handles the mobile services in 16 circles out of
a total 23 circles across the country; and the Infotel group, which handles the NLD, ILD,
fixed line, broadband, data, and satellite-based services. Together they have so far deployed
around 23,000 km of optical fiber cables across the country, coupled with approximately
1,500 nodes, and presence in around 200 locations. The group has a total customer base of
6.45 million, of which 5.86 million are mobile and 588,000 fixed line customers, as of
January 31, 2004. In mobile, Bharti’s footprint extends across 15 circles. Bharti Tele-
Ventures' strategic objective is “to capitalize on the growth opportunities the company
believes are available in the Indian telecommunications market and consolidate its position to
be the leading integrated telecommunications services provider in key markets in India, with
a focus on providing mobile services”.

MTNL

MTNL was set up on 1st April 1986 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 – Delhi, the political capital, and
Mumbai, the business capital. In the past 17 years, the company has taken rapid strides to
emerge as India’s leading and one of Asia’s largest telecom operating companies. The
company has also been in the forefront of 5 technology induction by converting 100% of its
telephone exchange network into the state-of-the-art digital mode. The Govt. of India
currently holds 56.25% stake in the company. In the year 2003-04, the company's focus
would be not only consolidating the gains but also to focus on new areas of enterprise such as
joint ventures for projects outside India, entering into national long distance operation,
widening the cellular and CDMA-based WLL customer base, setting up internet and allied
services on an all India basis. MTNL has over 5 million subscribers and 329,374 mobile
subscribers. While the market for fixed wireline phones is stagnating, MTNL faces intense
competition from the private players—Bharti, Hutchison and Idea Cellular, Reliance
Infocomm—in mobile services. MTNL recorded sales of Rs. 60.2 billion ($1.38 billion) in
the year 2002-03, a decline of 5.8 per cent over the previous year’s annual turnover of Rs.
63.92 billion.
HUTCH

Hutch’s presence in India dates back to late 1992, when they worked with local partners to
establish a company licensed to provide mobile telecommunications services in Mumbai.
Commercial operations began in November 1995. Between 2000 and March 2004, Hutch
acquired further operator equity interests or operating licences. With the completion of the
acquisition of BPL Mobile Cellular Limited in January 2006, it now provides mobile services
in 16 of the 23 defined licence areas across the country. Hutch India has benefited from rapid
and profitable growth in recent years. it had over 17.5 million customers by the end of June
2006.

IDEA

Indian regional operator IDEA Cellular Ltd. has a new ownership structure and grand designs
to become a national player, but in doing so is likely to become a thorn in the side of Reliance
Communications Ltd. IDEA operates in eight telecom “circles,” or regions, in Western India,
and has received additional GSM licenses to expand its network into three circles in Eastern
India -- the first phase of a major expansion plan that it intends to fund through an IPO,
according to parent company Aditya Birla Group .

RELIANCE INFOCOMM

Reliance is a $16 billion integrated oil exploration to refinery to power and textiles
conglomerate (Source: [Link] It is also an integrated telecom
service provider with licenses for mobile, fixed, domestic long distance and international
services. 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. Reliance
IndiaMobile, the first of Infocomm's initiatives was launched on December 28, 2002. This
marked the beginning of Reliance's vision of ushering in a digital revolution in India by
becoming a major catalyst in improving quality of life and changing the face of India.
Reliance Infocomm plans to extend its efforts beyond the traditional value chain to develop
and deploy telecom solutions for India's farmers, businesses, hospitals, government and
public sector organizations. Until recently, Reliance was permitted to provide only “limited
mobility” services through its basic services license. However, it has now acquired a unified
access license for 18 circles that permits it to provide the full range of mobile services. It has
rolled out its CDMA mobile network and enrolled more than 6 million subscribers in one
year to become the country’s largest mobile operator. It now wants to increase its market
share and has recently launched pre-paid services. Having captured the voice market, it
intends to attack the broadband market.

TATA TELESERVICES

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 provides basic
(fixed line services), using CDMA technology in six circles: Maharashtra (including
Mumbai), New Delhi, Andhra Pradesh, Tamil Nadu, Gujarat, and Karnataka. It has over
800,000 subscribers. It has now migrated to unified access licenses, by paying a Rs. 5.45
billion ($120 million) fee, which enables it to provide fully mobile services as well. 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. The new licenses,
coupled with the six circles in which it already operates, virtually gives the CDMA mobile
operator a national footprint that is almost on par with BSNL and Reliance Infocomm. The
company hopes to start off services in these 11 new circles by August 2004. These circles
include Bihar, Haryana, Himachal Pradesh, Kerala, Kolkata, Orissa, Punjab, Rajasthan, Uttar
Pradesh (East) & West and West Bengal.
1.1.4 Companies Market Shares

Company Million Subs(Nov 2003) % share

BSNL 40.3 58.8

Reliance 6.1 8.9

Bharti 5.7 8.3

MTNL 4.9 7.2

Hutchison 2.9 4.2

Idea Cellular 2.1 3.0

BPL 1.4 2.1

Tata Teleservices 1.3 1.9

Spice 1.0 1.4

Escotel 0.8 1.1

Fascel 0.8 1.1

Aircel 0.9 1.4

Hexacom 0.2 0.3

Shyam Telelink 0.1 0.2