Indian Telecom Sector: India is the fourth largest telecom market in Asia after China, Japan and South

Korea. The Indian telecom network is the eighth largest in the world and the second largest among emerging economies. Indian telecom sector has undergone a major process of transformation through significant policy reforms. The reforms began in 1980s with telecom equipment manufacturing being opened for private sector and were later followed by National Telecom Policy (NTP) in 1994, NTP'1999 and Broadband Policy 2004. With 359 million telephone subscribers today, India now boasts of having the second largest telecom network in the world after China. The country is adding some 8.5 million to 10 million new mobile subscribers to the network every month to also emerge as one of the fastest growing telecom markets in the world. The telecom industry also saw an estimated $8.5 bn in investment flow in during 2006-07 alone, of which $550 million was in the form of foreign direct investment. All major telecom handsets manufacturers have their presence in India, so do the leading global service companies and infrastructure majors. The next phase of growth will be in the country's vast rural areas that would bring more development. Also, with a tele-density of just 8 percent in rural India, as opposed to 50 percent in urban centers, the hinterland offers good scope for expansion. The Telecom sector in India has witnessed unparalleled growth by global standards. In a little over a decade of wireless telephony, India has moved from a subscriber base of zero to becoming the second-largest market in the world after China. We are hopeful that the progressive policies would facilitate growth and evolution of this sector by providing impetus to free flow of investment, ideas and technology. The progress in the sector has been something to be proud of and it is often viewed as ample testimony to the India growth story. Several developments in the industry are afoot, which will be crucial to defining the state of this industry in times to come. Additional 2G spectrum has been recently allotted, allowing the entry of several new players wherein a majority of them are also acquiring strategic international partners, commencing the globalization of Indian Telecom. The rollout of 3G, which could potentially transform the bouquet of services extended to consumers from vanilla voice and basic data to rich entertainment and far more, is poised for a take-off with the

impending auction of the 3G spectrum. Broadband conventional as well as wireless is poised for a major leap. In the wake of such developments, a concerted effort must be made between the industry and the Government (as the prime mover and regulator on policies in Telecom) on ensuring that policies, regulations and laws are formulated in a manner that creates systematic growth and harnesses the full potential of this industry for the Indian consumer. Confederation of Indian Industry CII, in collaboration with Ernst & Young, has put together the report India 2012: Telecom Growth Continues, which brings out the current status of the industry with a brief perspective on how that growth has been achieved, and sets the context for the landscape in 2012. It focuses on current issues and the envisaged future concerns and potential points of debate, which would need to be jointly addressed by the industry and the Government in order to enable this industry to continue on its already-impressive growth trajectory, and become the cynosure of the Telecom world.

Report highlights some focus areas that will need attention in order to maintain a positive outlook for 2012:

Rural market will be the next growth driver for operators with the near saturation of urban markets. Emphasis on data revenues to provide additional buffer: The launch of 3G services will drive data revenues. Operators will have to lay a larger focus on active and passive sharing. MVNOs and other sharing methodologies will gain further traction. Need to revisit the high levies on the Telecom sector: Revisiting high duties and levies in the sector would help reduce operational costs incurred by the operators and the benefits can eventually be passed on to the customers. The allocation of adequate spectrum is an urgent requirement for new and existing operators. A clear roadmap for future spectrum allocation has to be drawn, whether it is a 2G or 3G platform. Enhance the skill sets of personnel for employment in the Telecom sector to meet the needs of the Telecom industry for 2012. No major impact on telecom industry from the current financial crisis is seen. Despite the global slowdown, the demand for new mobile connections in India is expected to be robust, backed by the strong monthly net additions

The report concludes on the outlook for the Telecom sector in 2012 as hereunder: Wireless subscriber growth is estimated to continue till 2012 as India projected to garner about 640- 650 million mobile subscriptions. Fixed line subscriber base is expected to reach 45-50 million, largely driven by broadband growth. Nearly half of the projected mobile subscriber additions are likely to emerge from rural areas. The availability of adequate spectrum could become a hurdle for future wireless growth. Mergers and acquisitions are expected to reduce the number of operators to 57 key players by 2012. 3G and WiMAX services are expected to gain popularity, initially in the top 20 cities and gradually in the rest of the country. Mobile entertainment and mobile banking are likely to emerge as key data services. MVNOs will begin targeting the niche customer segment by providing differentiated product offerings, which will further intensify competition. Finally, India will have a broadband subscriber base of 25-30 million and an internet subscriber base of 45 million. The mobile is deemed to emerge as the principal means to access the internet in the next stage of evolution of Telecom services. Looking ahead, the growth momentum will continue in the Indian telecom sector over the period 2008-2012. The nature of this growth will however undergo a major transformation. Rural telecom and data services will be the principal drivers of this growth. Policy and regulation will become increasingly important to support and guide this growth and transformation. For requesting the report, please send your request to ict@ciionline.org

Important links for Indian telecommunication sector: Department of Telecom, Ministry of Communications & Information Technology: http://www.dot.gov.in/ Telecom Regulatory Authority of India: http://www.trai.gov.in/Default.asp