Telecom Analysis of Rural and Urban Areas12

STERLING COLLEGE OF ARTS, COMMERCE AND SCIENCE.
1. INTRODUCTION
Today the Indian telecommunications network with over 375 Million subscribers
is second largest network in the world after China. India is also the fastest
growing telecom market in the world with an addition of 9- 10 million monthly
subscribers. The teledensity of the Country has increased from 18% in 2006 to
33% in December 2008, showing a stupendous annual growth of about 50%, one
of the highest in any sector of the Indian Economy. The Department of
Telecommunications has been able to provide state of the art world-class
infrastructure at globally competitive tariffs and reduce the digital divide by
extending connectivity to the unconnected areas. India has emerged as a
major base for the telecom industry worldwide. Thus Indian telecom sector has
come a long way in achieving its dream of providing affordable and effective
communication facilities to Indian citizens. As a result common man today has
access to this most needed facility. The reform measures coupled with the
proactive policies of the Department of Telecommunications have resulted in an
unprecedented growth of the telecom sector.
The thrust areas presently are:
1. Building a modern and efficient infrastructure ensuring greater competitive

environment
1. With equal opportunities and level playing field for all stakeholders.
2. Strengthening research and development for manufacturing, value added
services.
3. Efficient and transparent spectrum management
4. To accelerate broadband penetration
5. Universal service to all uncovered areas including rural areas.
6. Enabling Indian telecom companies to become global players.
COMPARATIVE ANALYSIS OF TELECOM MARKET-URBAN vs RURAL 1

Recent things to watch in Indian telecom sector are:

1. 3G and BWA auctions
2. MVNO
3. Mobile Number Portability
4. New Policy for Value Added Services
5. Market dynamics once the recently licensed new telecom operators start
rolling out
6. Services.
7. Increased thrust on telecom equipment manufacturing and exports.
8. Reduction in Mobile Termination Charges as the cost per line has
substantially reduced
9. Due to technological advancement and increase in traffic.

2. HISTORY OF TELCOMMUNICATION INDUSTRY
The history of telecommunication industry started with the first public

demonstration of Morse’s electric telegraph, Baltimore to Washington in 1844. In
1876 Alexander Graham Bell filed his patent application and the first telephone
patent was issued to him on 7th of March. In 1913, telegraph was popular way of
communication. AT&T commits to dispose its telegraph stocks and agreed to
provide long distance connection to independence telephone system. In 1956,
the final judgment limited the Bell System to Common Carrier Communications
and Government projects but preserving the long-standing relationships between
the manufacturing, researches and operating arms of the Bell System. In this
judgment AT&T retained bell laboratories and Western Electric Company. This
final judgment brought to a close the justice departments seven -year-old
antitrust suit against AT&T and Western Electric which sought separation of the
Bell Systems Manufacturing from its operating and research functions. AT&T was
still controlling the telecommunication industry.
In 1982 , AT&T was requested to divestiture its stock ownership in Western

Electric; termination of exclusive relationship between AT&T and Western
Electric; divestiture by Western Electric of its fifty percent interest in Bell
Telephone Laboratories, AT&T ‘s telecommunication research and development
facility, is a jointly owned subsidiary in which AT&T and Western Electric each
own 50% of the stock; separation of telephone manufacturing from provision of
telephone service and the compulsory licensing of patents owned by AT&T on a
non-discriminatory basis.
It was telecommunication act of 1996 that true competition was allowed. The act
of 1996 opened the market to all competitors. AT&T being the first
telecommunication company paved the road for the telecommunication industry
as well as set the policy and standards for others to follow.

Beginning of telecommunication in India

 1851 - First operational land lines were laid by the government near
Calcutta
 1881- Telephone services introduced in India
 1883 - Merger with postal system
 1923 - Formation of Indian radio Telegraph Company
 1932- Merger of ETC and IRT into Indian Radio and Cable
Communication Company
 1947 - Nationalization of all foreign telecommunication companies

to form the posts, telephone and telegraph, a monopoly run by the
government’s ministry of communications
 1985 - Department of telecommunication established , an exclusive

provider of domestic and long-distance services that would be its
own regulator
 1986 - Conversion of dot into two wholly government – owned

companies the VSNL for international telecommunication and MTNL
for services in metropolitan areas
 1997 - Telecom regulatory authority created

3. REVIEW OF LITERATURE
Girija (1998), in its article “Socioeconomic Implications of Telecommunications

Liberalization: India in the International Context” says that Telecommunications
restructuring have evolved differently in Asia and Latin America. While Asian
governments have moved cautiously in bringing changes to the sector, Latin
American nations have implemented radical ownership and market
transformations. The Indian telecommunications reform falls in between these
two general regional trends. The choice of a high component of competition,
increased private participation, and no privatization of the national carrier set
conditions that will trigger unique socioeconomic effects. This article identifies
and highlights the likely implications of the Indian reform on key economic and
social issues, such as the cost of services, cross-subsidies, network
interconnection, private investments, universal services, employment, and the
possible rise of an information-intensive economy. It does so by comparing and
contrasting the Indian experience with dominant reform strategies elsewhere in
the developing world.
T.H. Chowdary (1999) discusses how Telecom reform, or demonopolization, in

India has been bungled. Shaped by legislation dating back to the colonial era
and post Second World War socialist policies, by the mid-1980s India realized
that its poor telecommunications infrastructure and service needed reform. At the
heart of the problem lay the monopoly by the government’s Department of
Telecommunications (DOT) in equipment, networks and services. The National
Telecom Policy 1994 spelt out decent objectives for reform but tragically its
implementation was entrusted to the DOT. This created an untenable situation in
which the DOT became policymaker, licenser, regulator, operator and also
arbitrator in disputes between itself and licensed competitors. He discusses the
question: ‘Why did India get it so wrong? and What India should do now?

Anand (1999), in his article named “India's economic

policy reforms” says that India was embarked on
economic reforms in July 1991, in the wake of a
balance of payments crisis. In this article, an attempt is
made to review two books and a set of World Bank
reports concerning the progress of these reforms.
Issues concerning economic policy, impact of the
reforms on poverty, sectoral issues relating to
agriculture, industry and infrastructure are briefly
discussed. As reforms enter a more difficult phase,
several challenges remain. Some of this fall under the
“economic agenda'' of measures needed to maintain
economic growth; others can be termed the
“development agenda'' of improving human
development. Progress with regard to the former is not
sufficient to produce results concerning the latter.
Bhattacharya (2000) constructs a vision of the Indian

telecommunication sector for the year 2020. The paper
aims at isolating agents of change based on
international experiences and situates India in the
development continuum. The agents of change have
been broadly categorized into economic structure,
competition policy and technology.
Das (2000), in her paper described the Liberalisation of

the Indian telecommunications services which started
in mid nineties with no change in the existing public
monopoly structure, entirely controlled by Department
of Telecommunications (DoT). In order to evaluate any

proposed industry structure, it is essential to analyse
the production technology of DoT so as to determine
the rationale of liberalisation and sustainability of
competition. Accordingly, the researcher estimates a
frontier multi-product cost function for DoT, where the
cost function has been duly modified to account for the
production
technology of a public monopoly. The study finds that
although DoT displays high allocation inefficiency, it is
still a natural monopoly with very high degree of sub
additively of cost of production. This study implies that
the choice of any reform policy should consider the
trade-off between the loss of scale and scope
economies and cost saving from the reduction in
inefficiency of the incumbent monopoly in the event of
competition.
Rao (2000), in her article named “Internet service

providers in India”, provides a broad view of the role of
an Internet service provider (ISP) and the factors to be
considered before entering the ISP market. Describes
the Internet/ISP scene within India and discusses the
configuration of local, regional and national level ISPs,
and the supporting infrastructure. She also identifies the
various success factors. The global Internet scenario is
discussed regarding the phases of the Internet in India,
i.e. pre and post commercialization. The main players
are described: ERNET, NICNET, STPI, VSNL, MTNL,
Satyam Infoway and Bharti-BT. The financial and legal
implications are highlighted in the Indian context. Many

companies entered the nascent ISP business in India
due to deregulation. Building local content,
foreknowledge of new Internet technologies,
connecting issues, competitiveness, etc. would help in
their sustainability. She concludes that though many
companies entered the nascent ISP businesses in
India
due to deregulation, many of them are unlikely to
survive in the longer term.
Vrmani (2000) estimates the contribution of

telecommunication (or telecom) services to aggregate
economic growth in India. Estimated contribution is
distinguished between public and private sectors to
highlight the impact of telecom privatization on
economic growth. Knowledge of policy determinants of
demand of telecom services is shown to be essential to
enhance growth contribution of telecom services. Using
a recent sample survey data from Karnataka State in
South India, price and income determinants of
demand for telecom services are estimated by capacity
of telephone exchanges
Estimation results offer evidence for significant negative
own price elasticity and positive income elasticity of
demand for telecom services.
Narinder (2004), in his article “Enhancing Developmental

Opportunities by Promoting ICT Use: Vision for Rural

India” talks about the foremost benefits of Information

and Communication Technologies (ICTs) in developing
countries that can be helpful in improving governance
including public safety and eradication of illiteracy. The
benefits of ICTs have not reached the masses in India
due to lack of ICT infrastructure, particularly in rural
areas, where two-third of the population of the country
lives. Even in cities and suburban areas, use of ICTs is
not popular due to lack of awareness to its use, computer
illiteracy, and absence of practical applications. India is
the largest country in South Asia, with a population of
over one billion people and its telecom sector is presently
experiencing fast growth phases. However telephony
penetration in villages is less than two percent of the
rural population and about 15 percent of the villages are
still without any telephony service. Universal access to
ICTs in rural areas has been planned and is being
implemented through Public Tele Info Centers having
voice data and video, as majority of villagers in India
cannot afford a separate home connection. Illiteracy in
rural areas is as high as 40 percent and in some tribal
belts hardly about 20 percent people are literate. There
are 35 million children in age group of 6–11 years, who
are out of school and one out of four drops out during
primary classes. Education and training, therefore, must
be given the top priority if advantages of ICTs are to be
harnessed. Indian economy is agriculture based and
employs maximum workforce. Improvement in agriculture
productivity can help in reducing rural poverty. Adoption
of ICT in agriculture will play an increasingly important
role in crop production and natural resource
management. The other critical factor is technological

challenges for universal access to ICTs to bring down the
network access cost.
Nikam, Ganesh, Tamizhchelvan (2004), analyses that
changing face of India in
bridging the digital device. He reiterated - “India lives in
villages” said the Father of the Nation, Mahatma Gandhi.
With 1,000 million people and 180 million households,
India is one of the biggest growing economies in the
world. With the advent of the Information, Communication
and Technology (ICT) revolution, India and its villages
are slowly but steadily getting connected to the cities of
the nation and the world beyond. Owing to the late Rajiv
Gandhi, India is now a powerful knowledge economy,
and though India may have been slow to start, it certainly
has caught up with the West and is ahead in important
respects. The Government, the corporate sector, NGOs
and educational institutions have supported rural
development by encouraging digital libraries, e-business,
e-learning and e-governance. The aim of this paper is to
touch upon and highlight some of the areas where, by
using ICT, the masses have been reached in this way. A
follow-up paper will outline collections of significant
cultural material which, once national IT strategies are
fully achieved, could form part of a digitally preserved
national heritage collection.
Dey (2004), in her article talks about the discussions

between the Federal
Communications Commission (FCC) and
communications policy makers and regulators in other

countries and how they have gleaned several clusters of
issues where further research would directly benefit
them. Recently, there have been two notable shifts. First,
as the acceptance of the competition model over the
monopoly model for telecommunications markets takes
deep effect in regulators all over the world, questions
regarding process and procedure for regulation are
becoming ever more urgent. This paper discusses
current questions regarding decision making,
enforcement, and understanding consumer issues that
arise often in the FCC's discussions with other
regulators. Second, technological change is potentially
shifting market definitions. In the FCC's discussion with
other regulators over the last two years, the overlap of
wireline telecom, wireless telecom and cable television
has become more pronounced.
Singh (2005), in his article “The role of technology in the

emergence of the information society in India” describes
the role that information and communication technologies
are playing for Indian society to educate them formally or
informally which is ultimately helping India to emerge as
an information society. Though India has a huge
population, the illiteracy rate is also huge in this country.
The paper has taken an approach to find the historical
situation and present the prevailing scenario as well as
the change that are taking place with the application of
ICT to the advantage of the society in different areas
including daily life. India is making all out efforts to be
counted among the developed nations of the world. The

article also describes the considerable attention India is
taking for application of technology, development of
infrastructure and human resource for meeting national
needs. Basically India is building an information society.
Technology has helped society to cut across the
traditional boundaries for getting converted into an
emerging information society. The study concludes that
The Indian software and services industry has
significantly helped to boost the Indian economy. In IT-
enabled services too, India has been clearly perceived to
be the dominant hub. The Indian software sector is being
recognized as the single largest contributor to
incremental market capitalization in India but the sector is
still small in terms of contribution to GDP, especially
when compared to other large sectors in the economy
like agriculture and manufacturing. Similarly, the
telecommunication sector has contributed a lot but still
has a considerable way to go. The paper also enforces
that comparisons of India’s telecommunication statistics
with those of developed and other emerging economies
show that the country is still far behind its
contemporaries.
Mr. Banka (2006) gives an overview of the mergers and

acquisitions in the
telecommunication industry. According to him
Governments decision to raise the foreign investment
limit to 74% is expected to spur fresh rounds of mergers
and takeovers in India. He foresees a sector that

represents humongous opportunity waiting to be tapped

by Indian and foreign conglomerates.
Thomas (2007), in his article describes the contribution

made by telecommunications in India by the state and
civil society to public service, this article aims to identify
the state’s initial reluctance to recognize
telecommunications provision as a basic need as against
the robust tradition of public service aligned to the postal
services and finds hope in the renewal of public service
telecommunications via the Right to Information
movement. The article follows the methodology of
studying the history of telecommunications approach that
is conversant with the political economy tradition. It uses
archival sources, personal correspondence, and
published information as its research material. The
findings of the paper suggests that public service in
telecommunication is a relatively ‘‘new’’ concept in the
annals of Indian telecommunications and that a de-
regulated environment along with the Right to
Information movement holds significant hope for making
public service telecommunications a real alternative. The
article provides a reflexive, critical account of public
service telecommunications in India and suggests that it
can be strengthened by learning gained from the
continual renewal of public service ideals and action by

the postal services and a people-based demand model

linked to the Right to Information Movement. All studies
done by the researcher suggests that the right to
information movement has contributed to the
revitalisation of participatory democracy in India and to a
strengthening of public service telecommunications.
Anderson (2008), in his single executive interview titled

“Developing a route to market strategy for mobile
communications in rural India An interview with Gurdeep
Singh, Operations Director, Uttar Pradesh, Hutch India”
suggests that managers need to go beyond traditional
approaches to serving the poor, and innovate by taking
into account the unique institutional context of developing
markets. His practical implication says that the
experience of Hutchison Essar in India provides some
important lessons for mobile network operators (MNOs)
and other firms in other developing markets who are
hoping to serve the rural poor: Hutchison has recognized
the value of corporate and non-corporate partners. The
company has proactively established relationships with
individual entrepreneurs, and has provided has provided
development support to other partners such as
distributors. The company has recognized the value of
leveraging existing local institutions, and has seen gaps
in local infrastructure or missing services as potential
opportunities rather than barriers to growth. The
company has seen the rural market as an opportunity –
not just an obligation to be served because of universal
service obligations. Also this article demonstrates that
MNOs can deliver availability and affordability to achieve
increased individual or household penetration through

business model innovation.
Shah (February, 2009), has analysed Indian telecom

industry and studied the sector keeping in mind three
companies; namely Bharti, R.Comm and idea in the
background of recent global meltdown. The study
suggests that though there is no sign of slowdown in this
sector, but surely a strong turmoil is going on in the
industry. The study states that the sector is fairly immune
from the current economic downturn & does provide a
good defensive bet in medium term. With the help of
newer technologies, wireless penetration is expected to
increase in the near future, which is basically fuelling the
growth of the sector. While the 3G / Broadband adoption
would ensure long term growth momentum, the article
has thoroughly investigated about the intense
competitive scenario, pricing pressure, high capital
intensity & substantial regulatory uncertainties currently
faced by
the industry. The article has also described the cause of
being relatively safe of this industry. The causes
described by Shah are increasing rural coverage, rising
affordability, declining handset/subscription costs,
substantially low tariffs & established brand/distribution.
However, the study also cautions the telecom industry
that a steeper economic slowdown could start impacting
the subscriber usage patterns as well as operator capital
investments & thereby could substantially restrict
revenue growth rates going forward.

4. INDIAN TELECOMMUNICATION INDUSTRY

The Indian telecommunications 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. India has surpassed US to become the second
largest wireless network in the world with a subscriber
base of over 300 million in April, according to the
Telecom Regulatory Authority of India (TRAI).
India's telecom sector has shown massive upsurge in the
recent years in all respects of industrial growth. From the
status of state monopoly with very limited growth, it has
grown in to the level of an industry. Telephone, whether
fixed landline or mobile, is an essential necessity for the
people of India. This changing phase was possible with
the economic development that followed the process of
structuring the economy in the capitalistic pattern.
Removal of restrictions on foreign capital investment and
industrial de-licensing resulted in fast growth of this
sector. At present the country's telecom industry has
achieved a growth rate of 14 per cent. Till 2000, though
cellular phone companies were present, fixed landlines
were popular in most parts of the country, with
government of India setting up the Telecom Regulatory
Authority of India, and measures to allow new players
country, the featured products in the segment came in to
prominence. Today the industry offers services such as
fixed landlines, WLL, GSM mobiles, CDMA and IP

services to customers. Increasing competition among

players allowed the prices drastically down by making the
mobile facility accessible to the urban middle class
population, and to a great extend in the rural areas. Even
for small shopkeepers and factory workers a phone
connection is not an unreachable luxury. Major players in
the sector are BSNL, MTNL, Bharti Teleservices,
Vodafone, BPL, Tata, Idea, etc. With the growth of
telecom services, telecom equipment and accessories
manufacturing has also grown in a big way. Indian
Telecom sector, like any other industrial sector in the
country, has gone through many phases of growth and
diversification. Starting from telegraphic and telephonic
systems in the 19th century, the field of telephonic
communication has now expanded to
make use of advanced technologies like GSM, CDMA,
and WLL to the great 3G
Technology in mobile phones. Day by day, both the
Public Players and the Privat
Players are putting in their resources and efforts to
improve the telecommunication technology so as to give
the maximum to their customers.
The year 2007 saw India achieving significant

distinctions:
1 Having the world's lowest call rates 2-3 US cents
2 The fastest growth in the number of subscribers 15.31

million in 4 months
3 The fastest sale of million mobile phones in a week

4 The world's cheapest mobile handset US$ 17.2
5 The world's most affordable color phone US$ 27.42
6 Largest sale of mobile handsets in the third quarter
IndianTelecom Industry - Fact
• One of the fastest growing • Total telecom subscriber

Cellular markets in the world in -300.49 million (March 2008
terms of number of subscriber Cellular + Fixed Line)
addition-261.07 million (March • Tele- density -26.22 percent
2008) (March 2008)
• Expected reach of total • Number of new mobile
subscriber base of about 500 subscriber added last quarter
million by 2010 (i.e., more than -27.62 million (March 2008
one phone for every household)
• Annual growth rate of the
5. CELLULAR SERVICE PROVIDERS

As on Apr 2007 India has 167 million mobile phone
subscribers. Out of this 125 million are GSM users and
41 million CDMA users. BSNL, Bharti Airtel, Hutch, Idea,
Aircel, Spice and MTL are the main GSM providers in
India. Reliance Communications and Tata Indicom are
the main CDMA providers in India.
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 5.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”. Airtel is providing cellular services in Delhi,
Mumbai, Kolkata, Chennai, Andhra Pradesh,Gujarat,
Haryana, Himachal Pradesh, Jammu and Kashmir,
Karnataka, Kerala, MadhyaPradesh Maharashtra, Goa,
Orissa, Punjab, Rajasthan, Tamil Nadu, UP and West
Bengal. Airtel is the No.1 cellular service provider in India

using GSM
technology. Airtel has 23% market share in India with a
total subscriber base of 38 million.
Reliance is a $16 billion integrated oil exploration to

refinery to power and textiles
conglomerate (Source:
http://www.ril.com/newsitem2.html). 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. Reliance has both CDMA and GSM
networks and total subscriber base of 29 million or 17%
market share. It has GSM network in Assam, Bihar,
Himachal Pradesh, Kolkata, North East, Madhya
Pradesh, Orissa and West Bengal. Reliance has CDMA
networks in other states and cities.
Bharat Sanchar Nigam Limited (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 BSNL
is a state owned telecom company which has GSM
presence in almost every cities and towns. BSNL has 27
million subscribers with a market share of 16%.
Vodafone’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.
Hutch is another emerging GSM provider in India with

coverage in Kerala, Mumbai, Delhi, Kolkata, Chennai,
Gujarat, Andhra Pradesh, Karnataka and Punjab with a
total subscriber base of 27 million.
Tata Indicom
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.
Tata Indicom is a main CDMA provider in India with 16

million subscribers all over India. Tata Indicom has
presence in almost every states and cities in India.
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 .

7. TELECOM SUBSCRIBER BASE IN INDIA
Indian telecommunication Industry is one of the fastest

growing telecom market in the world. The mobile sector
has grown from around 10 million subscribers in
2002 to reach 150 million by early 2007 registering an
average growth of over 90%. The two major reasons
that have fuelled this growth are low tariffs coupled with
falling handset prices. Surprisingly, CDMA market has
increased it market share upto 30% thanks to Reliance
Communication. However, across the globe, CDMA has
been loosing out numbers to popular GSM technology,
contrary to thescenario in India.The other reason that
has tremendously helped the telecom Industry is the
regulatory changes and reforms that have been pushed
for last 10 years by successive Indian governments.
According to Telecom Regulatory Authority of India
(TRAI) the rate of market expansion would increase with
further regulatory and structural reforms. Even though
the fixed line market share has been dropping
consistently, the overall (fixed and mobile)
subscribers have risen to more than 200 million by
first quarter of 2007. The telecom reforms have allowed
the foreign telecommunication companies to enter Indian
market which has still got huge potential. International
telecom companies like Vodafone have made entry into
Indian market in a big way.
Currently the Indian Telecommunication market is valued

at around $100 billion (Rupees 400,000 crore). Two
telecom players dominate this market - Bharti Airtel with
27% market share and Reliance Communication with
20% along with other players like BSNL (Bharat Sanchar
Nigam Limited) and AT&T. One segment of the market
that has been puzzling is broadband Internet. Despite the
manner in which the country’s Internet market has been
booming, India’s move into high-speed broadband
Internet access has been distinctly slow. And, while there
appears to be considerable enthusiasm amongst the
population for the Internet itself, this has not been
reflected in broadband subscription numbers. In 2006
India witnessed a good surge in broadband users with
the total subscriber base in the country expanding by
almost 200% to just over 2 million by
years end. Despite this surge, broadband penetration
in India still remains around only 0.2%; broadband
services still account for only 25% of the total Internet
subscriber base, still in itself comparatively low. So, if
70% of total population is rural, the scope for growth in
this Industry is unprecedented.
The Ministry of Communications and Information

Technology (MCIT) is has very
aggressive plans to increase the pace of growth,
targeting 250 million telephone
subscribers by end-2007 and 500 million by 2010. Most
of the expansion in subscribers is set to occur in rural

India. India’s rural telephone density has been

languishing at around 1.9%. The subscriber addition rate
has been strong in the last 12 months but the regulatory
developments will increase competition and thus curtail
the long-term growth rates of individual companies. The
savings through the setting of tower companies will partly
go towards the higher capex and opex costs from more
stringent spectrum allocation norms for the incumbents.
The Telecommunications sector has been consistently
adding more than 7 million subscribers for the last 6
months, a very healthy net addition rate infact. All the
private operators GSM as well as the CDMA operators
have been very consistent in their performance. The
sector provides very strong revenue as well as earnings
visibility over the next 12 months. However the recent
regulatory developments are seem to be negative for the
telecom companies as it will increase the number
operators per circle which will intensify competition.

TELECOM SERVICE AVAILABLE IN INDIA
The telecom services available in India include-
1. Basic Fixed Line Services

2. Mobile Services (GSM & CDMA)
3. Internet Services
4. International Long Distance Services
5. National Long Distance Service
6. Pager Services
The telecom subscriber base as of 31st March

2008 was 300.48 million compared to 6.4 million and 3.6
million at the
end of the March of 2002 and 2001 respectively.
Telecom subscriber as on 31st march 2008-

1. Wireline subs 39.42 mn
2. Wireless subs 261.07 mn
- GSM 192.7mn
- CDMA 68.37mn

7. TELECOM SEGMENT
The Telecom sector can be broadly classified in four

categories.
• Fixed Line Telephony
• Mobile Telephony
• Internet
• Telecom Equipments
However in the present report the market segment

considered is limited to only
fixed line and mobile telephony only.
a) FIXED LINE TELEPHONY
The current market size of this segment is about Rs.

30164 crore with a total of 43million lines.
This market is dominated by the state operators, BSNL
and MTNL, who together
accounts for around 92 per cent of the total subscriber
base. Private sector services are presently available in
selective urban areas (in about 18 circles), and
collectively account for remaining 8 per cent of the
subscriptions. However, private services focus on the
business/corporate sector, and offer reliable, high-end
services, such as leased lines, ISDN, closed user group
and videoconferencing, and as a result average revenue
per user (ARPU) is higher for private players.

b) MOBILE TELEPHONY
In the mobile segment there are 25 private companies
providing cellular service in 19 telecom circles and 4
metro cities, covering 1500 towns across the country.
Presently there are 5 private service operators in each
area and an state operator. Almost 80% of the cellular
subscriber base belongs to the pre-paid segment. DOT
(Department Of Telecommunication) has allowed
companies to buy rivals within the same operating circle
provided their combined market share did not exceed
67%. Previously, they were allowed to buy companies
outside their circle.
Number of wire line and wireless subscribers over

the years

SUPPLY - DEMAND ANALYSIS

The wireless sector has grown exponentially in the last
couple of years as
compared to the wireline sector. As a matter of fact in the
last 2 years the number of wire line consumers have
decreased by about 13%.
Cheaper call rates, mobility, good connectivity and other
value added services such as SMS, E-mail service, Live
updates are some of the reasons that have spurred the
growth of the mobile sector.
The wireless sector can again be grouped into GSM
(Global System for Mobile
Communication) service providers and CDMA (Code
Division Multiple Access)
service providers. The two basically denote the
difference in technology in
providing wireless service.
The major GSM service providers in India are:

Bharti Airtel, Vodafone, BSNL, Reliance, Aircel, Idea,
Spice, MTNL and BPL.
While in the CDMA sector major players are:

Reliance Infocom, Tata Teleservices, BSNL, MTNL,
HFCL and Shyam Telelink.
The relative market share of various players in the two

segment are:
Market Share of CDMA Operators
Share of Wire line Operators
Chart. 4: Market
Market Share of GSM Operators

c) Internet Services
TRAI is constantly monitoring the growth of the Internet
and Broadband services in the country by way of
Performance Monitoring Reports being submitted by
Internet Service Providers (ISP). Issues raised by ISPs,
from time to time, were successfully resolved by TRAI to
create conducive environment and to encourage the
growth of the service during the financial year. Total 138
ISPs reported data to TRAI, which indicates 11.09 million
Internet Subscribers at the end of 31st March 2008.
There was an increase of 19.63% in the subscriber’s
base as compared to March 2007.
Internet Subscriber
The Internet subscriber base in the country as of 31st
March 2008 stood at 11.09 million as compared to 9.27
million during the previous year, registering an annual

growth rate of about 19.63%.
Internet Subscriber
The distribution of Internet Subscribers among Govt.

ISPs & Private ISPs as on 31st March 2008 is at Figure
1.17. The market share of top eight Internet Service
Providers (ISPs), including BSNL, in terms of subscriber
base as on 31st March 2008 is at Figure 1.18. The BSNL
has maximum of 50.82% of total internet subscriber
base. Among PSUs owned ISPs, M/s BSNL and M/s
MTNL have reported a subscriber base of 5.64 Million
and 1.89 Million respectively. Amongst the Private Sector
ISPs M/s Bharti Airtel Limited has a subscriber base of
0.81 Million and stood third overall.
Share of pubic and private sector IPS (in lakhs)

d) Broadband
The number of Broadband subscribers (with a download
speed of 256 kbps or more) was 3.87 Million on 31st
March 2008 as compared to 2.34 Million subscribers on
31st March 2007 registering an annual growth of 65.38%.
The distribution of Broadband subscribers among
Government ISPs and Private ISPs as on 31st March
2008 is as below:
Number of broadband subscribers

Broadband Subscriber
The total Broadband subscriber base has reached 3.87
million by the end of March, 2008 as compared to 2.34
million by the end of March 2007 thereby registering a
net addition of 1.56 million broadband subscribers during
the financial year 2007-08.
Broadband Subscriber

Now accessing and analysing the demand side

for the telecom sector we see the following
salient points:
• A large sector of the market is still untapped,

specially the rural regions. The telecom revolution
has been able to extent its wing only in the urban
and semi-urban small towns of the country. Out of
the total population of about 1.136 billion in India,
only about 28% live in urban areas and the rest
72% live in rural areas. But however, only about
2% (16m) of the rural population has access to
mobile phones. It is a high time for the companies
to invest in these rural areas, too. Driven by a
significant addition in rural telephony, overall
population coverage in the country is expected to
increase from 65% to 80%. Therefore still there
are large segments which have not been
addressed yet by the wireless companies, either
due to price structure of the calls (profitability for

the company) or due to inaccessible terrain

(demographic reasons).
• The GSM subscriber base reached 192.70 million
in the quarter ending March 2008, as against
172.23 million at the end of the previous quarter.
The growth for this quarter is 11.89% as
compared to previous quarter. Bharti, with 61.98
million subscriber base, remains the largest GSM
mobile operator followed by Vodafone with
44.13m, BSNL with 36.21m. The CDMA
Subscriber Base on he other hand reached 68.37
million during the quarter ending March 2008 as
against 61.39 million at the end of December
2007. The quarterly growth in was 11.37% as
against 11.44% the previous quarter. Reliance
remains the largest CDMA mobile operator
followed by Tata Teleservices and BSNL with
subscriber base of 38.78m, 24.33m and 4.58m
respectively. Not taking into consideration the
wire line segment, going by the number of mobile
phone subscribers, India has become the world’s
fastest growing region. With almost 5-6 million
subscribers added every month, 500 million
subscribers till 2010 actually seems a reality.
Such kind of extra-ordinary growth rate clearly
indicates the huge demand among the people for
wireless service.
• The lifestyle of the people of India is changing
dramatically. They need to be in contact with
each other continuously. This is spurring the
growth of the wireless sector.
Addition of GSM wireless subscribers monthly
• However the story is little different on the wire line

services front. The total subscriber base of Wire
line services stood at 39.42 million as on 31st
March 2008. The incumbents BSNL and MTNL
have 80.05% and 9.33% market share
respectively in the subscriber base, while all the
five private operators together have 10.62%
share. Wire line subscriber base has been
declining in the last few years.
• So we can safely say that the demand for wire line
services is less and decreasing at a faster rate.
Summarizing the demand analysis we can say that,
given the low penetration levels in the country and
continuously falling tariffs, demand will continue to
remain higher in the foreseeable future across all the
segments.

Analysing the supply side of the sector:

Intense competition has resulted in prompt service to the
subscribers. The reducing tariffs will hurt the new
entrants, as they will be unable to recover their high
capital investments.
• The various wireless service providing companies
have been investing a lot in the sector for keeping
up with the demand. The total investment in the
sector is about Rs. 1,96,584 crore which was
spread over 127 projects. The growth is fuelled by
growth in GSM sector, consequently Bharti Airtel
is planning to invest about $ 8 billion by the end of
2010.
Investment Trends (in Crores)
• Additional spectrum to service providers India is

on the brink of full-fledged rollout of 3G and
WiMAX services across the country. The
regulators and the government are in deep

discussions on spectrum allocations. It’s decided

to have Additional spectrum to be allocated to
service providers, based on their existing
subscriber base. This will provide the foundation
for next generation mobile services in the country.
• The wire line sector still lagging way behind the
demand as far as the supply is concerned. Even
wire line service providers have failled to reach
every nook and corner of the country. There are
5,93,485 villages in India, as per census 2001
reported by BSNL. Presently there are 5,59,503
VPTs (Village Public telephones) in the country.
29,376 VPTs were increased during the last 2
years. BSNL reported increase of 1,547 VPTs
during this time, while the rest five private
operators together added of 27,829 VPTs during
this period. Thus the total number of villages still
left uncovered is about 33,982.
Some factors of concern as far as supply is
concerned are:
• Due to the proposal from TRAI to hike spectrum
charges from 4% to 5% of the revenues generated
by the service providers, for the new spectral band
it is proposing to open, mobile operators may have
to shell out a higher percentage of their annual
revenues towards spectrum charges.
• Low ARPU (Average Revenue Per User) Despite

the high penetration in urban areas, the ARPU is
quite low, one of the lowest in the world and
continues to fall steadily. For operators, this is
offset by increased subscription. However, profit

margins are decreasing and to stay in good shape
operators will have to leverage on larger
economies of scale. One trend seen in this
direction is the sharing of towers and base station
location sites among operators. However during
the same period the Minutes Of Use (MOU), per
user has grown phenomenally.
ARPU &MOU comparison (both GSM & CDMA)

Margins (percent)
8. FOREIGN DIRECT INVESTMENT

Ever since the government opened up its gates
for foreign direct investment (FDI) in 1991,
telecom sector has emerged as the clear winner
in attracting foreign capital.
For starters, Indian telecom sector ranks first in terms of
actual FDI inflow since August 1991 till February 2003,
pipping to post many developed as well as developing

countries including the South East Asian countries. More,

it stands second only to petrochemicals in attracting FDI,
beating other sectors in the manufacturing as well as
services.
FDI Inflows into India’s Telecom Industry (1991-2007, in

Rs million)
According to the numbers published by

Investindiatelecom, an on-line agency which tracks
developments in the Indian telecom sector, Indian
telecom has grossed actual FDI worth Rs 9,576.40 crore
during the period starting from late 1991 to early 2003. In
absolute terms, this is the highest inflow of FDI into the
telecom sector in the world.
Mauritius, which houses a number of holding and
investment companies, emerges as a distant second with
FDI grossing Rs 6,855.83 crore during the period.

“The Mauritius numbers may be deceptive as it is one of

the last tax havens in the region and may include money
actually invested elsewhere. Though data for several
important countries are not included, the FDI inflow into
India telecom sector is impressive,” a senior analyst who
tracks the telecom sector says.
Of the total FDI inflow into Indian telecom sector, the

lion’s share has gone into
investment in holding companies followed by cellular
network and manufacturing and consultancy. The total
foreign money invested in the holding companies stood
at Rs 4,813.3 crore or 50.26 per cent of the total inflow,
cellular telephony attracted Rs 2,332.8 crore accounting
for 24.36 per cent during the period.
The foreign capital inflow into the manufacturing and

consultancy segment stood at Rs 1,578.4 crore or 16.48
per cent of the total inflow.
On an inter-sectoral comparison, telecom sector is the

second largest recipient of FDI with 19.79 per cent of
total inflow.
“The numbers are a clear indication of the foreign

companies perception about the prospects in Indian
telecom sector. So far, the investment is mainly confined
to cellular telephony. However, with recent changes,
basic telephony too will start attracting foreign capital in a
big way,”

8. STATUS OF RURAL TELEPHONY

India’s Tele-density in 1948 was 0.02 per cent. The
telecom industry was for the exclusive preserve of the
public sector. All Five Year Plans, and successive
governments placed strong emphasis on telecom
development. Yet in 1998, the tele-density was only 1.94
per cent, displaying an incremental growth of 1.92 per
cent in the fifty year period post-Independence, indicating
an average yearly growth of 0.04 per cent. After the
introduction of telecom regulation in 1997 and
liberalization of the sector, growth accelerated 12.5 times
over the non-liberalized monopoly years. Competition
regulation was introduced in 2003 and it led to a growth
of 2 per cent in 2003–4 and again in 2004–5. With
stabilization of competition regime, tele-density increased
by about 3 per cent in 2005–6 and at the present monthly
rate of growth, it would increase by more than 5 per cent
during 2006–7, 125 times the growth in 1948–98 (Figure
4.1.1).
Stage 1

Year ending
25
22.5
Teledensity 20
15
11.5
10
6
5
1.94
0 0.02 0.02 0.02 0.2 0.02 0.02
1948 Stage1 1998 2003 2005 2007
Year Ending
Fig. 4.1.1 Telecom Growth: The Changing Scenario
Source: TRAI (2005b) and TRAI (2006).

40
37.99
35
30
26.2
25
21.3
20
15 14.3
12.2 12.86
10 10.4
8.2 9.08
6.9 7.04
5 4.8 5.8 5.1
4 3.6 4.2
2.3 2.9
1.3 1.6 1.9 0.9 1.2 1.5 1.7 1.86
0 0.3 0.3 0.4 0.5 0.7 0.74
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Urban Rural Total
population taken as 1088 million
Fig. Rural and Urban Tele-densities (1996–2006)

Source: TRAI (2005b and 2006).
Despite governmental concern for rural tele-connectivity

and allocation of huge USO funds for rural telecom, there
has been no substantial growth in rural areas and the
rural growth curve pre- and post-liberalization looks
remarkably flat (Figure) This is perhaps on account of the
fact that mobile technology, the vehicle for growth in
urban areas has not been introduced in rural areas.
Competition in rural telecom is virtually non-existent and
the government is the monopoly provider not unlike the
1948–98 scenario countrywide.

The growth in the sector came in after the Government of

India/TRAI made major changes in the policies, structure,
and the regulation in the telecommunication sector. All
stakeholders also responded positively. As can be seen
from Figure 4.1.3, the Universal Service Objectives are
affected by a number of policies and it would be
necessary to analyse the implications of the same before
implementing a plan to increase rural tele-density. Even
after the implementation of reforms, tele-density picked
up slowly and increased from 1.94 per cent in 1998 to
5.11 per cent in 2003, that is, an average incremental
growth of 0.6 per cent per year. The growth substantially
picked up after 2003, when the regulator ceased to
micromanage tariffs by replacing the cost-plus tariff
regulation by competition regulation in urban areas. The
regulator also substantially reduced interconnection
charges and Access Deficit Charges (ADC). During this
period, the government also substantially and
continuously decreased revenue share. The changes led
to drastic reductions in tariff to levels among the lowest in
the world, despite higher taxation in India. Based on
current monthly growth rates, over 5 per cent increase
during 2006–7 can be expected. It would be worthwhile
to look at the tele-density growth graph again and
examine the growth engines during various phases and
then examine the rural tele-density graphs for reasons of
increasing divergence.
During 2003–6, 88 million mobile and 12 million fixed line
telephones were added, and this addition too was
basically wireless technology driven.

Mobile Phone Growth

Telecom grow th
120
Subscriber Base (in million)

100 101
90.14
80
60
52.22
40
33.7
20
13
6.54
0 0.88 1.19 1.86
1998 1999 2000 2001 2002 2003 2004 2005 2006
Mobile phone growth
Fig. - Mobile Phone Growth
60
Fig Growth Fixed line Telephone
50
Subscriber base (in
50
40 46.19
42.84
million)
41.48
30 38.43
32.71
20 26.65
21.61
10 17.8
0
1998 1999 2000 2001 2002 2003 2004 2005 2006
Fixe d line growth
Source: TRAI (2005b and 2006).

Tapping Effective Demand for Rural Telecom Services:

Purchasing Power is not a Barrier
A demand side analysis will help to differentiate the

areas where services may be provided in a commercially
viable way from those where support will be required to
enable provision. The increasing purchasing power of
rural Indians and a similarity in the purchase basket with
those of urban areas increasingly indicates an ability to
purchase telecom services and the low rural tele-density
in some areas may indicate supply side constraints.
Subscribers buy telephones when they can afford it. If we

look at tele-density in India and in other countries with
similar Gross National Income (GNI) per capita on
purchasing power parity (PPP) basis, it appears that
India can also increase its tele-density very fast based
only on income indicators
It is interesting to note that while in percentage terms, the

middle to high income households in rural areas are
nearly one-third of those of urban areas, in absolute
terms these numbers are almost the same. Further, in
the lower middle-income group also, while the
percentage of rural households is just a shade higher
than urban households, in absolute terms, these
constitute nearly two and a half times the number in
urban areas. The cost-effectiveness of a given solution in
providing communication service in rural areas because
of the spread out characteristic of the subscriber base is
a different consideration and may require subsidization of
the network
Income Group Rural House hold Urban households

Lower 58.87 (47.94%) 9.31 (18.96%)
Lower Middle 42.77 (34.83%) 16.58 (33.56%)
Middle to High 21.16 (17.23%) 23.22 (47.28%)
Total 122.81 (100%`) 49.11 (100%)
Source NCAER IMDR 2002
Any subsidization of individual telephones may
not be an appropriate policy, in view of the huge
rural demand and inevitable problems in
implementing micro-managed subsidization
policies. India’s rural market has been growing
steadily over the years and is now bigger than the
urban market for FMCG (53 per cent share of the
total market). Rural India also accounts for a large
pie of consumer durables/white goods,
automobile/ two-wheeler/tractor sales among a
host of other industry sectors in our country.
Table 4.1.10 presents the ownership pattern of
key durables. According to the World Bank,
‘wherever they are given the choice, poor
communities often spend on communications as
much as urban communities, in terms of
percentage of available income’ (World Bank,
2002). With wide network coverage and
affordable communication services, rural growth
can pick up substantially in a short time frame
and this opens the Universal Service Opportunity
window, both for the operators as well as
subscribers. The demand for mobile telephones is

increasing very fast even in small towns. Category

C states have, on average, 85
per cent rural population, while Category A and B
consist of 67 per cent and 75 per cent rural
population respectively. Further, Category C
states, which include Himachal Pradesh, Bihar and
Jharkhand, Orissa, Assam, Sikkim, Tripura,
Meghalaya, Manipur, Mizoram, Nagaland,
Arunachal Pradesh, and Jammu & Kashmir, have
on average lower per capita income than states in
other categories—approximately Rs 8000 as
compared to Rs 10,000 and Rs 13,000 for B and A
category states respectively. Yet, Category C
circles have outperformed the national and other
Category averages in percentage growth.
The leading cellular service providers have the
following number of
subscribers:
Service Provider No of CDMA Subscribers No

of GSMSubscribers
Reliance 2.75 crores 38.76 lakhs
Tata 1.07 crores
Airtel 3.37 crores
MTNL 24.98 lakhs
BSNL 2.44 crores
Hutch 2.44 crores
Idea 1.3 crores
Spice 25.56 lakhs

BPL 10.62 lakhs
Aircel 48 lakhs
Bharti Airtel has the largest customer base with 31%

market share, followed by Hutch and BSNL with each
holding 22% market share.
The 2007 budget has brought further relief to the

customers with the reduction in the tariffs, both local and
long distance, and with slashing down the roaming
rentals. This is likely to lead to even more people going
for cellular services and more and more use of the value
added services. However, landline telephony is likely to
remain popular, too, in the foreseeable future. MTNL, the
largest landline service provider, has recently taken some
bold initiatives to retain its market share and, if possible,
expand it.
2. Rural Telecom, Current Status in India

A study by TRAI reveals that the incumbent service
providers (BSNL and MTNL) are the market leaders of
fixed line in the rural market. The private players hold
only marginal shares in the rural market. Table 1, shows
the market capitalization of the fixed line rural players.
Table 1: Fixed line market share in rural India
Company Market share (%)
BSNL 99.87
Shyam-Sistema 0.12
RCOM 0.004
Tata teleservice 0.0014
Source: TRAI
0.12 BSNL
0.004 Shyam-Sistema
0.0014 RCOM
Tata Teleservice
99.87
The rural mobile market as per as December 2007, data

shows that Airtel is the market leader. Figure1 illustrates
the market shares of the private and public players in the
mobile subscriber market space.

0%
Airtel
1%
BSNL
2% 0%
5% Vodafone
8% 26%
RCOM
IDEA
14%
Aircel
Tata Teleservice
Spice
HFCL
Shyam-sistema
22%
22%
Rural Telecom Successes in other Countries

Table 1 summaries the four experiences of success rural
telecom services provided in rural areas. The first one if
the Grameen Phone experience in Bangladesh which is
based on a share access model and has been
successfully extended to other countries also. Second is

the experience of Smart Communication Inc and how it
adapted its services in rural areas if Philippines and
improved the penetration of mobile services in the
country. Third is the experience of rural communication in
Chile and the constructive role that the
government played in the scripting the success story
there and last is the experience in Africa, the success
story which has been documented by many researchers.
The Grameen Phone experiences show the importance

of relying on a existing institutional infrastructure of the
Microfinance helped it in succeeding and the use of
share access model. Similar initiatives on tying up the
rural telecom initiative in the country to some exiting
Institutional Infrastructure like cooperatives or
Microfinance institutions and NGOs would ensure more
sustainable success of the launch of the services. And
the Experience of Smart Communications Inc in
Philippines reemphasizes the importance of making the
services affordable by innovations in both service
delivery as well as pricing of services. Learning form the
Chile experience shows us that government too needs to
play a constructive role, and the African experience
highlights the importance of low cost handsets in the
expansion of services.

Example Salient Features Reasons for success
Bangladesh Garmeen Phone - Captured 63% of the Share access business

(Garmeen Foundation 2005, country’s model
World Institute, 2001) Mobile market - A cadre of phone
- Average of 60 customers entrepreneurs
use each - Effective use of the
phone and average monthly Microfinance network
bills amount upto $144.02 in for promoting Grameen
2000. Phone.
- Use of GSM Technology
- Model has been extended - Significant subsidy being
to given to the service
Uganda
Philippines – Smart Mobile penetration at 30% by
Use of Innovative over the air
Communications Inc 2004 payment
(Anderson & Billou, and expected to reach 70 % system to overcome the
2007, Anderson et.al, by availability
2005). 2008. problems
- Developed smaller
denominations of
recharge
- Use of used handsets
reduced barriers to
ownership.
Rural Communications - From 1995-2002 reduced Reliance in market forces
– Chile (Wellenius, the and minimum
2002) population living without regulations
access to - Simple and relatively
basic voice communication expeditious
from 15 processing
to 1 percent - Effective Government
leadership
African Experience in 15 million mobile subscribers Use of Mobile technology to
Mobile Telephony added to subscriber base in leap-frog the
(Vodafone 2006, ITU 2004, older technologies
2006) equivalent to total number of - Ability of Mobile operators
telephone subscribers in to provide
1996 mobile coverage rapidly
- Mobile penetration three - High degree of liberalization
times the and
land line at 9.1 per 100 competition in the mobile
inhabitants sector
- 75 % of all African - Reduction in Tariff
telephone combined with “ultralow-
subscribers are Mobile cost” Handsets and
availability of
prepaid service
Rural Telecom Market – an emerging market

According to numbers compiled by the Telecom
Regulatory Authority of India, nearly 21 per cent of the
mobile user base now resides in the villages of India,
where a few years ago none of the operators wanted to
venture. As on September 2007, out of the 209 million
mobile users in the entire country, 43 million were in rural
areas.
As the government targets to increase rural teledensity
from the current 2 percent to 25 percent by 2012, rural
telephony will require major investments. This segment
will boost the demand for telecom services, equipment,
Internet services and other value-added services;
thereby, offering great market opportunities for telecom
players.
Rural India will wrest 40 percent of new telecom

market
India’s rural telecom connectivity is poised for explosive
growth in the next five to 10 years, grabbing a 40 percent
share of the new market, a study released Wednesday
said. “Of the estimated new 250 million Indian wireless
users, in next 5-10 years approximately 100 million will

be from rural areas,” said the study by the Federation of
Indian Chambers of Commerce and Industry (Ficci) and
Ernst and Young.
Operators have demonstrated they can achieve

profitability by reducing fixed costs, controlling variable
costs and carefully tailoring services to the requirements
of their customers. A similar model with minor
customization could be emulated in the rural areas.
The government will roll out new incentives for mobile

networks in rural India. It’s also planned that the ultra-low
cost handset of approximately Rs.840 ($17) to the
market with built-in subsidies, lifetime validity and
minimal maintenance costs have promoted mobile usage
in remote areas. Moreover, operators could learn from
business models that have been experimented across
the developing world for expanding rural connectivity.
Reasons for rural inclination
Far from being considered as a social obligation, offering

telecom services in rural areas has now become the hot
spot for private telecom operators. Nearly 75 per cent of
the mobile users in the villages are now owned by private
operators as cellular phones catch the imagination of
rural consumers. Until now, state-owned Bharat Sanchar

Nigam Ltd was known to be the only significant rural

telecom operator in the country.
Analysts said that the share of rural telecom consumers

will continue to increase as operators have initiated an
aggressive roll-out plan to cover remote areas of the
country. This is primarily driven by a slump in the growth
rate of mobile user base in the metro and urban areas.
According to the data released by the Cellular Operators

Association of India Circle C and Circle B States such as
Bihar, Kerala, Madhya Pradesh and Punjab are showing
better growth rates compared to the metros. Therefore,
most of the mobile operators are investing heavily in
setting up infrastructure in these circles.
The telecom regulator has suggested a number of

initiatives to make mobile connectionattractive, including
lower entry cost to make it more affordable.


Telecom Sector Analysis for June Quarter –

Severe Decline In ARPU, MOU But Growth
Continues
The boom phase for Indian telecom sector continues

to ride on availability of cheaper telecom services at the
same time aggressive marketing by new and established
players. The growth phase is panning out across India
and is not just limited to urban India.
TRAI released the ‘Indian Telecom Industry

performance indicator report’ for quarter ended june 09.
The report points out detail info regarding the surge in
telecom – density as well as the current situation in
Telemedia businesses.

Major Facts & Figures:

Telecom Subscriber Base:
 Telecom Subscribers Base in April-June quarter
reached 464.82 million users compared to 429.72
Million in march quarter.
 Subscriber base registered a 8.17 percent Q-o-Q
growth.

The telecom subscriber base continues to grow positively

and has been able to provide record net-additions in
recent past.
Mobile Subscriber Base:
 Total mobile subscriber base stood at 427.29 at the

end of June-09 Quarter.
 Net quarterly additions in total wireless segment
(GSM+CDMA) came in 35.53Mn.
 Wireless Tele-density reached 36.64 per cent.

Teledensity & Demographics:

 Total Tele-density stood at 39.86 per cent.
 Wireline Tele-density came in at mere 3.22 %
whereas wireless subscription contributed 91.9 % of
overall Tele-density.
 Subscription in Urban Areas was at 328.55 Million
and Rural subscribers increased to 136.27 Million.
Indian Telecom Market

Indian telecom market is currently the most attractive
telecom market with a lot of interest being shown by
foreign players. The country was divided into 23 circles
when the mobile phones were introduced in the country.
Now DOT recognises Chennai as part of TN. Separate
licenses were given out for each of the circles in 1994.
The circles were classified as Metros, A,
B or C depending upon the revenue potential for the
circle with Metros & A circles expected to have the
highest potential. The following table lists the current
wireless penetration by Metro/

India is the now the second largest market in terms of

mobile subscriber base after China but still it is at 32%
teledensity and adding 10-12 million new subscribers
every month. Indian market is not only the most attractive
but also the most competitive with over 7 operators in
each circle and another five new operators likely to start
operations in the near future. Nowhere in the world does
any country have so many carriers. The dominant
players are Airtel, Reliance, Vodafone, BSNL (state
owned), Idea and Tata. Reliance and Tata offer CDMA
technology while all the other players are in the GSM
space. GSM has a 75% share of sbscribers and now
even Reliance and Tata have either launched or in the
process of launching nation-wide GSM services. Apart
from the current players, there are several new players
like Aircel, Unitech-Telenor, Shyam-Siestema, Etisalat
that have got the license and spectrum to launch mobile
services in several telecom circles. Shyam-Siestema is
the only player to launch CDMA services while all the
new operators are in the lucrative GSM space. The
adjoining figure gives the market shares of the operators
in India. It is a fragmented market with the biggest

operator (Airtel) garnering only 24% share.
India is a predominantly prepaid market (93% of all

subscribers are on prepaid) with low ARPU and high
minutes of usage(MoU).The GSM ARPU is Rs 220 (~
USD 4.6) per month with a usage of 496 minutes per
month in the quarter ending Dec, 2008. Similarly, CDMA
ARPU stood at Rs 111 with a usage of 370 minutes per
month. There is a wide disparity in the rural and urban
teledensity with rural teledensity at 12% vs. urban
teledensity of around 75%.
Regulatory has played a big role in development of

Indian telecom market by brining in the competition at the
right time and by removing bottlenecks. However, there
are a few pending issues that still need to be resolved
like the 3G spectrum auction and allocation, Mobile
Number Portability and 2G spectrum allocation policy.
Given the low tele density in the country, the subscriber
base is expected to grow at a brisk pace. Government
expects the mobile base to cross 600 million by 2010 and
most of the new additions are expected to come from
rural areas where the mobile penetration is still low. (All
the data is sourced from COAI, AUSPI and TRAI which
are the leading industry associations and regulatory
bodies and ofcourse other secondary research)

India has an urban population of about 26.8% and rural

population is about 73.2% And there are over 600,000
villages in India. But a vast section of the rural
Table I. GSM Subscribers growth rate

Company No of Subscribers (in million) % Market Service Areas
March 2006 April 2006 Share
Bharthi 19.57 20.68 28.7% 23
BSNL 17.16 17.59 24.4% 21
Hutch 15.36 16.06 22.3% 16
IDEA 7.37 7.64 10.6% 11
Aircel 20.61 2.83 3.9% 7
Reliance 1.90 2.01 2.8% 8
Spice 1.93 1.98 2.7% 2.
MTNL 1.94 2.02 2.8% 2
BPL 1.34 1.31 1.8% 1
Total 69.19 72.12 100%
sector is still cut off from the benefits of telecom services.
The rural population of around 700 million is waiting for
its share of economic growth. Initially the big telephone
companies focused only on urban centres, which they felt
were more profitable. However, this mindset is gradually
changing with the realisation that there is equal, if not
bigger money in rural areas.
Table II. CDMA Subscribers growth rate
Company No of Subscribers % Service

(in million) Market Areas
March April Share
2006 2006
Relianc 18.307 18.809 77.65% 20
e
TATA 4.851 5.323 21.98% 20
HFCl 0.062 0.062 0.26% 1
Shyam 0.027 0.028 0.11% 1
Total 69.19 72.12 100%

It is estimated that a one per cent increase in rural

connectivity can generate 0.5 per cent economic growth.
Thus a well-planned 10 per cent increase in rural
connectivity can propel India into double-digit growth and
unprecedented prosperity.
Rural India possesses enormous potential in terms of

economy and human resources. Recent experiments
have confirmed that ICT (information and communication
technology) helps improve the timeliness and efficiency
of rural farm operations and enhance income through
producer-oriented markets. Hence the communication
ministry has requested the finance ministry for higher
allocations from the USO Fund for executing rural
telephony network. The finance ministry has made a
budgetary allocation of 15 billion from the USO Fund.
The rural telephony targets include, providing 50 million
telephones by 2007(i.e. one phone per three rural
households) and 80 million by 2010 (i.e. one phone per
two rural households) and provisioning mobile access to
all villages with population more that 5,000 by 2006 and
more than 1,000 by 2007.The Government is confident
that the Bharat Nirman Programme target of providing
coverage to remaining 41,000 villages would be met by
March 2007 which will be much earlier than a schedule of
November 2007[6].
India plans to establish 0.25 million, village knowledge

centres. The ICT industry can establish rural call centres
modelled on the Kisan Call Centre established by the
Ministry of Agriculture to provide domain knowledge in
the services, agriculture and manufacturing sectors. This

spread will increase the volume of users and

automatically bring down bandwidth cost, with a spiralling
effect on efficiency and economy. Advanced telecom
services are no longer considered a luxury but a
necessity for all. Thus, providing telecom services to
every individual in a country like India is a huge
challenge, and at the same time holds immense
opportunities for those in the telecom industry.
10. Urban and metor circles

India's geographical structure is not very conducive for

maintaining ARPUs. India comprises of 4 telecom circles,
which consist of the high income Metro circle and lower
income À, Â and Ñ circles.
Metro circle first adopted mobile services, while the other

three circles viz., À, Â and Ñ circles took time to catch
up. Initially, Metro circle witnessed exponential growth,
which has since stagnated, as teledensity has already
crossed 90%. However, the remaining three circles are
growing faster, as teledensity is much lower.
In addition to the consistent tariff cuts, shift in the focus of

telecom operators from Metro to lower income Â and Ñ
Circles is one of the major reasons for deterioration of
ARPUs. In our view, À, Â and Ñ circles offer easy entry
to entrants, compared to Metro circle, due to the low
teledensity of the former. Entrants will have to lure the
subscribers of other operators by offering better quality
and / or lower tariffs.
Underperformance of Metro circle vis-a-vis rest
Circle wise subscriber numbers and growth in

India (mn nos.)

(Source: TRAI data, Keynote Capitals Research)
Subscriber growth in Metros deteriorating due to

high penetration
Subscriber growth q-o-q
(Source: TRAI data and Keynote Capitals Research)
Mobile Tele-density vis-a-vis Subscriber growth

High per capita income of Metros vis-a-vis rest

Higher average spend on Mobile calls in Metros
MNP's effect on the telecom industry based on

geographic structure
MNP is more attractive tor entrants and existing

operators in Metro circle than in other circles. Metro circle
offers limited growth potential for new subscriber
addition; entrants and existing operators will both
compete for the existing customer base of the latter.
MNP is a good tool for these operators. However, pricing
and quality of service will play a major role in customer
retention.

In other circles, existing operators will target both, new

subscribers, as well as existing subscribers of other
operators.
11. ECONOMIC BENEFITS OF MOBILE

SERVICES IN INDIA
According to a study conducted by the reputed
international agency, Ovum on “The economic benefits of
mobile services in India” the Indian mobile industry is a
major contributor to the social and economic growth of
the country, in terms of employment generation,
revenues to the Government, GDP growth and rural

development[7].
1 Employment
Because of the mobile industry about 3.6 million jobs

could be generated directly or indirectly. Ovum has also
estimated that employment dependent on the industry is
expected to rise by at least 30% over the next 12
months.
2 Government Revenues
The Government can generate Rs. 145 billion per

annum through License Fees, Spectrum Fees, Import
Duties, Taxes, etc. from Mobile industry.
3 GDP
The mobile services industry can generate an
annual GDP contribution of Rs. 313 billion.
4 Rural Development
Research shows that having access to

telecommunications would substantially improve the
social and economic conditions of people living in

rural areas by improving access to family, education,
health and financial services and by enabling the
development of non-agricultural economic activity.
Government has set a target of 20% for rural mobile
coverage by the end of 2004 and 75% by the end of
2006.
Taking the OVUM findings as the base, COAI

has tried to estimate the benefits from mobile
communications for the future years. The benefits listed
by OVUM are for a subs base of 48 million in January
2005. Pro-rating the data on a simplistic estimate at a
mobile subscriber base of 200 million in 2007, the
industry would contribute 10 million jobs and Rs 500
billion annual revenue to the Government.

12. CONCLUSION
India has one of the worlds largest telecommunication

network. The telecom story continues to be the best
evidence of the efficacy of the reforms process. In just six
years, the number of mobile subscribers has gone from
just about one million to 100 million. None can doubt the
correlation between this explosive growth in numbers
and the steep decline in the cost of the mobile phone and
of its usage. Effective tariffs have dropped from over Rs
14 a minute to Re 1, bringing the phone within reach of
people even below the middle-class.
In India there are 600,000 village across the country and

in this country, there is huge demand of telecom market.
In the telecom company can extend the growth at 1% in
each village they can make the more profit.
India’s rural telecom connectivity is poised for explosive

growth in the next five to 10 years, grabbing a 40 percent
share of the new market, a study released Wednesday
said. “Of the estimated new 250 million Indian wireless
users, in next 5-10 years approximately 100 million will
be from rural areas,” said the study by the Federation of
Indian Chambers of Commerce and Industry (Ficci) and
Ernst and Young.

The Government may have, therefore, landed

itself a winner in the mobile phone, but the task of taking
telecom to the other 90 per cent of the population will call
for even greater innovation in policymaking, technology
and marketing. Still three-fourths of the land mass is not
illuminated by a cellular signal and the price of the
instrument is beyond the reach of a substantial section of
the population let alone the charges for its use. These
issues, of course, can be resolved by decisive policy
action, such as a creative use of the Universal Services
Obligation fund that now has over Rs 70 billion, releasing
adequate spectrum to operators in the metros, and a
proactive investment policy that invites many more
equipment manufacturers to set up base in this country.
The road for India achieving the top most position in
telecommunication is no longer a dream as India is
nearing China in all aspects in few years India will over
power all countries and achieve its target of top most
position in telecom industry.

13. BIBLIOGRAPHY
For the starting prat with the guidenc of the marketing

faculty
For history part –www.google.com
Company information of various service providers –
• www.airtel.com
• www.bsnl.com
• www.vodafone.com
• www.loopmobile.com
• www.relianceinfocom.com
• www.ideamobile.com
• www.tatateleservice.com

Growth and marketing related information-

www.googl.com-mangement=paradise.com
www.projcetparadise.com
All the graph and performance of the telecom
company related,
ARPU -- www.traiindia.com

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STERLING COLLEGE OF ARTS, COMMERCE AND SCIENCE.

The thrust areas presently are:

1. Building a modern and efficient infrastructure ensuring greater competitive

COMPARATIVE ANALYSIS OF TELECOM MARKET-URBAN vs RURAL 1

Recent things to watch in Indian telecom sector are:

COMPARATIVE ANALYSIS OF TELECOM MARKET-URBAN vs RURAL 2

2. HISTORY OF TELCOMMUNICATION INDUSTRY

The history of telecommunication industry started with the first public

In 1982 , AT&T was requested to divestiture its stock ownership in Western

COMPARATIVE ANALYSIS OF TELECOM MARKET-URBAN vs RURAL 3

Beginning of telecommunication in India

 1881- Telephone services introduced in India

 1883 - Merger with postal system

 1923 - Formation of Indian radio Telegraph Company

 1947 - Nationalization of all foreign telecommunication companies

 1985 - Department of telecommunication established , an exclusive

 1986 - Conversion of dot into two wholly government – owned

 1997 - Telecom regulatory authority created

COMPARATIVE ANALYSIS OF TELECOM MARKET-URBAN vs RURAL 4

Girija (1998), in its article “Socioeconomic Implications of Telecommunications

T.H. Chowdary (1999) discusses how Telecom reform, or demonopolization, in

COMPARATIVE ANALYSIS OF TELECOM MARKET-URBAN vs RURAL 5

Anand (1999), in his article named “India's economic

Bhattacharya (2000) constructs a vision of the Indian

Das (2000), in her paper described the Liberalisation of

of Telecommunications (DoT). In order to evaluate any

Rao (2000), in her article named “Internet service

implications are highlighted in the Indian context. Many

Vrmani (2000) estimates the contribution of

Narinder (2004), in his article “Enhancing Developmental

COMPARATIVE ANALYSIS OF TELECOM MARKET-URBAN vs RURAL 8

India” talks about the foremost benefits of Information

management. The other critical factor is technological

Dey (2004), in her article talks about the discussions

communications policy makers and regulators in other

Singh (2005), in his article “The role of technology in the

counted among the developed nations of the world. The

Mr. Banka (2006) gives an overview of the mergers and

COMPARATIVE ANALYSIS OF TELECOM MARKET-URBAN vs RURAL 12

represents humongous opportunity waiting to be tapped

Thomas (2007), in his article describes the contribution

COMPARATIVE ANALYSIS OF TELECOM MARKET-URBAN vs RURAL 13

the postal services and a people-based demand model

Anderson (2008), in his single executive interview titled

increased individual or household penetration through

Shah (February, 2009), has analysed Indian telecom

COMPARATIVE ANALYSIS OF TELECOM MARKET-URBAN vs RURAL 15

4. INDIAN TELECOMMUNICATION INDUSTRY

COMPARATIVE ANALYSIS OF TELECOM MARKET-URBAN vs RURAL 16

services to customers. Increasing competition among

The year 2007 saw India achieving significant

1 Having the world's lowest call rates 2-3 US cents

2 The fastest growth in the number of subscribers 15.31

3 The fastest sale of million mobile phones in a week

4 The world's cheapest mobile handset US$ 17.2

5 The world's most affordable color phone US$ 27.42

6 Largest sale of mobile handsets in the third quarter

IndianTelecom Industry - Fact

• One of the fastest growing • Total telecom subscriber

5. CELLULAR SERVICE PROVIDERS

Established in 1985, Bharti has been a

mobile service in Delhi, first private basic telephone

Bengal. Airtel is the No.1 cellular service provider in India