Final Telecom Industry

Introduction
Alliance Business School 2009-10 Page 1

1.1 HISTORY OF TELECOMMUNICATION
INDUSTRY
‘Telecommunication’ is a term coming from Greek and meaning

‘communication at distance’ through signals of varied nature coming from
a transmitter to a receiver. In order to achieve effective communication,
the choice of a proper mean of transport for the signal has played (and
still plays) a fundamental role.
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 Kingsbury commitment 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 as
approved by the Interstate Commerce Commission.
In 1956 Final Judgment, 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 Modified final judgement (MFJ) , 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. AT&T
would be the nation's largest provider of long-distance telephone service
and cable TV.
1.2 HISTORY OF INDIAN TELECOMMUNICATIONS
YE
AR
First operational land lines were laid by the government near Calcutta
1851 (seat
of British power)
1881 Telephone service introduced in India
Merger with the postal
1883 system
Formation of Indian Radio Telegraph Company
1923 (IRT)
Merger of ETC and IRT into the Indian Radio and Cable
1932 Communication
Company (IRCC)
Nationalization of all foreign telecommunication companies
1947 to form the
Posts, Telephone and Telegraph (PTT), a
monopoly run by the
government's Ministry of
Communications
Private sector was allowed in telecommunication equipment
1980 manufacturing
Conversion of DOT into two wholly government-owned
1986 companies: the
Videsh Sanchar Nigam Limited (VSNL) for international
telecommunications
and Mahanagar Telephone Nigam Limited (MTNL) for service in
metropolitan areas.
Telecom revolution in many other countries which resulted in better
quality of
services and lower tariffs and finally resulting in opening for the private
1990 sector
services and lower tariffs and finally resulting in opening for the
private sector
1997 Telecom Regulatory Authority of India created.

Cellular Services are launched in India. New National
1999 Telecom Policy is
adopted
.
DoT becomes a corporation,
2000 BSNL
2004 Broad Band policy
2006&2007 Years of dynamic growth for telecom
sector
Table – 1.1: History of the Indian Telecom Industry
The telecom industry is one of the fastest growing industries in India. With
a growth rate of
45%, Indian telecom industry has the highest growth rate in the world.
The improvement in the standard of living and the development of
infrastructure and connectivity are some of the mains reasons for the
significant growth of the telecom industry. The Indian Telecommunications
network with 200 million connections is the fifth largest in the world and
the second largest among the emerging economies of Asia. Today, it is
the fastest growing market in the world and represents unique
opportunities for U.S. companies in the stagnant global scenario. The total
subscriber base is increasing day by day. The wireless technologies
currently in use are Global System for Mobile Communications (GSM) and
Code Division Multiple Access (CDMA).
1.3 OBJECTIVES OF THE STUDY

The main objectives of the research are:
• To study the history and evolution of Telecom industry in India

• To analyze the current Indian Telecom Industry
• To study the policies and regulations and their impact on Indian
Telecom industry
• To perform comparative industry analysis for large Indian Telecom
companies on the basis of profitability and market share
• To analyze the Global Telecom Industry
• To evaluate the future prospects of the Indian Telecom Industry
1.4 METHODOLOGY
The proposed methodology for the study of Telecom Industry is as
follows:
• Data collection methods: The data that would be used in
the analysis will be only secondary data because of time and

resource constraints. Data sources like journals, newspapers &
magazines, conference papers, industry reports, electronic
databases and internet will be used.
• Analysis of data and Interpretation of findings: Both
quantitative and qualitative methods will be used-
i) Quantitative analysis of the data will be done by
summarizing the data using graphs, charts, tables and
percentages.
➢ Techniques: To analyze the quantitative data, tool used

would be :
○ RATIO Analysis: The key ratios of major large telecom

companies would be used for the analysis.
○ TIME Series: The trends in the Telecom Industry would be
examined by studying the growth in the Indian Telecom industry.
The comparative analysis of the major large telecom industries
would be analyzed by studying their sales pattern and
subscribers.
i) Qualitative analysis of the data will be done by studying

the industry, the factors affecting it, the competitiveness of
the industry and the trends in the industry.
➢ Techniques: To analyze the qualitative data, techniques

used are:
○ SWOT Analysis: Analysis of the strengths and weaknesses of
the major large telecom companies in India would be examined
and the opportunities and threats posed to them.
○ PEST Analysis: The political, economic, social, technological
environment of the Indian Telecom Industry would be studied
and how these affect the companies in the industry.
○ PORTER’s Five Force Analysis: This framework would enable
to analyze the competitive intensity and attractiveness of the
Indian Telecom Industry. It will examine the micro-environment
of the major large telecom companies and how it affects the
companies to serve their customers and make a profit.
1.5 SOURCES OF DATA

Database is a collection of data. It enables us to access the necessary
information required to examine and study a particular industry.

Data has been collected from government and regulatory websites and
from the websites of private and research companies and also from
journals and magazines.

Literature Review

Literature Review
I. Kewalramani (February 2009), in his article “Telecom Sector :

Why the Phone Will Keep Ringing ?” believes that the Telecom sector has great times
ahead mainly due to the new recommendations from Telecom Regulatory Authority
Of India, the trend and disruptive technologies that have begun to surface in
the telecom sector. Describes in brief about the Indian telecom scene and
also discusses how Indian telecom is positioning themselves well for
changing trends. Discusses how the arrival of 3G and broadband wireless
access (BWA) is expected to ring in revolution in the broadband access
space. Also mentions the new technologies and services like Wi-Fi and Wi-
Max, Mobile phone advertising, Tracking Stock quotes and mutual
fund portfolios on mobile phones, Mobile messaging, Mobile/cell
phone gaming and 4G technology making its appearance on the scene
to be of benefit to the telecom industry. He also emphasises on tapping
the rural growth market as it is an important growth driver.
II. TRAI (June 2007), in its study paper on “Financial Analysis of

Telecom Industry of China and India” has done a comparative analysis on
the status of telecom service sector of India and China. The comparison of
performance indicators between two fastest growing telecom markets
help to draw strategies for new investment and expansion of telecom
networks, tariff and pricing of retail etc. The report starts with the
overview of the Chinese telecom industry and compares both the Indian
and Chinese Telecom Industry on factors such as Subscriber base, Average
Revenue Per User (ARPU), MOU, EBITDA, Capital Expenditure, Corporate
and Turn Over Tax, Employment etc and also summarized the important
performance indicators of Indian and Chinese telecom sector.
III. TRAI (2006), in the Consultation Paper “Issues Pertaining to Next

Generation Networks” speaks about the benefits of using Next Generation
Networks (NGN) and the drivers behind migration from the current
networks to the NGN. It analyses the benefits of migrating to NGN, and
also about technical issues and complications which might arise while
trying to implement the NGNs and while migrating existing systems to the
new format. It educates the reader regarding how the advancements in

Telecommunications are forcing the unification of networks & services.
This is setting up a stage for multiple access networks to interact with one
single core network which will be IP based. This is the future of all
telecommunication and in all practicality must be implemented at the
earliest, since this promises a number of significant benefits and
opportunities for both the telecom service providers as well as the end-
users in terms of better service at lower rates.
Issues Pertaining to Next Generation Networks; TRAI (2006)
IV. TRAI (2010), in their Press Release “Signing of Memorandum

between TRAI and Ministry of Internal Affairs and
Communications, Japan” speaks about the Memorandum which has
been signed between the Telecom Regulatory Authority of India (TRAI)
and the Ministry of Internal Affairs and Communications, Japan (MIC) on 6th
January, 2010. It goes on to say how the Memorandum will allow for
mutual sharing of information on best practices between TRAI and MIC.
MIC is the regulatory authority of the telecom sector in Japan, thus making
it a counterpart of the TRAI. The memorandum which has been signed
intends to improve cooperation in the fields of Technological
Developments and New Technologies, Regulatory Policies, Convergence of
Telecom and Broadcasting, Spectrum Issues, Green Telecom, Telecom for
development Strategy, and any other issues which may be mutually
agreed upon. This is an important development for the Telecom Sector in
India, and could mark the introduction of several new technologies and
processes which could improve the performance of the entire sector on a
whole.
“Signing of Memorandum between TRAI and Ministry of Internal Affairs

and Communications, Japan”, Press Release No. 01/ 2010, 6th January,
TRAI (2010)
V. Mani(2006), The growth performance of India’s

telecommunications services industry, 1991-2006. Can it lead to
the emergence of a domestic manufacturing hub? Speaks about the
potential India has in manufacturing the products pertaining to the
telecom industry. One of the facets of the telecom revolution has been the
phenomenal increase in the number of telephones in the country. This in
turn has a number of effects and one of more important effects is its
potential to create a major manufacturing hub in the country for the
manufacture of telecom equipments and indeed for downstream
industries such as semiconductor devices that are required for the
manufacture of these equipments. The telecom industry in India is thus

slowly emerging as a fine example of the service sector acting as a fillip to
the growth of the manufacturing sector.
VI. 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.
VII. 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.

VIII. 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.

Global Scenario

GLOBAL SCENARIO
3.1 INTRODUCTION
World telecom industry is an uprising industry, proceeding towards a goal
of achieving two third of the world's telecom connections. Over the past
few years information and communications technology has changed in a
dramatic manner and as a result of that world telecom industry is going to
be a booming industry. Substantial economic growth and mounting
population enable the rapid growth of this industry.
The world telecommunications market is expected to rise at an 11 percent

compound annual growth rate at the end of year 2010. The leading
telecom companies like AT&T, Vodafone, Verizon, SBC Communications,
Bell South, and Qwest Communications are trying to take the advantage
of this growth. These companies are working on telecommunication fields
like broadband technologies, EDGE(Enhanced Data rates for Global
Evolution) technologies, LAN-WAN inter networking, optical networking,
voice over Internet protocol, wireless data service etc.
Economical aspect of telecommunication industry: The growth of the
telecoms industry has been truly remarkable and today we live in world
where the number of mobile phones far outweighs the number of fixed
lines. Millions of people around the world also enjoy high-speed Internet
services with at least 30% of all Internet users now connected to fixed
broadband. It is expected that the milestone of 500 million fixed
broadband subscribers will be reached early in the next decade. On a
regional level, Western Europe still has the largest share of broadband
subscribers worldwide
Present market scenario of world telecom industry: Millions of users
worldwide now also connect to the Internet using mobile broadband
services. As a result mobile data revenue is growing – albeit slowly. This
slow growth will continue in the future until proper infrastructure based on
4G becomes available. In recent times traditional fixed-line operators have
had an uphill battle; facing external pressures such as deregulation, a
severe industry and economic downturn, declining prices and major
inroads by mobile services. As would be expected, markets with strong
competition have also seen a considerable drop in mobile call charges.
3.2 EVOLUTION IN GLOBAL TELECOM SECTOR

Until the 1980s the world telecommunications systems had a simply
administrative structure. The United States telephone service was
supplied by a regulated monopoly, American Telephone and Telegraph
(AT&T). Telegraph service was provided mainly by the Western Union
Corporation. In almost all other countries both services were the
monopolies of government agencies known as PTTs (for Post, Telephone,
and Telegraph). In the United States beginning in 1983, AT&T agreed in a
court settlement to divest itself of the local operating companies that
provided basic telephonic service. They remained regulated local
monopolies, grouped together into eight regional companies.
AT&T now offers long distance service in competition with half a dozen
major and many minor competitors while retaining ownership of a
subsidiary that produces telephonic equipment, computers and other
electronic devices. During the same period Great Britain’s national
telephone company was sold to private investors as was Japan’s NTT
telephone monopoly. For telegraphy and data transmission, Western
Union was joined by other major companies, while many multinational
firms formed their own telecommunications services that link offices
scattered throughout the world. New technology also brought continuing
changes in the providers of telecommunication. Private companies such
as Comsat in the United States were organized to provide satellite
communication links within the country.
The focus is also shifting away from broadband to what it can actually
achieve. Next Generation Telecommunications better describes this new
environment and is essential for the emerging digital economy. Important
services that depend on NGT include tele-health, e-education, e-business,
digital media, e-government and environmental applications such as
smart utility meters.
In order to meet this burgeoning consumer demand for NGT applications,

we are seeing increasing investment in All-IP Next Generation Networks
and fibre networks. A proper inventory of national infrastructure assets is
required if we want to establish an efficient and economically viable
national broadband structure for these services. In the developing
markets, next generations telecoms will take the form of wireless NGNs
(i.e., LTE/Wi-MAX).
One of the drivers behind the industry changes are the declining revenues
experienced by the telecom in their traditional markets. Over the past 10
years or so, fixed-line operators have been affected by deregulation, a
severe industry downturn, declining prices and major inroads by mobile
services. In addition, people are drifting to other forms of communication,

such as email, online chat, and mobile text messaging instead of the
traditional phone.
For the time being however, voice will remain the killer application for
mobile with some data services included as support services and niche
market services. 4G (i.e., Wi-MAX/LTE) is the real solution for mobile data
and by 2015 it is expected that the majority of mobile revenues will come
from data.

3.2.1 Key Highlights of year 2009:
• Penetration of mobile phones had reached around 60% worldwide
by mid-2009 (including multiple subscriptions).
• Over 3 trillion text messages will be sent during 2009.
• In 2009 Finland continued to offer the cheapest mobile call charges
in Western Europe.
• Consumers in the US use their mobile phones for longer per use
than in other parts of the world, averaging over 800 minutes each
month.
• Mobile termination rates and roaming charges remain an important
source of revenue for operators.
• Revenue from mobile data, including SMS, now contributes as much
as 25% to overall global mobile revenue.
• Sales of smart phones are growing and in 2009 smart
phone sales will account for over 10% of the worldwide market.
Figure - 3.1

Figure -3.2
3.3 GLOBAL PLAYERS

3.3.1 AT&T
AT&T consistently provided innovative, reliable, high quality
communication services and products. It offers services and products to
consumers in the United States and telecommunications services
worldwide. The Group operates in four segments: Wireless, which provides
both wireless voice and data communications services across the United
States and wire line which provides primarily landline voice and data
communication services, AT&T U-Verse television, high-speed broadband
and voice services. AT&T are leading worldwide providers of IP-based

communications services to businesses and also have the nation's fastest
3G network and the largest international coverage of any U.S. wireless
carrier, the largest Wi-Fi network in the United States; and the largest
number of high speed Internet access subscribers in the United States,
Company making huge advances in the entertainment and
communications industry.
Key facts of AT&T (2009-2010)
• The nation's fastest 3G network serving 85.1 million customers and

offering voice coverage in more than 220 countries, data roaming in
more than 190 and 3G in 115 countries.
• The U.S. wireless carrier for the new i-Phone 3GS, which launched in
June 2009 and revolutionized the industry.
• The nation's largest provider of broadband — more than 17.3 million
high speed Internet subscribers (as of 4Q09).
• The nation's largest Wi-Fi provider, now offering access at more
than 125,000 hot spots spanning countries around the world.
• One of the world's largest providers of IP-based communications
services for businesses, with an extensive portfolio of Virtual Private
Network (VPN), Voice over IP (VoIP) and other offerings — all backed
by innovative security and customer support capabilities.
3.3.2 SPRINT NEXTEL
Sprint Nextel offers a comprehensive range of wireless and wire line
communications services bringing the freedom of mobility to
consumers, businesses and government users. Sprint Nextel is widely
recognized for developing, engineering and deploying innovative
technologies, including two wireless networks serving more than 48
million customers at the end of the fourth quarter of 2009 and the first
4G service from a national carrier in the United States; industry-leading
mobile data services; instant national and international push-to-talk
capabilities; and a global Tier 1 Internet backbone. The company's
customer-focused strategy has led to improved first call resolution and
customer care satisfaction scores.
Key facts of Sprint Nextel (2009-2010)
• Achieved positive net post-paid subscriber growth for Sprint-
branded services, leading to best sequential and year-over-year
improvement in net post-paid subscriber results in Sprint Nextel
history
• Free Cash Flow of $666 million in the fourth quarter and $2.8 billion
for 2009 highest annual Free Cash Flow in Sprint Nextel history.

• Eight consecutive quarters of improvement in Customer Care
Satisfaction and First Call Resolution
• Invested more than $1.1 billion of additional funding in Clear wire;
extended 4G leadership into 27 markets
• Completed acquisitions of Virgin Mobile USA, Inc. and iPCS, Inc.
• The company served 48.1 million customers at the end of the fourth quarter of
2009
3.3.3 Deutsche Telekom

Deutsche Telekom (DTAG) is a telecommunications company
headquartered in Bonn, Germany. It is the largest telecommunications
company in Germany and in the European Union.Deutsche Telekom is
represented in about 50 countries worldwide. As one of Europe's largest
telecommunications providers, the company is present in the most
important markets in Europe, Asia and America. The graphic which
automatically opened itself in a new browser window offers an overview of
Deutsche Telekom's shareholdings worldwide.
Key facts of Deutsche Telekom (2009-2010)
• Lines in operation, telephone lines including IP-based lines,

excluding internal use and public telecommunications and including
wholesale services and business customers.
• Broadband lines in operation.
Figure- 3.3 TRENDS IN WORLD TELECOM INDUSTRY

Source: Insight Research
3.4 GLOBAL TRENDS

The industry is dominated by three major communication tools. These are:
• Fixed-lines
• Mobile
• The Internet
The State of the market though has been changing. This has been mainly
characterized by increasing competition, mainly due to the numerous
players in the telecom industry. The boom in the telecom industry can be
mainly attributed to increasing private sector participants. There also has
been an increased independent regulation by these companies.
ITU’s latest statistics, published in the World in 2009: ICT facts

and figures, reveal rapid ICT growth in many world regions in everything
from mobile cellular subscriptions to fixed and mobile broadband, and

from TV to computer penetration - with mobile technology acting as a key
driver.
The brand new comprehensive data, forecasts and analysis on the global
ICT market show that mobile growth is continuing unabated, with global
mobile subscriptions expected to reach 4.6 billion by the end of the year,
and mobile broadband subscriptions to top 600 million in 2009, having
overtaken fixed broadband subscribers in 2008.
More than a quarter of the world’s population is online and using the
Internet, as of 2009. Ever-increasing numbers are opting for high-speed
Internet access, with fixed broadband subscriber numbers more than
tripling from 150 million in 2004 to an estimated 500 million by the end of
2009.
ITU estimates show that three quarters of households now own a
television set and over a quarter of people globally – some 1.9bn – now
have access to a computer at home. This demonstrates the huge market
potential in developing countries, where TV penetration is already high,
for converged devices, as the mobile, television and Internet worlds
collide.
Source: ITU World Telecommunication/ICT Indicators Database
Figure 3.4 The world in 2009: Facts and Figure

3.4.1 Mobile and broadband growth continues
In particular, growth in the mobile and fixed broadband sectors has
continued and mobile subscriber penetration now sits at around 70% on a
global level. The use of mobile data and mobile broadband services has
also grown due to capped data packages, strong competition, smart
phones and increased 3G penetration
Table-3.1 worldwide telecom statistics at a glance – 2010
telecom statistic forecasts
Population 6.9 billion
Fixed lines 1.4 billion
Mobile subscribers 5.1 billion
Mobile text messages sent 4.2 trillion
Internet users 1.6 billion
Fixed broadband subscribers 580 million
(Source: Budde Comm forecasts, 2010)
The financial crisis has led to global attention focusing on high-speed

broadband based on Fibre-to-the- Home and deployments are expected to
grow steadily for at least the next five years. This is due to a growing
recognition, particularly amongst government bodies, that broadband
does not only offer high-speed internet services; it is also important for
national infrastructure and will underpin a range of positive social and
economic developments. A trans-sector approach to the digital economy
is also required in order to advance developments in e-government, e-
health, e-education, social media, e-commerce and e-science.

Table-3.2 worldwide broadband subscribers and annual change –
2005 – 2010
Approximate
Year broadband Annual change
subscribers (million)
2005 221 36%
2006 286 29%
2007 344 20%
2008 410 19%
2009 485 19%
2010 (e) 580 20%
(Source: BuddeComm - Global - Broadband - Statistical Overview)
By the end of 2010 there will be well over 500 million fixed broadband
subscribers worldwide and broadband will account for around 35% of all
internet connections.
3.5 CONCLUSION
The vibrant global telecommunications industry has faced many

challenges over the last decade including regulatory and technology
changes, a severe industry downturn, consolidation, market saturation,
declining prices and major inroads by mobile services. Despite the
unsteady state of the global financial markets, the worldwide
telecommunications industry is expected to continue expanding over the
next five years as continuing growth of wireless services in emerging
markets offsets the spending slowdown in the advanced economies, says
a new market analysis report from The INSIGHT Research Corporation.
According to the new industry market study, overall telecommunications
services revenues are expected to grow at a compounded rate of nearly

10.3 percent over the next few years, reaching $2.7 trillion by 2013.
Wireless makes the strongest showing while wire line follows a distant
second. Nearly all of the growth in both sectors is expected to occur in
broadband services, with wireless broadband service revenues expected
to grow at a compounded rate of more than 70 percent over the forecast
period, while wire line broadband services grow at under 10 percent over
the same forecast horizon.
The success of the smart phone, especially the Apple i Phone, has finally
sparked consumer interest in using mobile broadband services. This has
resulted in an increase of traffic on existing mobile networks and created
a more pressing need to develop 4G technologies, such as LTE, as it can
deliver a fully IP-based infrastructure that will allow for mass use of these
applications over the network. LTE development took an important step in
late 2009 with Ericsson and TeliaSonera launching the world’s first and
largest commercial 4G LTE network in Stockholm.
There is no doubt that the next ten years will bring further exiting
developments to the increasingly vital telecommunications industry. The
foundations for change are already in motion and the continuing
deployment of high-speed broadband and developments relating to 4G
technology will provide the infrastructure to ignite the new innovations
and revolutions of the future.

INDIAN
SCENARIO
OF THE

TELECOM
INDUSTRY

4.1 INTRODUCTION
The Telecom Sector in India has continuously shown extraordinary growth

during the last decade fuelled largely by unprecedented demand of
mobile telephony (Wireless Communications. Current growth of around 15
million connections per month, put India in line to achieve the target of
500 million lines by early 2009, much ahead of the targeted date in the
year 2010.
The number of telephone subscribers in India has now increased to 509.03

Million at the end of Sep-09 from 464.82 Million in Jun-09, thereby
registering a growth rate of 9.51%. With this, the overall Tele-density in
India reached 43.50 as on 30th September 2009. The Department of
Telecommunications has been able to provide state of the art world-class
infrastructure at globally competitive tariffs and has reduced the digital
divide by extending connectivity to the unconnected areas.
India is now 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 (DOT) has helped provide extraordinary growth for
the sector.
(Note: The above figures have been updated as on 24th March, 2010 with
available data from the TRAI websites and the TRAI annual reports. Please
keep in mind that the annual report for 2010 is yet to be released and
hence there might be a slight difference between the reported figures and
the actual figures)

4.2 Recent Events of significant consequence to the
Indian Telecom Industry
a. MVNO licensing bypassing possible – Allowing for big players like

Virgin Mobile to enter into the Indian Market through backdoor entry
in the form of Franchising with Tata Teleservices.
b. Failure of Bharti Airtel’s Bid for South Africa’s MTN, left India’s
largest player in the Telecom industry looking for new avenues,
eventually leading to the bid for Zain.
c. Bharti Airtel’s Bid for Zain has gone through, they are preparing to
finance the deal through two SPVs (Special Purpose vehicles) one in
Singapore and the other in Netherlands. The signing of the deal will
be finalized before the end of March 2010, in Netherlands.
d. BSNL’s Dollar Tender for Telecommunications Hardware and
equipment estimated to be worth Rs. 30,000 crores has been put on
hold by the Pitroda led committee.
4.3 Events to watch out for in the Indian telecom Sector

i. 3G auctions (Scheduled for April 9th, 2010): The current bidders for
the 3G Spectrum are:
a. Bharti Airtel
b. Reliance Communications
c. Vodafone Essar
d. Tata Teleservices
e. Etisalat
f. Idea Cellular
g. Videocon
h. S Tel
i. Aircel Cellular
ii. Broadband Wireless Access (BWA) Auctions (Scheduled for April,

2010): The current bidders for the BWA Auctions are:
a. Tata Communications
b. Reliance Communications
c. Qualcomm
d. Augere
e. Tikona Digital Networks

f. Vodafone Essar
iii. Commercial Launch of 3G services will be allowed from September

1st, 2010.
iv. Mobile Number Portability
v. New Policy for Value Added Services
vi. Market dynamics once the recently licensed new telecom operators
start rolling out
vii.Services.
viii.Increased thrust on telecom equipment manufacturing and exports.
ix. Reduction in Mobile Termination Charges as the cost per line has
substantially reduced due to technological advancement and
increase in traffic on the networks.
4.3.1 A Brief about the Spectrum Auctions (3G & BWA)

The Indian Government has huge hopes for the spectrum auctions, and it
comes at a time when the country is still recovering from a very adverse
fiscal deficit.
The government has fixed Rs 3,500 crore as the reserve price for pan-
India 3G spectrum and Rs 1,750 crore for Broadband Wireless Access
(BWA) services. What this means is that given the very limited number of
slots available for the auctions, the government is sure to garner at least
Rs. 20000 crore if not more from the auctions of the spectrum for both 3G
and BWA combined.
The auction for the 3G spectrum begins on April 9 which will be followed
by the auction for BWA.
The government will be selling spectrum to three players across the

nation with the exception of a few states where four slots will be on offer.
According to the Notice Inviting Applications only Punjab, Bihar, West
Bengal, HP and J&K will have four private players offering high-speed
content download and broadband services (3G). For BWA, only two slots
are on the block.
The successful bidders would be allowed to offer 3G services on a

commercial basis from September 1, 2010. This suggests that the bidders
are already in a race to get their setups completed.
As per the schedule, the pre-qualification of bidders would take place on

March 30, mock auctions would be held on the April 5 and 6 followed by
auction on April 9.

The 3G mobile services will allow high-speed content download and
broadband services, while BWA operates on different technology platform
known as Wimax and is a leading technology for wireless broadband
services.
However, Qualcomm's plans to use the BWA spectrum for offering TD-LTE
– the advanced version of 3G technology — has not gone down too well
with the other wireless players.
4.4 The Market share of Major Providers in India

Table:.1 – GSM & CDMA subscribers and Market share of different
companies
The service providers for the telecom sector in India are led by Bharti,
Reliance, Vodafone Essar, BSNL and IDEA Cellular. Other important
The Rural subscribers are still far behind the Urban subscriber base, hence
it shows that there are still a number of avenues for further growth in the
rural areas. Whereas in the urban areas the revenue per user has come
down to a level wherein further entries into the market would only cause
the revenues to go down even further to a point wherein the sustenance
of the industry would be difficult.

4.5 Mobile Phone Manufacturers share in the Indian
Market
Fig. 4.1 – Comparison of Market Share of Mobile Phone

Manufacturers in India and globally
The figures favour Nokia over the other manufacturers which suggest that
Nokia has greater market reach in India as compared to the others.
India being a volumes market will be led by those manufacturers which

continue to provide good quality handsets at the lowest reasonable price.
The Indian consumer is more discerning about price, features, and quality
of the phone over most other product aspects (a very difficult consumer to
please).

4.6 TELECOM SUBSCRIBER BASE IN INDIA
Indian telecommunication Industry has one of the fastest growing telecom
markets 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 subscriber base currently stands at over 500 million, and it still boasts
of a huge growth rate per quarter.
The two major reasons that have fuelled this growth are low tariffs
coupled with falling handset prices.
The CDMA market has increased it market share upto 30% thanks to
Reliance Communication. This is a contradicting trend, since the CDMA
market has been declining globally.
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.
The telecom reforms have allowed foreign telecommunication companies

to enter into the Indian market which unlike other markets is mostly a
volumes market, and even though the ARPU is amongst the lowest
globally, the overall returns are still lucrative. This coupled with the drop
in the norms and regulations which need to be met in order to enter into
the Indian market has encouraged a lot of international players into
entering.This is now leading to a price war which is further reducing the
tariff rates charged in India.
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) had
very aggressive plans to increase the pace of growth, targeting 250
million telephone subscribers by end-2007 and 500 million by 2010 (the
target of achieving 500 million subscriber base was reached in mid 2009
before the target of 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
in fact. 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.
4.7 GENERAL ENVIRONMENT IN THE TELECOM SECTOR

The year 2007-08 also witnessed a phenomenal growth in the subscriber
base for mobile services which includes subscribers of WLL (F), thus
building on the growth trend in subscriber base experienced since mid-
1990s. As per the data available on CTIA (International Association for the
wireless Telecommunications Industry) website, India has become second
largest wireless network in the world after China by overtaking USA.
4.7.1 Total Revenue generated by the sector

The revenue generated by the sector has shown certain degree of
fluctuations.
Fig. 4.2: Gross revenue over the years (data for period ’08-‘09 is
incomplete)

Unlike the subscriber base which has seen a constant increase, the total
revenues generated by the industry have been fluctuating, with a fall in
revenue noted even though the overall subscriber base has noted a
significant increase in size. This shows that the ARPU has been constantly
on the fall.
4.7.2 P/L generated by the sector

The Profit/Loss generated by the sector like the revenue has also been
fluctuating over time which shows that the average revenues have been
reducing at a faster rate than the decrease in the average costs per user.
Fig. 4.3: Profit/Loss from ordinary activities(figures in Crores)

4.8 FUTURE ESTIMATES FOR THE SECTOR
1. Network expansion
a. 1 Billion connections by the year 2015
b. Provision of mobile coverage of 90% geographical area by
2010
2. Rural telephony
a. One phone per two rural households by 2010 (about 80 million
rural connections)
b. Reduce urban-rural digital divide from present 25:1 to 5:1 by
2010
3. Broadband
a. Broadband with minimum speed of 1 mbps
b. Broadband coverage for all Grampanchayats by the year 2010
4. Infrastructure Sharing
a. USO subsidy support scheme for shared wireless
infrastructure in rural areas with about 18,000 towers by 2010
b. Increase sharing in urban areas to 70% by 2010
5. Introduction of Spread of IPTV and Mobile TV

a. IPTV in 600 towns by 2010
6. Manufacturing
a. Making India a hub for telecom manufacturing by facilitating
more and more telecom specific SEZs
b. Quadrupling production in 2010
c. Achieving exports of 6 times from present level of 0.5 billion in
2010
7. Research & Development

a. Pre-eminence of India as a technology solution provider
b. Comprehensive security infrastructure for telecom network

c. Tested infrastructure for enabling interoperability in Next
Generation Network
d. Doubling the telecom equipment R&D by 2010 from present
level of 15%
8. International Bandwidth
a. Facilitating availability of adequate international bandwidth at
competitive prices to drive ITES sector at faster growth
Rank in world in network size 2nd
Tele–density (per hundred 36.98

populations)
Telephone connection (In millions)
Fixed 37.96
Mobile 391.76
Total 429.72
Village Public Telephones 6.2 lakh
Licenses issued
Basic 2
CMTS 60
UAS 224
Infrastructure Provider I 177
ISP (Internet) 382
ISP with Telephony (Broadband) 125
National Long distance 24
International Long Distance 19
Table: 4.4 Indian Telecommunications at a glance
(As on 31st March 2009)

4.9 CONCLUSION
Indian telecommunication Industry is one of the fastest growing telecom
markets in the world. The mobile sector has grown from around 10
million subscribers in 2002 to reach 525 million by the end of
2009. The two major reasons that have fuelled this growth are low tariffs
coupled with falling handset-prices.
However there are certain facts which are ignored regarding the market.
Mobile Operators in India are not making revenues that are anywhere
close to the amounts being made by operators in developed countries.The
revenue per month ranges anywhere from $7 per month to $10 per month
according to various studies and estimates. For firms operating in the US
and Europe, the Average Revenue Per User stands at $100.
This makes India a volumes market. And because the ARPU figures are so
low, Indian Mobile Operators are looking at squeezing as much as they
can out of partners who can bring in the revenues (in many cases the VAS
providers). One also needs to keep in mind that Indian consumers have a
tendency to move towards free contextual content and thus VAS rates
that are too high might not work in a price sensitive market.
One often looks at the mobile market in India as something that can be
looked at as a benchmark for the World. However the large companies in
India are miniscule in comparison to the Big Companies in Chineasuch as
China Mobile (392 Million subscribers as opposed to Bharti’s 62 Million,
RCom’s 45.5 Million, and BSNL’s 40 Million odd) and China Unicom (168
Million subscribers). Vodafone and Spain’s Telefonica are the other 2 big
names that come to mind. So it’s quite clear that Indian Mobile Operators
today are looking at the Chinese models of scalability and also picking up
and modifying their operational model because in both markets,
consumer responses to pricing and ARPU’s will be similar in the long run.
In the current situation, Indian Mobile Telecom operators will not have the
liberty to innovate fast enough, they will not have the opportunity to scale
high value services. The reasons for Indian firms’ enthusiasm for foreign
acquisitions are many. By acquiring international companies, Indian
companies get easy access to new markets, new products and the latest
technology. By buying domestic companies in other countries, they can
enter protected or heavily regulated overseas markets much more easily.
The strategy allows them to benefit from economies of size and scale, and
to increase their presence along the value-addition chain, such as by

acquiring raw material suppliers or users of their products, thus improving
margins and efficiencies.
While on the topic of margins and efficiencies, it must be noted that Indian
Telecom Operators are very efficient when it comes to administrative,
sales and marketing and technical expenses as opposed to their western
counterparts. A Mint Study says the following. As a percentage of sales,
Selling, General and Administrative expenses account for 15% for Indian
companies (against 20% for Western operators). Other key costs are inter
connect charges (12% for Indian operators, against 15% to 20% for
Western companies), license fees (10%, 5-9%), personnel (7-8%, 10-15%)
and network (11-12%, 15-17%). This leaves Indian companies with a
handsome 36% to 40% as operating profit against 12% to 30% for
Western operators. As these numbers show, Indian mobile companies are
saving on sales and marketing. They also focus on prepaid customers,
which lower their customer support costs. They share infrastructure. Most
importantly, perhaps, they outsource whatever they possibly can.’
All this takes a toll on the quality of service but there are some obvious
cost advantages – if they are taken beyond National Boundaries, then
results can be fantastic in terms of higher profits and also greater
technological innovation + diversification of risk.
The DoT Guidelines with respect to M & A’s has ensured that the Indian
Market will be more or less competitive. While there is no doubt that the
market is growing at a frantic pace, the following need to be considered:
- Mergers of telecom licences will be allowed only within the same
service area.
- A telecom company can sell equity to another company only after
3 years from getting a license.
- Merged telecom companies should not command more than 40%
Market Share. (this used to be 67%)
- No M & A activity to be allowed if the number of operators in a
service area fall below 4.
- No investor with 10% stake in an existing telecom company will
be allowed to merge or acquire another telecom company.
The M & A guidelines ensure that the Indian Mobile Domain is not big
enough to be owned only by 2 or 3 majors. So possibly operators’
expectations from the market have also been recessed. As addressed
above, there are multiple reasons as to why Telecom Operators are
looking to go abroad. – beyond the Indian Market.

Industry Structure &
Analysis

5.1 Current Scenario
5.1.1 Telecom Subscription Data (as on 31st December

2009)
a) Total Telephone subscriber base reached 562.21 Million

b) Wireless subscription reached 525.15 Million
c) 19.10 Million new additions in wireless
d) Wireline subscription declined to 37.06,
e) Wireline subscription declined by 0.09 Million
f) Overall Tele-density reached 47.89
g) Broadband subscription was 7.83 million
The number of telephone subscribers in India increased to 562.21 Million

at the end of December-09 from 543.20 Million in November-09, thereby
registering a growth rate of 3.50%. With this, the overall Tele-density in
India reaches 47.89.
5.1.2 Wireless Segment (GSM, CDMA & FWP)
Wireless subscriber base increased from 506.04 Million in November-09 to

525.15 Million at the end of December-09 at a monthly growth rate of
3.78%.
Wireless Tele-density stands at 44.73.
5.1.3 Wireline Segment
Wireline subscriber base declined from 37.16 Million in November-09 to

37.06 Million at the end of December-09. BSNL/MTNL, two PSU operators
hold 85.22% of the Wireline market share. However, they lost 0.12 Million
subscribers in the month of December-09. Overall Wireline teledensity
was 3.16.
5.1.4 Broadband (≥ 256 Kbps download)

Total Broadband subscriber base has increased from 7.57 million in
November-09 to 7.83 million in December-09, there by showing a growth
of 3.56%.

5.1.5 Service Provider wise net additions during the
month december-09 (in percentage)
Stel - 0.74%
Uninor - 6.32%
Vodafone - 14.63%
Loop - 0.28%
Idea - 8.93%
Sistema - 2.09%
Tata - 17.46%
Aircel - 8.74%
MTNL - 0.30%
BSNL - 10.89%
Bharti - 14.92%
Reliance - 14.70%
The Telecom Regulatory Authority of India issued the Telecommunication

Mobile Number Portability Regulations, 2009 (8 of 2009) dated 23rd
September, 2009 laying down the basic business process framework for
implementation of mobile number portability in the country.
Considering the present preparedness of various service providers and the
process involved, the Government has decided to extend the time for
implementation of these regulations from 31st December, 2009 to 31st
March, 2010, for all circles.

5.2 Effect of recession on the Sector
People will not stop to communicate with each other due to global crises
rather it has been seen that it will increase much particularly with mobile
communication. With cheap cell phones available in the Indian market and
cheaper call rates, the sector has become the necessity and primary need
of everyday life.
“Although the global economy is passing through a phase of recession, its
impact has been comparatively less on telecom sector” was said by A.
Raja, the Minister of Communications and IT, Government of India.
Telecom sector, according to industry estimates, year 2008 started with a
subscriber base of 228 million and will likely to end with a subscriber base
of 332 million – a full century. The telecom industry expects to add at
least another 90 million subscribers in 2009 despite of recession. The
Indian telecommunications industry is one of the fastest growing in the
world and India is projected to become the second largest telecom market
globally by 2010.

Analytical Framework

6.1 SWOT ANALYSIS
A scan of the internal and external environment is an important part of the
strategic planning process.
The Environmental factors internal to the firm usually can be classified as
strengths (S) or weaknesses (W), and those external to the firm can be classified
as opportunities (O) or threats (T). Such an analysis of the strategic environment
is referred to as a SWOT analysis.
The SWOT analysis provides information that is helpful in matching the available
resources and capabilities to the competitive environment in which the
operations are conducted. As such, it is vital in strategy formulation and
selection.
The following framework describes how the Strengths, Weaknesses,
Opportunities and Threats fit into the environment.
SWOT Analysis Framework
Figure 6.1 – Framework for a typical SWOT analysis

6.1.1 Strengths
Here we will analyze the strengths of the telecom industry as a whole. The most
important factors are:
• It is the biggest market for the Telecom Industry, second only to China.
• It has the highest growth rate globally in terms of sheer numbers of
subscribers.
• Technology is advanced and easy to implement: For telecom industry
the technology is really advanced and more and more investment is
done on technology to get world class infrastructure and knowhow to
put in this field. The Telecom sector is going to add 3G spectrum as its
latest up-gradation.
• Fastest Growing Mobile Market in the World.
• Even though the ARPUs are low, there are a number of Consumers who
are willing to pay higher amounts for cutting edge services.
6.1.2 Weaknesses
The weaknesses of the Indian telecom sector are as follows.
• Lowest Call Tariffs in the world
• Market is very strongly regulated by Government Bodies, both ISPs and

the general Telecom Sector.
• High Cost of Infrastructure: The infrastructure costs associated with

entering into the Telecom Industry is extremely high.
• Widescale customer churn in Telecom.
• Primarily a voice based market.
• Low ARPU

6.1.3 Opportunities
• Capability of extending the same model used in India, in countries

abroad: The same model which the Indian Telcos have been using in
India, can be used in markets across the world. The rest of the world has
mostly higher ARPUs, this suggests that the Indian revenue model will be
very successful globally in terms of price competitiveness.
• FDI: The foreign direct investment in telecom has been hiked up from
49% to 74%. This move is positive for the sector, as it requires
investments of Rs 700 –900 million over the next 5 years. FDI inflow by
2004 was 9950.94 cores in telecom. Countries like Europe, Korea, and
Japan telecom are likely to enter India, as India is seen as fastest growing
telecom market in world.
• Huge Wireless subscriber base & Potential: India has a huge existing
subscriber base with over 500 million subscribers, and it still has not
exploited it’s full potential, with the penetration in the rural areas still
negligible as compared to the urban and sub urban areas.
• Government has proposed to hike the FDI limit in the Telecom sector to
74%.
• Unified License Scheme.
6.1.4 Threats
The threats to the industry are the following:
• Government Policies – Government may provide licenses to many foreign

operators, which may already have pose a threat for the existing players
in the industry.
• Emerging Technologies: There are several technologies which can

compete and act as substitutes for the existing services which are being
provided by the Telecom Service Providers.
Some of the examples are follows:
➢ VOIP (Skype, Messenger etc.)

➢ Online Chat
➢ Email
• Since most of the firms in the Indian Telecom Sector are low-cost service
providers, the amount of time taken for breaking even for new entrants is
very long.

• Political Instability is a characteristic of India. This causes a lot of
fluctuations for the firms, with different parties supporting their own list of
firms.

6.2 Porter’s 5 Forces
Porter has identified five competitive forces that shape every industry and
every market. These forces determine the intensity of competition and
hence profitability and attractiveness of an industry. Based on the
information derived from the five forces analysis, management can decide
how to influence or to exploit particular characteristics of their industry
1. THREAT FROM NEW ENTRANTS: How easy or difficult is it for new

entrants to start competing.
2. THREAT OF SUBSTITUTES: How easy can a product or service be
substituted, especially made cheaper.
3. BARGAINING POWER OF BUYERS: How strong is the position of the
buyers? Can they work together in ordering large volumes?
4. BARGAINING POWER OF SUPPLIERS: How strong is the position of
the sellers? Do many potential suppliers exist or only a few potential
suppliers, monopoly?
5. RIVALRY AMONG THE EXISTING PLAYERS: Does a strong competition
between the existing players exist? Is one player very dominant or
are all equal in strength.
Figure 6.2 – Porter’s Five Forces Framework

6.2.1 Threat From New Entrants
Supply Side of Economies of Scale
• Declining Average Revenue Per Unit(ARPU)

• Infrastructure tenancy costs being very high
• Other FC like BPO
Demand Side Benefits
• Brand pull exists to some extent for brands like Airtel /idea/ Vodafone
• Customer Switching Costs is low
• Cost of new connection is low
Capital Requirement
• Extremely high infrastructure setup costs
Incumbent Advantages
• Established brand image

• Reliability of network

6.2.2 Bargaining Power of the Buyer
 Is high
 Lack of differentiation among the service provider
 Cut throat competition because of the existence of numerous
suppliers
 Customer is price sensitive
 Low switching costs
 Number portability to have negative
 Mobile number portability after getting approval will result in high
bargaining power for consumer, hence the overall bargaining power
is high
6.2.3 Rivalry between Existing competitors

 Is high
 High Exit Barriers
 High Fixed Cost
 6-7 players in each region
 3 out of 4 BIG-Four present in each region
 Very less time to gain advantage by an innovation (Eg. Caller tunes,

life time card)
 Price wars
6.2.4 Bargaining Power of the Seller

 Large number of suppliers.
 Is low
 Shared tower infrastructure.
 Limited pool of skilled managers and engineers especially those well

versed in the latest technologies.
 Medium cost of switching since changing their hardware would lead

to additional cost in modifying the architecture.

6.2.5 Threat of Substitutes
 Some Substitutes for telecommunication:
➢ VOIP (Skype, Messenger etc.)
➢ Online Chat
➢ Email
➢ Satellite phones
 Price-Performance trade-off very high.
 Issues of mobility and penetration with the substitutes.

6.3 PEST Analysis of the Indian Telecom Sector
6.3.1 Political Scenario
Government Policies and Framework

Introduction:
As the sector is open for both private and public players there are huge
number of players in the market which requires a proper picturing of rules
and regulation. The government has created bodies like DOT, TRAI, DTS
which takes care of the rules and regulations. The first policy the National
Telcom Policy was announced in 1994. The Telecom Regulatory Authority
of India (TRAI) was setup in 1997 and the second National Telecom Policy
came into effect in mid 1999. In January 2001, the Telecom Disputes
Settlement and Appellate Tribunal (TDSAT) started functioning and a
policy was announced for additional licenses especially in the area of
basic and mobile services. In November 2003, the Unified Access (Basic &
Cellular) Service License (USAL) was introduced as a first step towards a
Unified License Regime Technology and allows provisioning any kind of
service.
National Telecom Policy 1994

Introduction:
1. The new economic policy adopted by the Government aims at
improving India's competitiveness in the global market and rapid
growth of exports. Another element of the new economic policy is
attracting foreign direct investment and stimulating domestic
investment. Telecommunication services of world class quality are
necessary for the success of this policy. It is, therefore, necessary to
give the highest priority to the development of telecom services in
the country.
Objectives:
2. The objectives of the New Telecom Policy will be as follows :
a. The focus of the Telecom Policy shall be telecommunication
for all and telecommunication within the reach of all. This
means ensuring the availability of telephone on demand as
early as possible.

b. Another objective will be to achieve universal service covering
all villages as early as possible. What is meant by the
expression universal service is the provision of access to all
people for certain basic telecom services at affordable and
reasonable prices.
c. The quality of telecom services should be of world standard.
Removal of consumer complaints, dispute resolution and
public interface will receive special attention. The objective
will also be to provide widest permissible range of services to
meet the customer's demand at reasonable prices.
d. Taking into account India's size and development, it is
necessary to ensure that India emerges as a major
manufacturing base and major exporter of telecom
equipment.
e. The defence and security interests of the country will be
protected.
Achievements:
As against the NTP 1994 target of provision of 1 PCO per 500 urban
population and coverage of all 6 lac villages, DoT has achieved an urban
PCO penetration of 1 PCO per 522 and has been able to provide
telephone coverage to only 3.1 lac villages. As regards provision of total
telephone lines in the country, DoT has provided 8.73 million telephone
lines against the eighth plan target of 7.5 million lines.
NTP 1994 also recognized that the required resources for achieving
these targets would not be available only out of Government sources
and concluded that private investment and involvement of the private
sector was required to bridge the resource gap. The Government invited
private sector participation in a phased manner from the early nineties,
initially for value added services such as Paging Services and Cellular
Mobile Telephone Services (CMTS) and thereafter for Fixed Telephone
Services (FTS). After a competitive bidding process, licenses were
awarded to 8 CMTS operators in the four metros, 14 CMTS operators in
18 state circles, 6 BTS operators in 6 state circles and to paging
operators in 27 cities and 18 state circles. VSAT services were liberalised
for providing data services to closed user groups. Licences were issued
to 14 operators in the private sector out of which only nine licencees are
operational. The Government has recently announced the policy for
Internet Service Provision (ISP) by private operators and has commenced
licensing of the same. The Government has also announced opening up

of Global Mobile Personal Communications by Satellite (GMPCS) and has
issued one provisional license. Issue of licenses to other prospective
GMPCS operators is under consideration.
The Government recognises that the result of the privatisation has so far
not been entirely satisfactory. While there has been a rapid rollout of
cellular mobile networks in the metros and states with currently over 1
million subscribers, most of the projects today are facing problems. The
main reason, according to the cellular and basic operators, has been the
fact that the actual revenues realised by these projects have been far
short of the projections and the operators are unable to arrange
financing for their projects and therefore complete their projects. Basic
telecom services by private operators have only just commenced in a
limited way in two of the six circles where licenses were awarded. As a
result, some of the targets as envisaged in the objectives of the NTP
1994 have remained unfulfilled. The private sector entry has been
slower than what was envisaged in the NTP 1994.
The government views the above developments with concern as it would
adversely affect the further development of the sector and recognises
the need to take a fresh look at the policy framework for this sector.
NEW TELECOM POLICY 1999
Need for a new telecom policy
In addition to some of the objectives of NTP 1994 not being fulfilled,
there have also been far reaching developments in the recent past in the
telecom, IT, consumer electronics and media industries world-wide.
Convergence of both markets and technologies is a reality that is forcing
realignment of the industry. At one level, telephone and broadcasting
industries are entering each other’s markets, while at another level,
technology is blurring the difference between different conduit systems
such as wire line and wireless. As in the case of most countries, separate
licences have been issued in our country for basic, cellular, ISP, satellite
and cable TV operators each with separate industry structure, terms of
entry and varying requirement to create infrastructure. However this
convergence now allows operators to use their facilities to deliver some
services reserved for other operators, necessitating a relook into the
existing policy framework. The new telecom policy framework is also
required to facilitate India’s vision of becoming an IT superpower and
develop a world class telecom infrastructure in the country.
Objectives

• Access to telecommunications is of utmost importance for
achievement of the country's social and economic goals.
Availability of affordable and effective communications for the
citizens is at the core of the vision and goal of the telecom policy.
• Strive to provide a balance between the provision of universal
service to all uncovered areas, including the rural areas, and the
provision of high-level services capable of meeting the needs of
the country’s economy;
• Encourage development of telecommunication facilities in remote,
hilly and tribal areas of the country;
• Create a modern and efficient telecommunications infrastructure
taking into account the convergence of IT, media, telecom and
consumer electronics and thereby propel India into becoming an IT
superpower;
• Convert PCO’s, wherever justified, into Public Teleinfo centres
having multimedia capability like ISDN services, remote database
access, government and community information systems etc.
• Transform in a time bound manner, the telecommunications
sector to a greater competitive environment in both urban and
rural areas providing equal opportunities and level playing field for
all players;
• Strengthen research and development efforts in the country and
provide an impetus to build world-class manufacturing capabilities
• Achieve efficiency and transparency in spectrum management
• Protect the defence & security interests of the country
• Enable Indian Telecom Companies to become truly global players.
Targets
• Make available telephone on demand by the year 2002 and
sustain it thereafter so as to achieve a teledensity of 7 by the year
2005 and 15 by the year 2010.
• Encourage development of telecom in rural areas making it more
affordable by suitable tariff structure and making rural
communication mandatory for all fixed service providers
○ Increase rural teledensity from the current level of 0.4 to 4
by the year 2010 and provide reliable transmission media in
all rural areas.
• Achieve telecom coverage of all villages in the country and
provide reliable media to all exchanges by the year 2002.

• Provide Internet access to all district head quarters by the year
2000.
• Provide high speed data and multimedia capability using
technologies including ISDN to all towns with a population greater
than 2 lakh by the year 2002.
Addendum to the New Telecom Policy – 1999 (NTP-99)

Given the central aim of NTP-99 to ensure rapid expansion of
teledensity; given the unprecedented expansion of telecom services that
competition has brought about; given the steep reductions in tariffs that
competition has ensured; given the fact that advances in technologies
erase distinctions imposed by earlier licensing systems; given the fact
that even more rapid advances in technologies are imminent; given the
steep reduction in costs of providing telecom services; given the rapid
convergence of tariffs for wireless services; given the fact that the
provision of such services at the cheapest possible rates and by the most
reliable mode is the sine qua non for India to consolidate its position as a
leading hub of Communications systems, Information Technology, IT
enabled services, and of establishing itself as a leader in new disciplines
such as bioinformatics and biotechnology; given the recommendations of
TRAI in this regard; Government, in the public interest in general and
consumer interest in particular and for the proper conduct of telegraphs
and telecommunications services, has decided that there shall also be the
following categories of licences for telecommunication services:
i. Unified Licence for Telecommunication Services permitting Licensee
to provide all telecommunication/ telegraph services covering
various geographical areas using any technology;
ii. Licence for Unified Access (Basic and Cellular) Services permitting
Licensee to provide Basic and /or Cellular Services using any
technology in a defined service area.
The Telecom Regulatory Authority Of India Act, 1997
Powers & functions of the TRAI
a. Recommend the need and timing for introduction of new service

provider;
b. Recommend the terms and conditions of license to a service
provider;

c. Ensure technical compatibility and effective inter-connection
between different service providers;
d. Regulate arrangement amongst service providers of sharing their

revenue derived from providing telecommunication services;
e. Ensure compliance of terms and conditions of license;
f. Recommend revocation of license for non-compliance of terms and

conditions of license;
g. Lay down and ensure the time period for providing local and long
distance circuits of telecommunication between different service
providers;
h. Facilitate competition and promote efficiency in the operation of

telecommunication services so as to facilitate growth in such
services;
i. Protect the interest of the consumers of telecommunication service;
j. Monitor the quality of service and conduct the periodical survey of

such provided by the service providers;
k. Inspect the equipment used in the network and recommend the

type of equipment to be used by the service providers;
l. Maintain register of interconnect agreements and of all such other

matters as may be provided in the regulations;
m. Keep register maintained under clause (l) open for inspection to any
member of public on payment of such fee and compliance of such
other requirements as may be provided in the regulations;
n. Settle disputes between service providers;
o. Render advice to the Central Government in the matters relating to

the development of telecommunication technology and any other
matter relatable to telecommunication industry in general;

p. Levy fees and other charges at such rates and in respect of such
services as may be determined by regulations;
q. Ensure effective compliance of universal service obligations;
r. Perform such other functions including such administrative and

financial functions as may be entrusted to it by the Central
Government or as may be necessary to carry out the provisions of
this Act.
BROADBAND POLICY 2004

Preamble
Recognising the potential of ubiquitous Broadband service in growth of
GDP and enhancement in quality of life through societal applications
including tele-education, tele-medicine, e-governance, entertainment as
well as employment generation by way of high speed access to
information and web-based communication, Government have finalised a
policy to accelerate the growth of Broadband services.
Demand for Broadband is primarily conditioned and driven by

Internet and PC penetration. It is recognised that the current level of
Internet and Broadband access in the country is low as compared to many
Asian countries. Penetration of Broadband, Internet and Personal
Computer (PC) in the country was 0.02%, 0.4% and 0.8% respectively at
the end of December, 2003. Currently, high speed Internet access is
available at various speeds from 64 kilobits per second (kbps) onwards
and presently an always-on high speed Internet access at 128 kbps is
considered as ‘Broadband’. There are no uniform standards for Broadband
connectivity and various countries follow various standards.
Government envision an accelerated growth in Internet penetration

and PC as the success of Broadband would largely be dependent on their
spread. It has been decided that following shall be the framework of the
policy.
FDI Policy
• Under Basic and cellular, Unified Access Services, National/
International Long Distance, V-Sat, Public Mobile Radio Trunked

Services (PMRTS), Global Mobile Personal Communications Services
(GMPCS) and other value added telecom services, equity cap of 74%
(including FDI, FII, NRI, FCCBs, ADRs, GDRs, convertible Preference
shares, and proportionate foreign equity in Indian promoters/
Investing Company) is available with FDI limit to 49% under
automatic route subject to guidelines notified in the PN 3(2007).
• Under ISP with gateways, radio-paging, end-to-end bandwidth equity

cap of 74% is available. FDI is limit to 49% under Automatic Route
and FIPB route beyond 49% Subject to licensing and security
requirements notified by the Dept. of Telecommunications.
• Under (a) ISP without gateway,(b) infrastructure provider providing

dark fibre, right of way, duct space, tower ;(c) electronic mail and
voice mail, Equity Cap of 100% with FDI upto 49% under Automatic
route and FIPB route beyond 49% is available subject to the
condition that such companies shall divest 26% of their equity in
favour of Indian public in 5 years, if these companies are listed in
other parts of the world. Also subject to licensing and security
requirements, where required.
• Under Manufacture of telecom equipments, 100% Equity cap under

automatic route subject to sectoral requirements is available.
Major Policy Achievements
The telecom sector in India has witnessed unparalleled growth especially
over the last decade as compared to global standards. This telecom boom
in India can be attributed to policies of liberalisation, globalisation, certain
reforms by the government and most importantly competition. The liberal
policies of the government thus provide easy market access for telecom
equipment and also a regulatory framework that is fair and just and offers
telecom services to the Indian consumer at astonishingly affordable prices
.India also provides a safe, secured and transparent market for the
telecom companies and moreover the investment policies and other
lucrative incentives have made foreign collaborations possible and India
one of the fastest growing markets. In the last couple of years huge
investments have been witnessed in this sector with most of it being in
the form of FDI. In the last couple of years India has witnessed huge
investments Introduction of the additional 2G spectrum has helped in the
entry of several new players who are now partnering with various
international operators thereby commencing the globalisation of the
Indian Telecom Industry. Given below are few of the policy achievements:
a. Unified Access Service License Regime (UASL)

Unified licensing marked the end of the license regime in the Indian
telecom industry. It helped in aligning convergent technologies and
services. The establishment of the Unified Access Licensing Regime
(2003) eliminated the need for different licenses for different services.
Players are now allowed to offer both mobile and fixed-line services under
a single license after paying an additional entry fee. This does not take
into account national and international long-distance services and Internet
access services.
b. Access Deficit Charges (ADC)
ADC makes it mandatory for a service provider at the caller’s end to share a percent of the
revenue earned with the service provider at the receiver’s end in long-distance telephony.
This subsidises the infrastructure costs of the service provider enabling access at receiver’s
end, especially because rental for fixed-line services is low. Revision in the ADC regime is
expected to be followed by further tariff reduction in telecom services.
c. Universal Service Obligation (USO)
The USO policy was laid along with NTP ’99 to widen the reach of telephony services in
rural India. All telecom operators are bound to contribute 5 percent of their revenues to this
fund. This system was put in place to bridge the wide gap between urban and rural
teledensity, bringing it down from the current 31 percent. Initially, only basic service
providers were under the purview of USO. Later, its scope was expanded to include mobile
services also. Although it increases the cost burden for the telecom companies, USO helps in
building the telecommunication infrastructure in the rural areas.
d. Approval for setting up 7 Centres of Excellence:
Approval for setting up of 7 centres of excellence have been given during
the year. 7 Centres of Excellence have already been set up at various
locations in the country to give fillip to research and development in the
telecom sector.
e. Setting up of Centre of communication security, research and
monitoring:
Approval has been given for setting up Centre for Communication security
research and monitoring with a Centralized model for telecom lawful
interception, monitoring and analysis.
f. Guidelines for infrastructure sharing
Government has issued detailed guidelines on sharing of both active and
passive infrastructure to different service providers in order to reduce
input of telecom Access service providers and facilitate further reduction
in tariff as well as enhanced tele-density in rural areas.
g. Total amount disbursed under the USO Fund upto 31.03.2008
was Rs. 6371.44 Crores.

h. Adoption of international commission on Non-Ionizing
Radiation protection (ICNRP):
Adoption of ICNRP Guidelines in Telecom Sector in India regarding basic

restriction and reference levels for limiting EMF exposure. These
conditions to be incorporated in import licenses of mobile sets.
Manufacturers of mobile sets in India are being asked to adopt these
standards and self certify the products. Similarly the custom authorities
should notify that mobile handsets being imported should bear
certification of the manufacturer that they meet these standards.

6.3.2 Economic Environment
The development of world class telecommunication infrastructure is the
key to rapid economic growth and to bring social change of the country.
India’s telecommunication sector has undergone a major process of
transformation through significant policy reforms, particularly beginning
with the announcement of NTP 1994 and was subsequently re-
emphasized and carried forward under NTP 1999. Driven by various policy
initiatives, the Indian telecom sector witnessed a complete transformation
in the last decade. It has achieved a phenomenal growth during the last
few years and is poised to take a big leap in the future also. Such rapid
growth in the communication sector has become necessary for further
modernization of Indian economy through rapid development in IT.
The impact of telecommunication on economic growth

Telecom is one area in India where significant improvements have
happened. Even in the current scenario, where most of the industries are
suffering due to global economic recession, telecom is one sector which is
still going strong. In February 2009, total subscriber addition was 13.25
million. This was marginally lower than 15.35 million additions in January.
The total subscriber base in the country now stands at 375 million, nearly
50% more than that a year ago.
Demand Analysis
Real and Nominal Growth & Supply/Demand Analysis: Indian telecom

continues to register a significant growth in the current fiscal year. This
has been due to the impact of economic reforms and pro-active policies of
the government. Today, Indian telecom network with about 364 million
connections in October 2008 is the third largest in the world .Indian
telecom has achieved another milestone as it has become the second
largest wireless network in the world by surpassing USA. With the current
pace, where about nine million telephones are being added every month,
the target of 500 million connections by 2010 is well within our reach.
The total number of telephones has increased from 76.53 million on March
31, 2004 to 363.95 million on October 31 2008. While 94.63 million
telephones were added during the twelve months of 2007-08, about more
than nine million subscribers are being added every month during the

current fiscal year. Tele- density has also increased from 12.7 per cent in
March 2006 to 31.50 per cent in October 2008. Rural tele density
increased to 13.4 per cent in October 2008 with 109.05 million rural
telephone connections. Urban tele density on the other hand has been
74.61 per cent in October 2008.
The growth of wireless services has been phenomenal, with wireless

subscribers growing at a compound annual growth rate (CAGR) of 87.7 per
cent per annum since 2003. The share of private sector in total telephone
connections is now 77.44 per cent as per the latest statistics available for
October 2008 as against a meagre 5% in 1999.
Rural telephones have gone up from 12.3 million in March 2004 to

109.05 million in October 2008 with a tele density of 13.04%. The target
of 100 million rural telephones by 2010 has been achieved well in
advance.
It is also envisaged that internet and broad-band subscribers will increase

to 40 million and 20 million by 2010. As per the latest available statistics
for September 2008, about 5.7% villages have broadband coverage and
the number of rural broadband connections is 1.55 lakh.
Foreign direct investment (FDI) is one of the important sources to meet

the huge funds that are required for rapid network expansion. The FDI
policy provides an investor-friendly environment for the growth of the
telecom sector. The policy of the Government of India is to strive to
maximize the developmental impact and spin-offs of FDI. At present, 74%
to 100% FDI is permitted for various telecom services. The total FDI equity
inflows in telecom sector have been 1261 million USD during 2007-08.
The government is now looking forward to achieve the target of 600

million telephone subscribers by the end of Eleventh Plan and to achieve
rural tele density of 25% by means of 200 million rural connections at the
end of 11th Plan. It is also envisaged that internet and broad-band
subscribers will increase to 40 million and 20 million, respectively, by
2010.

Supply Analysis
Degree of Concentration: Today, the telecommunications industry is a

vast one with a large number of private players who are constantly
bringing down the cost to consumers thereby making services more
affordable and helping improve life in general and business in particular.
On the Indian business scene are successful government owned
institutions like MTNL and BSNL on the one hand, and even more
successful and aggressive players like the Tata’s and Reliance on the
other. Competition has just begun and is heating up every day with either
lowering of tariffs or introduction of newer and improved services to keep
a larger share of the market. Reliance, for instance, has been one of the
recent, more aggressive players in the telecom business when it
introduced a wireless phone in the market for as low as Rs. 500.
The same needs to be resolved with government intervention through the

regulator in order to further improve the services. The telecom sector
today is not a small one and covers various services and many players
within each service. One of the most vibrant developments in
telecommunications has been Cellular telephony – a technology that gives
us the power to communicate anytime and anywhere. This segment, a
part of the broader telecommunications industry, has today spawned an
entire industry in mobile telecommunication. Mobile phones today are an
integral part of growth, success and economic efficiency of businesses.
The government in India has today recognized, providing world-class
telecommunications infrastructure as the key to rapid economic and social
development of the country.

6.3.3 Social Environment
Even though India is a country with diverse culture, it doesn’t matter
much as telecommunication has become a basic need nowadays.
• There are some concerns about use of mobile phones affecting
health but again no effect on the industry.
• Around 60% of Indian population is middle aged (15-50), so
company must keep this aspect in mind and design the service
accordingly. This also supports the fact that there is enough
workforce available.
• Population growth rate of India(1.38%) is well above the worlds
growth rate, hence promising further growth.
6.3.4 Technology
Existing Technologies:
GSM (Global System for Mobile Communication)
GSM (Global System for Mobile communications) is an open, digital

cellular technology used for transmitting mobile voice and data services.
GSM supports voice calls and data transfer speeds of up to 9.6 kbit/s,
together with the transmission of SMS (Short Message Service). GSM
operates in the 900MHz and 1.8GHz bands in Europe and the 1.9GHz and
850MHz bands in the US. It offers the best voice quality of any current
digital wireless standard.
By having harmonised spectrum across most of the globe, GSM’s
international roaming capability allows users to access the same services
when travelling abroad as at home. This gives consumers seamless and
same number connectivity in more than 218 countries.
GPRS (General packet radio service)
GPRS is a packet oriented mobile data service available to users of the 2G

cellular communication systems global system for mobile communications
(GSM), as well as in the 3G systems. In the 2G systems, GPRS provides
data rates of 56-114 kbit/s.
GPRS data transfer is typically charged per megabyte of traffic

transferred, while data communication via traditional circuit switching is
billed per minute of connection time, independent of whether the user
actually is using the capacity or is in an idle state. GPRS is a best-effort
packet switched service, as opposed to circuit switching, where a certain

quality of service (QoS) is guaranteed during the connection for non-
mobile users.
2G cellular systems combined with GPRS are often described as 2.5G, that
is, a technology between the second (2G) and third (3G) generations of
mobile telephony. It provides moderate speed data transfer, by using
unused time division multiple access (TDMA) channels in, for example, the
GSM system. Originally there was some thought to extend GPRS to cover
other standards, but instead those networks are being converted to use
the GSM standard, so that GSM is the only kind of network where GPRS is
in use. GPRS is integrated into GSM Release 97 and newer releases. It was
originally standardized by European Telecommunications Standards
Institute (ETSI), but now by the 3rd Generation Partnership Project (3GPP).
EDGE (Enhanced Data rates for GSM Evolution)

Enhanced data for global evolution (EDGE) is a high-speed mobile data
standard, intended to enable second-generation global system for mobile
communication (GSM) and time division multiple access (TDMA) networks
to transmit data at up to 384 kilobits per second (Kbps). As it was initially
developed just for GSM systems, it has also been called GSM384. Ericsson
intended the technology for those network operators who failed to win
spectrum auctions for third-generation networks to allow high-speed data
transmission.
EDGE provides speed enhancements by changing the type of modulation
used and making a better use of the carrier currently used, for example
the 200kHz carrier in GSM systems. EDGE also provides an evolutionary
path to third-generation IMT-2000-compliant systems, such as universal
mobile telephone systems (UMTS), by implementing some of the changes
expected in the later implementation in third-generation systems.
EDGE builds upon enhancements provided by general packet radio service
(GPRS) and high-speed circuit switched data (HSCSD) technologies that
are currently being tested and deployed. It enables a greater data-
transmission speed to be achieved in good conditions, especially near the
base stations, by implementing an eight-phase-shift keying (8 PSK)
modulation instead of Gaussian minimum-shift keying (GMSK).
CDMA (Code division multiple access)

CDMA is a "spread spectrum" technology, allowing many users to occupy
the same time and frequency allocations in a given band/space. CDMA

(Code Division Multiple Access) assigns unique codes to each
communication to differentiate it from others in the same spectrum. In a
world of finite spectrum resources, CDMA enables many more people to
share the airwaves at the same time than do alternative technologies.
The CDMA air interface is used in both 2G and 3G networks. 2G CDMA
standards are branded cdmaOne™ and include IS-95A and IS-95B. CDMA
is the foundation for 3G services: the two dominant IMT-2000 standards,
CDMA2000® and WCDMA, are based on CDMA.
WiMax
WiMAX is a wireless digital communications system, also known as IEEE
802.16, that is intended for wireless "metropolitan area networks". WiMAX
can provide broadband wireless access (BWA) up to 30 miles (50 km) for
fixed stations, and 3 - 10 miles (5 - 15 km) for mobile stations. In contrast,
the WiFi/802.11 wireless local area network standard is limited in most
cases to only 100 - 300 feet (30 - 100m).
With WiMAX, WiFi-like data rates are easily supported, but the issue of
interference is lessened. WiMAX operates on both licensed and non-
licensed frequencies, providing a regulated environment and viable
economic model for wireless carriers. WiMAX can be used for wireless
networking in much the same way as the more common WiFi protocol.
WiMAX is a second-generation protocol that allows for more efficient
bandwidth use, interference avoidance, and is intended to allow higher
data rates over longer distances.
SS7
There are two essential components to all telephone calls. The first, and
most obvious, is the actual content—our voices, faxes, modem data, etc.
The second is the information that instructs telephone exchanges to
establish connections and route the “content” to an appropriate
destination. Telephony signaling is concerned with the creation of
standards for the latter to achieve the former. These standards are known
as protocols. SS7 or Signaling System Number 7 is simply another set of
protocols that describe a means of communication between telephone
switches in public telephone networks. They have been created and
controlled by various bodies around the world, which leads to some
specific local variations, but the principal organization with responsibility

for their administration is the International Telecommunications Union or
ITU-T.
3G
3G is a short term for third-generation wireless, and refers to near-future
developments in personal and business wireless technology, especially
mobile communications. The third generation, as its name suggests,
follows the first generation (1G) and second generation (2G) in wireless
communications
3G is expected to include capabilities and features such as:
• Enhanced multimedia (voice, data, video, and remote control)

• Broad bandwidth and high speed (upwards of 2 Mbps)
• Usability on all popular modes (cellular telephone, e-mail, paging,
fax, videoconferencing, and Web browsing)
• Routing flexibility (repeater, satellite, LAN)
• Operation at approximately 2 GHz transmit and receive frequencies
Emerging Technologies
IP Multimedia Subsystem (IMS)
IP Multimedia Subsystem (IMS) is a generic architecture for offering

multimedia and voice over IP services, defined by 3rd Generation
Partnership Project (3GPP). IMS is access independent as it supports
multiple access types including GSM, WCDMA, CDMA2000, WLAN, Wireline
broadband and other packet data applications. IMS will make Internet
technologies, such as web browsing, e-mail, instant messaging and video
conferencing available to everyone from any location. It is also intended
to allow operators to introduce new services, such as web browsing, WAP
and MMS, at the top level of their packet-switched networks
Some of the possible applications where IMS can be used are:
• Presence services
• Full Duplex Video Telephony
• Instant messaging

• Unified messaging
• Multimedia advertising
• Multiparty gaming
• Videostreaming
• Web/Audio/Video Conferencing
• Push-to services, such as push-to-talk, push-to-view, push-to-video
I. High Speed Downlink Packet Access (HSDPA)
High Speed Downlink Packet Access (HSDPA) is a packet based technology

for CDMA downlink with data transmission rates of 4 to 5 times that of
current generation 3G networks (UMTS) and 15 times faster than GPRS.
The latest release boosts downlink speeds from the current end-user rate
of 384 kbps (up to 2 Mbps according to standards) to a maximum value
according to standards of 14.4 Mbps. Real life end-user speeds will be in
the range of 2 to 3 Mbps.
HSDPA provides a smooth evolutionary path for Universal Mobile

Telecommunications System (UMTS) networks to higher data rates and
higher capacities, in the same way as Enhanced Data rates for GSM
Evolution (EDGE) does in the Global System for Mobile communication
(GSM) world. The introduction of shared channels for different users will
guarantee that channel resources are used efficiently in the packet
domain, and will be less expensive for users than dedicated channels.
HSDPA was introduced in the Third Generation Partnership Project (3GPP)

release 5 standards. Assuming comparable cell sizes, it is anticipated that
by using multi-code transmission it will be possible to achieve peak data
rates of about 10 Mbit/s (the maximum theoretical rate is 14.4 Mbit/s).
This will result in a six- to seven-fold throughput increase during an
average downlink packet session compared with the Downlink Shared
CHannel (DSCH) standards of 3GPP release 99.

HSDPA will make life easy for 3G customers, providing vastly better
service for both corporate users and individuals, with data delivered at
speeds comparable to or better than fixed-line broadband access systems.
• Corporate users will have easy and secure mobile access to

corporate networks, with rapid retrieval and downloading of
confidential corporate information.
• Consumers will enjoy superior quality for video services, including

video streaming and gaming.
• All customers will enjoy fast Web browsing, with rapid access to
graphics-heavy Internet sites.
Mobile TV
It is the latest technology where the TV services are streamed on to the

mobile or hand-held devices. Mobile TV is going to get more and more
prevalent over the next couple years. There is lot of momentum in the
area, even if there are a few commercial products so far. At the
moment, mobile TV is mostly streamed over 3G networks. But sending
an individual data stream to each viewer is inefficient and will be
unsustainable in the long run if mobile TV takes off. There are three
main standards: DVB-H (Digital Video Broadcasting - Handhelds) ,
favored in Europe; DMB (Digital Multimedia Broadcasting), which has
been adopted in South Korea and Japan; and Media FLO , which is
being rolled out in America.
Mobile Virtual Network Operator (MVNO)

It is a GSM phenomenon where an operator or company which does not
own a licensed spectrum and generally without own networking
infrastructure. Instead MVNOs resell wireless services under their brand
name, using regular telecom operator's network with which they have a
business arrangements. Usually they buy minutes of use from the licensed
telecom operator and then resell minutes of usage to their customers of
MVNO. Currently MVNOs are emerging in fast pace in European markets
and beginning in USA also.
An example for MVNO is Virgin Mobile.
Characteristics of an MVNO:

• MVNOs are new breed of wireless network operators who may not
own the wireless spectrum, or wireless infrastructure (also termed
pipe, in colloquial terms) but give a virtual appearance of owning a
wireless network. These operators lease the pipe or wireless
capacity from traditional operators and then repackage it for a
specific vertical industry application.
• Main added value that MVNO provides is billing and customer care
functions. In that sense MVNOs own the customers.
• MVNOs generally provide both voice and data services to end users
through a paid up subscription agreement.
• To become an MVNO, one should cobble together a partnership that

consists of a connectivity of a regular telco, a customer base, and a
sales channel. Most important, they need unique and compelling
data services.
Internet Protocol Version 6 (IPv6)

IPV6 is a new suite of standard protocols for the network layer of the
Internet defined by IETF to replace the current version of Internet Protocol
version 4 (IPv4). IPv6 is also called as Next Generation Internet Protocol or
IPng.
IPv6 is designed to be an evolutionary step from IPv4. It is a natural

increment to IPv4. It can be installed as a normal software upgrade in
internet devices and is interoperable with the current IPv4.
IPv6 Features:
➢ New header format

➢ Large address space
➢ Efficient and hierarchical addressing and faster routing infrastructure
➢ Stateless and stateful address configuration
➢ Mobile support (Mobile IPv6)
➢ Built-in network layer security
➢ Better support for QoS
➢ New protocol for neighboring node interaction
4G TECHNOLOGY

4G (also known as Beyond 3G), an abbreviation for Fourth-Generation, is a
term used to describe the next complete evolution in wireless
communications. A 4G system will be able to provide a comprehensive IP
solution where voice, data and streamed multimedia can be given to users
on an "Anytime, Anywhere" basis, and at higher data rates than previous
generations.
As the second generation was a total replacement of the first generation

networks and handsets, and the third generation was a total replacement
of second generation networks and handsets, so too the fourth generation
cannot be an incremental evolution of current 3G technologies, but rather
the total replacement of the current 3G networks and handsets. The
international telecommunications regulatory and standardization bodies
are working for commercial deployment of 4G networks roughly in the
2012-2015 time scale. At that point it is predicted that even with current
evolutions of third generation 3G networks, these will tend to be
congested.
There is no formal definition for what 4G is; however, there are certain
objectives that are projected for 4G. These objectives include: that 4G will
be a fully IP-based integrated system. 4G will be capable of providing
between 100 Mbit/s and 1 Gbit/s speeds both indoors and outdoors, with
premium quality and high security.
Many companies have taken self-serving definitions and distortions about

4G to suggest they have 4G already in existence today, such as several
early trials and launches of WiMAX. Other companies have made
prototype systems calling those 4G. While it is possible that some
currently demonstrated technologies may become part of 4G, until the 4G
standard or standards have been defined, it is impossible for any
company currently to provide with any certainty wireless solutions that
could be called 4G cellular networks that would conform to the eventual
international standards for 4G. These confusing statements around
"existing" 4G have served to confuse investors and analysts about the
wireless industry.

6.4 Time Series
6.4.1 Trend for Wireline subscribers (In Crores)
Figure 6.3 – Trend for wireline subscriber base
The above figure shows the decreasing trend in the number of wireline
subscribers in India. This suggests that people are shifting from fixed
wired lines to other alternatives for voice communications.

6.4.2 Trend for Wireless subscribers (In Crores)
Figure 6.4 – Trend for wireless subscriber base
Unlike the decrease in the number of the WireLine Subscribers, the

wireless subscriber base has been on a huge growth spree.
This suggests that India is a volumes market, wherein the number of

subscribers are switching from the traditional wired telephones to the
mobile phones, and mobile phone service providers.

6.4.3 Trend for Internet Subscribers
Figure 6.5 Internet Subscriber base trend
The internet subscriber base in India has also been on the gradual rise.
In India, a country with a large number of it’s population living in the rural
regions, most of the population does not have access to computers. This
shows that the usage of computers is gradually on the rise, and with it, so
is the internet usage.

6.4.4 Trend for Broadband Subscribers
Figure 6.6 Broadband subscriber base
This trend shows that the number of broadband subscribers is increasing

with time. People are more aware about broadband services and the
advantage of using a broadband connection over a regular dial-up service.
It suggests that most of the rise in subscribers are coming from the more
aware customers in the urban and sub-urban regions.

6.4.5 Trend for Teledensity
Figure 6.7 – Changing trend in Tele-Density
The teledensity has been rising constantly. Showing that the penetration
of mobile services has been on the rise.
The teledensity will keep growing because the penetration in the rural
areas is still not complete. Thus, this suggests that even though India has
high tele-density in the urban areas, the sub-urban and rural areas can
still improve much further.

6.4.6 Net Sales Trend
Figure 6.8 – Change in Net Sales
From the above graph we can see that the net sales will show a positive
growth with an approximate increase of 10000 crores a year which is a
good sign for the future of the telecom industry.

6.4.7 Trend for Net Profit
Figure 6.9 – Reported Net Profit Trend
The above graph shows an increasing trend in the net profits, but the margin of
increase is small compared to the net sales this may be attributed to the stiff
competition among service providers and low pricing.

Company Analysis

7.1 INTRODUCTION
This chapter deals with a financial overview of the major players. The
ratios of the individual companies are compared with the industry
standards. The financial performance of the companies are evaluated
across a number of parameters like return on equity, return on capital
employed, etc.
Figure: 6.1 Market Share of Telecom Companies as on December, 2009
7.2 Major Players

For our analysis we will be considering the bottom 5 and the top 5
companies participating in the Telecom Sector within India. The ranking is
decided on the basis of Net Profits as mentioned in the annual reports
which were released for year 2008-09.
The top five companies on the basis of “Net profit” are:
○ Bharti Airtel
○ Reliance Communication
○ Idea cellular
○ Vodafone Essar Gujarat
○ Bharat Sanchar
The bottom 5 companies are:
○ Supreme telecom
○ HFCL Infotel
○ Tata tele Mah

○ Sify
○ Shyam Telelink
7.2.1 Bharti Airtel
• Bharti Enterprises is one of India’s leading business groups with interests

in telecom, financial services, retail and manufacturing. Bharti Airtel is a
flagship company of Bharti Enterprises.
• The businesses at Bharti Airtel have been structured into three individual
strategic business units (SBUs) - Mobile Services, Airtel Telemedia
Services & Enterprise Services.
• It is the largest cellular service provider in India in terms of number of
subscribers. Services are offered include Mobile Services (GSM
Technology), Broadband & Telephone Services, Long Distance Services
and Enterprise Services (Telecommunications Consulting for corporate).
• It provides end-to-end telecom solutions to corporate customers and
national & international long distance services to carriers.
• The company served an aggregate of 88,270,194 customers as of
December 31, 2008; of whom 85,650,733 subscribed to GSM services and
2,619,461 use the Telemedia Services either for voice and/or broadband
access delivered through DSL.
• . They have recently forayed into media by launching their DTH and IPTV
Services.
• Company shares are listed on The Stock Exchange, Mumbai (BSE) and The
National Stock Exchange of India Limited (NSE).

7.2.2 Reliance communication
• Reliance – ADA Group’s flagship company, Reliance Communications, is

India's largest private sector information and communications company,
with over 100 million subscribers.
• It has established a pan-India, high-capacity, integrated (wireless and
wireline), convergent (voice, data and video) digital network, to offer
services spanning the entire info communication value chain.
• Their business encompasses a complete range of telecom services
covering mobile and fixed line telephony.
• It includes broadband, national and international long distance services
and data services along with an exhaustive range of value-added services
and applications.
• Today the company can proudly claim that they were instrumental in
harnessing the true power of information and communication, by
bestowing it in the hands of the common man at affordable rates.
7.2.3 Idea cellular
• IDEA Cellular is a publicly listed company, having listed on the Bombay

Stock Exchange (BSE) and the National Stock Exchange (NSE) in March
2007.
• IDEA Cellular is part of the Aditya Birla Group, India's first truly
multinational corporation. The group operates in 25 countries, and is
anchored by over 1,25,000 employees belonging to 25 nationalities.
• IDEA Cellular is a leading GSM mobile services operator in India with over
53 million subscribers, under brand IDEA. It is a pan India integrated GSM
operator covering the entire telephony landscape of the country, and has
NLD and ILD operations.
• A frontrunner in introducing revolutionary tariff plans, IDEA Cellular has
the distinction of offering the most customer friendly and competitive Pre
Paid offerings, for the first time in India, in an increasingly segmented
market. From basic voice & Short Message Service (SMS) services to high-
end value added & GPRS services such as Blackberry, Datacard, Mobile
TV, Games etc - IDEA is seen as an innovative, customer focused brand.

• IDEA has seen phenomenal growth since its inception, the company's
footprint idea is to first achieve critical mass, then drill deep instead of
spreading thin.
7.2.4 Vodafone Essar
• Vodafone Group Plc is the world's leading mobile telecommunications

company, with a significant presence in Europe, the Middle East, Africa,
Asia Pacific and the United States through the Company's subsidiary
undertakings, joint ventures, associated undertakings and investments.
• The Group's mobile subsidiaries operate under the brand name

'Vodafone'. In the United States the Group's associated undertaking
operates as Verizon Wireless.
• During the last few years, Vodafone Group has entered into arrangements
with network operators in countries where the Group does not hold an
equity stake. Under the terms of these Partner Market Agreements, the
Group and its partner operators co-operate in the development and
marketing of global products and services, with varying levels of brand
association.
• On 31 December 2009, based on the registered customers of mobile

telecommunications ventures in which it had ownership interests at that
date, the Group had 333 million customers, excluding paging customers,
calculated on a proportionate basis in accordance with the Company's
percentage interest in these ventures.
7.2.5 Bharat Sanchar Nigam Ltd.
• Bharat Sanchar Nigam Ltd. formed in October, 2000, is World's 7th largest
Telecommunications Company providing comprehensive range of telecom

services in India: Wireline, CDMA mobile, GSM Mobile, Internet, Broadband
etc.
• Presently it is one of the largest & leading public sector units in India.
• Today, it has about 46 million line basic telephone capacity and 0.6 million
Data One broadband customers
• BSNL is the only service provider, making focused efforts and planned
initiatives to bridge the Rural-Urban Digital Divide.
• BSNL has installed Quality Telecom Network in the country and now
focusing on improving it, expanding the network, introducing new telecom
services with ICT applications in villages and winning customer's
confidence.
• In fact there is no telecom operator in the country to beat its reach with
its wide network giving services in every nook & corner of country and
operates across India except Delhi & Mumbai.
The bottom 5 players:
7.2.6 Supreme telecom
• From a telecom cabling company to an ISO 9001 certified telecom turnkey

player, Supreme has indeed come a long way.
• In the FY 2000-01, the company has shown a growth of 37 percent and

has registered a turnover of Rs 87.08 core.
• The company continues to maintain its edge in the utilities and public
networks (non-DoT) segment.
• It bagged major projects from Tata Cellular, Sky Cell, Western Railway and
Indian Oil Corporation, etc.

• During the last fiscal, Supreme has also bid for projects in countries like
Ghana, Dubai and Mauritius
7.2.7 HFCL Infotel
• HFCL Infotel Ltd., the first basic telephony services provider for Punjab
and it launched its operations on 16th October, 2000.
• Today it has added a milestone to the rich economy of Punjab by

providing world-class telephony and data services in the state.
• During 2003-04, The Company launched its Prepaid Mobile product and a
complete range of innovative value Added Services and Data products
were launched in May 2004, by the introduction of DSL-high speed
Internet product.
• The Company's services namely, Fixed Line Telephony, Mobile Telephony,

Broadband Internet Access and Data Networking Access are offered under
the brand name 'CONNECT'.
• With an investment of over Rs.1200 Crores HFCL Infotel, has set up a
state-of-the-art network in over 66 towns and cities in Punjab
• .The average revenue per line (ARPL) for its subscribers is already
amongst the highest in the country.
• With a clear focus on acquiring quality subscribers through targeted roll
out and by using revenue oriented marketing plans they intend to
maintain this trend in the future.
• The wide array of innovative products and services in the data and
broadband segment has further allowed the Company to maximize its
revenue drive.

7.2.8 Tata tele services
• Incorporated in 1996, Tata Teleservices Limited is the pioneer of the

CDMA 1x technology platform in India.
• It has embarked on a growth path since the acquisition of Hughes
Tele.com (India) Ltd [renamed Tata Teleservices (Maharashtra) Limited]
by the Tata Group in 2002.
• It launched mobile operations in January 2005 under the brand Tata
Indicom and today enjoys a pan-India presence through existing
operations in all of India's 22 telecom Circles.
• The company is also the market leader in the fixed wireless telephony
market with its brand Walky.
• The company has recently introduced the brand Photon to provide a
variety of options for wireless mobile broadband access.
• The company's network has been rated as the 'Least Congested' in India
for last five consecutive quarters by the Telecom Regulatory Authority of
India through independent surveys.
7.2.9 Sify
Sify is India’s largest provider of Broadband service that explores the true
potential of the Internet. It offers high speed, high quality, low cost and
easy to use Internet connection at home in two categories: Broadband
and Hi-Speed Plans
7.2.10 Shyam Telelink
• Sistema Shyam TeleServices Ltd. was founded in 1998 (original name –

Shyam Telelink Ltd.) and started full-scale business in Rajasthan in 2000.
• The company obtained its pan-India license for provision of mobile

services in March 2008 and at present has enough spectrum to provide
mobile telephony services in 22 telecom-circles, covering India’s 28 states
and 7 union territories, with a population of 130 million.

• As of May 2009, Sistema Shyam TeleServices has over 1 million users
spread over more than 600 cities in Rajasthan, 373 cities in Tamil Nadu
(including megapolis Chennai), 247 cities in Kerala and 250 towns in West
Bengal (including Kolkata).
• The subscribers’ base growth in Rajasthan has been 8.5 - 12% per month,
starting from the network launch on 30th September 2008.
• The company continues to implement its strategy of pan-India mobile

network construction, with the aim to cover over 35 million subscribers
with its services (almost 7% of Indian market)
7.3 Ratio analysis of the industry
Ratio analysis helps in assessing a company’s strengths and weaknesses. It acts a yard
stick to set goals for improvement. It is a powerful analytical tool for measuring
performance of a firm.
7.3.1 Liquidity ratio:
Current ratio:
• This ratio indicates the short term solvency of the company. This indicates the amount of
current assets that exists per rupee of current liability. Higher the ration the more
comfortable is the firm in repaying its current liabilities.
• The current ratio of the industry is 1.22; this indicates that the industry is comfortable in
repaying its current liabilities.

Debt Equity Ratio:
• This ratio indicates the cushion that shareholder’s funds provide on the debt. If this ratio is
1:1, this means that its capital structure is made of an equal amount of debt and
shareholder’s funds.
• Higher the ratio more will be the burden in the form of interest payments for the firm.
• The debt equity ratio of the industry is 0.35; this means the industry does not rely much
on debt instruments.
• The industry depends more on the shareholder’s funds for its functioning.
7.3.2 Turnover ratio:

• This ratio indicates how effectively the firm utilises its resources.
Fixed asset turnover ratio:
• Is Net sales divided by net fixed assets.

• This ratio indicates the sales generated per rupee invested in assets.
• The fixed asset turnover ratio for the industry for the year 2008-09 is 0.43. This
ratio is very low.
Inventory turnover ratio:
• Is cost of goods sold divided by average stock.

• The inventory turnover ratio for the industry for the year 2008-09 is 25.65.
• Thus stock velocity is 14.23 days, this indicates that the telecom industry takes
14.23 days to rotate the stock.
Debtor turnover ratio:
• Is net credit sales divided by average accounts receivable.

• Debtor velocity indicates how long the company takes to collect its receivables.
Lower the debtor turnover ratio the better it is for the company.
• The debtor turnover ratio for the industry in the year 2008-09 is 6.44.

• The debtor velocity is 56.68,that is the industry on an average takes 57 days to
collect its receivables.
Interest coverage ratio:
• Is profit before interest, depreciation and tax divided by interest expense.

• Higher the ratio less is the debt employed in the business.
• The interest coverage ratio for the industry is 4.52. This indicates the profit is
about 5 times the interest payments.
7.3.3 Profitability ratios:
• Profitability ratios assist in assessing the adequacy of profits earned by the

company.
• It facilitates intra and inter firm comparison.
Gross profit ratio:
• Is profit before interest tax and depreciation divided by net sales.

• This ratio indicates the margin on sales.
• The gross profit ratio of the industry is 39.53 for the year 2008-09. This indicates
the industry makes a profit of about 40% on sales.
Net Profit ratio:
• Is profit after tax divided by net sales.

• This indicates the profitability after meeting all expenses.
• The Net Profit ratio of the industry is 15.41 for the year 2008-09.
Return on capital employed:
• Is profit before interest and tax divided by capital employed. Capital employed
includes equity shareholder’s funds and long term debt.
• This ratio indicates the profit earned per rupee of capital employed.
• The ROCE for the industry is 9.72% for the year 2008-09. This indicates for every
one rupee of capital employed generates a profit of 9.72 rupees.
Return on net worth:

• Return on Net Worth is profit after tax divided by net worth. Net Worth includes
equity share capital and reserve and surplus.
• This indicates the return on the investment made by the equity shareholders.
• Return on Net Worth for telecom service provider industry for 2008-2009 is 10.11.

7.4 RATIO ANALYSIS OF SELECTED COMPANIES
BHARTI AIRTEL
Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar
09 08 07 06 05 04 03 02 01 00
Key Ratios
0.0 0.0 0.0 0.0 0.3

Debt-Equity Ratio 0.30 0.38 0.54 0.83 0.60
7 1 2 9 7
17. 40. 16. 13. 69.

Current Ratio 0.61 0.49 0.46 0.46 1.10
30 35 34 05 18
Turnover Ratios
0.0 0.0 0.0 0.0 0.0

Fixed Assets 1.04 0.94 0.80 0.72 1.19
0 0 0 0 0
571. 474. 509. 447. 500. 0.0 0.0 0.0 0.0 0.0
Inventory
62 19 03 74 51 0 0 0 0 0
12.7 11.0 12.1 12.5 22.0 0.0 0.0 0.0 0.0 0.0
Debtors
7 6 0 4 8 0 0 0 0 0
-
12.4 15.8 10.6 0.3 0.2 0.0 0.5
Interest Cover Ratio 4.80 5.93 4.2
7 1 5 9 7 4 8
2
39.7 41.8 40.7 36.2 36.7 0.0 0.0 0.0 0.0 0.0
PBIDTM (%)
4 1 0 3 0 0 0 0 0 0
30.3 29.4 27.5 22.4 23.8 0.0 0.0 0.0 0.0 0.0
PBITM (%)
1 9 2 6 0 0 0 0 0 0
33.4 39.4 38.9 34.1 32.6 0.0 0.0 0.0 0.0 0.0
PBDTM (%)
2 5 6 3 9 0 0 0 0 0
32.1 36.6 35.7 31.6 28.2 0.0 0.0 0.0 0.0 0.0
CPM (%)
9 1 8 9 2 0 0 0 0 0

22.7 24.2 22.5 17.9 15.3 0.0 0.0 0.0 0.0 0.0
APATM (%)
7 9 9 1 2 0 0 0 0 0
-
33.1 34.8 34.0 22.5 23.9 0.1 0.1 0.1 0.4
ROCE (%) 1.1
7 3 7 5 6 6 7 1 1
7
- - - - -
32.3 39.4 43.0 31.8 23.8
RONW (%) 0.2 0.4 1.4 2.5 0.4
5 6 4 2 8
7 7 7 5 0
Table 7.1: Key Ratios of Bharti Airtel Ltd.
Debt Equity Ratio of Bharti Airtel Ltd. is 0.3 for the year 2008-2009. This
indicates that the company does not employ much of debt in its capital
structure. The company relies more on shareholder’s funds.
Current Ratio of Bharti Airtel Ltd. is 0.61 for the year 2008-2009. This
means that the company is having lesser current assets to pay off its
current liabilities.
Fixed Assets Turnover Ratio of Bharti Airtel Ltd. is 1.04 for the year
2008-2009. This ratio exceeds the industry standards. This indicates that
assets are being fairly utilized by the company.
Inventory Turnover Ratio of Bharti Airtel Ltd. is 571.62 for the year
2008-2009. So the stock velocity of Bharti is 0.63 .Therefore, Bharti Airtel
takes less than a day to rotate its stock. It stock velocity is better off than
the industry standards.
Debtor Turnover Ratio of Bharti Airtel Ltd. is 12.77 for the year 2008-
2009. So the debtor velocity is 28.58 days. Thus Bharti takes on an
average 33 days to collect its receivables.
Interest Coverage Ratio of Bharti Airtel Ltd. is 4.8 for the year 2008-
2009. This means its profit is 4.8 times the interest expense. Its position
is comfortable when compared to the industry standards.
Gross Profit Margin Ratio of Bharti Airtel Ltd. is 39.74% for the year
2008-2009, means that Bharti is making a profit 39.74%. before deducting
the expenses.
Net Profit Ratio of Bharti Airtel Ltd. is 22.77% for the year 2007-2008
which is higher than the the industry standards. This indicates efficiency
in operations.

Return on Capital Employed Ratio of Bharti Airtel Ltd. is 33.17 for the
year 2008-2009 which indicate that the company ‘s earning is 33.17 times
the total capital employed.
Return on Net Worth of Bharti Airtel Ltd. is 32.35 for the year 2008-
2009. It earns 32.35 rupees per rupee invested by the investors.

RELIANCE COMMUNICATION:
Industry :Telecommunications - Service Provider
Key ratios: 9-Mar 8-Mar 7-Mar 5-Dec
Debt-Equity 0.77 0.41 0

Ratio 2.23
Current 1.25 1.94 5.13

Ratio 0.34
Turnover
Ratios
Fixed Assets 0.86 0.7 0.98 0
Inventory 255.99 98.7 207.19 0
Debtors 30.67 15.61 25.45 0
Interest 3.99 6.3 0

Cover Ratio 2.86
PBIDTM (%) 28.27 35.95 36.95 0
PBITM (%) 9.18 23.49 22.56 0
PBDTM (%) 25.06 30.07 33.37 0
CPM (%) 24.56 29.95 33.28 0
APATM (%) 5.47 17.49 18.88 0
ROCE (%) 22.72 8.66 9.23 0.16
RONW (%) 87.56 11.4 10.92 0.1
Table 7.2: Key Ratios of Reliance communication Ltd.

Debt Equity Ratio of Reliance Communications is 2.23 for the year
2008-2009 indicating that the company’s assets are funded through
equity shareholder’s funds.
Current Ratio of Reliance Communications is 0.34 for the year 2008-

2009. This indicates that current assets might not be sufficient to meet
the current liabilities. The current ratio is lesser than the industry
standards. Better management of current assets is required.
Fixed Assets Turnover Ratio of Reliance Communications is 0.86 for

the year 2008-2009. This ratio is better than the industry standards. This
indicates that assets are being utilized effectively by the company.
Inventory Turnover Ratio of Reliance Communications is 255.99 for the

year 2008-2009. So the stock velocity of Reliance is 1.42. When compared
to the industry standards the turnover ratio is satisfactory.
Debtor Turnover Ratio of Reliance Communications is 30.67 for the

year 2008-2009. So the debtor velocity is 11.9 i.e. Reliance takes on an
average 11 days to collect its receivables. However, when compared to
the industry standards the performance is satisfactory.
Interest Cover Ratio of Reliance Communications is 2.86 for the year

2008-2009, which means that Reliance‘s profit is 2.86 times their interest
obligation.
Gross Profit Margin Ratio of Reliance Communications is 28.27% for

the year 2008-2009, means that Reliance is making a profit before
interest, depreciation and tax of 28.27%. Its margin on sales before
meeting expenses is 28.27%.
Net Profit Ratio of Reliance Communications is 5.47% for the year 2008-
2009. This is higher than the industry standards, so this goes to show the
efficiency in operation of the company.
Return on Capital Employed Ratio of Reliance Communications is

22.72 for the year 2008-2009, which indicates that the company is
earning Rs.22.72 for every rupee of capital invested.
Return on Net Worth of Reliance Communications is 87.56 for the year

2008-2009, which is a little more than the industry average and therefore
shows a profit of 87.56 times per rupee invested by the investors.

Idea cellular services
Table 7.3: Key Ratios of Idea cellular services Ltd
9- 8- 7- 6- 5- 4- 3- 2- 1- Mar Mar-
Mar Mar Mar Mar Mar Mar Mar Mar Mar -00 99
KEY
RATIOS
:
Debt- 1.88 2.14 2.54 2.41 2.02 2 3.5 6 3.23 2.13

Equity
Ratio 0.95
Curren 0.66 0.84 0.76 0.8 0.93 0.89 0.51 0.41 0.47 0.43
t Ratio 0.76
Turnov
er
Ratios
Fixed 0.58 0.63 0.46 0.41 0.34 0.31 0.39 0.38 0.27 0.23
Assets 0.67
Invent 280. 295. 326. 180. 143. 137. 137. 134. 94.3 78.9 40.7
ory 23 19 83 33 04 44 11 11 5 5 2
Debtor 37.3 38.2 35.8 17.2 13.5 13.4 11.1 9.72 7.84 7.12 5.59
s 2 8 9 1 3 9 5
Interes 3.38 2.49 1.5 1.1 0.2 0.21 -0.14 -0.51 0.23 -1.63
t Cover
Ratio 1.94
PBIDT 30.7 36.6 34.8 36.6 32.1 21.6 35.3 24.8 -12.7 42.4 167.
M (%) 1 5 5 3 3 8 2 7 33
PBITM 23.6 19.4 19.3 17.5 4.44 4.99 -3.79 - 24.1 189.
(%) 7 1 3 25.3 5 22
18.1 4
PBDTM 21.39 29.6 27.0 23.7 16.1 -0.56 11.6 -3.03 - 60.9 -
(%) 7 4 2 7 2 62.6 8 283.

6 4
CPM 28.5 26.8 23.5 16.1 -0.56 11.6 -3.03 - 60.9 -

(%) 20.9 9 8 7 7 2 62.6 8 283.
4 6 4
APATM 15.5 11.5 6.26 1.6 - - - - 79.3 305.

(%) 4 17.7 18.7 31.6 75.2 1 29
8.33 5 7 5 9
ROCE 15.5 11.6 6.86 6.49 0 1.72 -1.83 - 4.75 -

(%) 11.6 9 1 14.4 20.7
1 7 5
RONW 21.8 14.3 5.32 1.8 0 - - 112. 41.5 -

(%) 1 7 28.8 62.1 71 9 99.9
9.88 1 3 7
Debt-to-Equity Ratio is 0.95 for the year 2008-2009, which means that
company using more of debt instruments. This also indicates the
company’s assets are primarily financed through debt.
Current Ratio of IDEA is 0.76 for the year 2008-2009. This indicates that
the company might face problems in meeting their current liabilities.
Better current asset management is required.
Fixed Assets Turnover Ratio of IDEA is 0.67 for the year 2008-2009.
This Performance is better off than the industry standards. This indicates
that assets are being fairly utilized by the company.
Inventory Turnover Ratio of IDEA is 280.23 for the year 2008-2009.

Hence, the stock velocity of IDEA 1.24. Therefore, the company takes
one day to rotate its stock.
Debtor Turnover Ratio of IDEA is 37.32 for the year 2008-2009. Hence
debtor velocity is 9.78 days. Thus, IDEA on an average takes 10 days to
collect its receivables.
Interest Cover Ratio of IDEA is 1.94 for the year 2008-2009, which
means that the profit it earns is about twice the amount of interest
obligation. The ratio is lesser than industry standards. The indications are
not very positive.
Gross Profit Margin Ratio of IDEA is 30.71 for the year 2008-2009,
means that IDEA is making a profit 30.71% on sales, before meeting its
expenses.

Net Profit Ratio of IDEA is 8.31 for the year 2008-2009 which is lesser
than the industry standards. The firm needs to manage expenses
efficiently.
Return on Capital Employed Ratio of IDEA is 11.61 for the year 2008-
2009, which indicate that the company is earns rupees 15.59 per rupee of
capital employed.
Return on Net Worth of IDEA is 9.88 for the year 2008-2009, which
means it earns rupees 9.88 per rupee invested by the investors.

Vodafone Essar Guj ltd
Key ratios 9-Mar 8-Mar 6-Dec 5-Dec
Debt-Equity Ratio 0.13 0.27 0.2 0.17
Current Ratio 1.69 1.4 1.51 1.61
Turnover Ratios
Fixed Assets 1.11 1.52 1.26 1.3
Inventory 1,656.82 1,137.4 1,414.3

0 2 8
Debtors 22.41 15.2 11.48 10.48
Interest Cover Ratio 42.29 2.44 3.93 12.18
PBIDTM (%) 37.86 30.81 34.92 39.26
PBITM (%) 26.58 22.18 27.51 30.85
PBDTM (%) 37.23 21.71 27.91 36.73
CPM (%) 37.41 21.99 29.16 35.25
APATM (%) 26.13 13.36 21.75 26.84
ROCE (%) 27.15 4.23 4.22 5.38
RONW (%) 30.25 3.22 4.01 5.5
Table 7.4: Key Ratios of Vodafone Essar Ltd.
Debt Equity Ratio of Vodafone is 0.13 for the year 2008-2009. This
indicates equity shareholder’s funds are the major source of funds for the
firm.
Current Ratio of Vodafone is 1.69 for the year 2008-2009. This indicates
that the company‘s current assets are sufficient to pay off the current
liabilities.

Fixed Assets Turnover Ratio of Vodafone is 1.11 for the year 2008-
2009. This ratio is higher than the industry standards. This indicates that
assets are being effectively utilized by the company.
Debtor Turnover Ratio of Vodafone is 22.41 for the year 2008-2009. So

the debtor velocity is 16.28 days i.e. Vodafone takes on an average 16
days to collect its receivables. The ratio is favourable considering the
industry standards.
Interest Cover Ratio of Vodafone is 42.29 for the year 2008-2009, which
means that Vodafone‘s profits is 42.29 the interest expense. The company
is comfortable with regard to interest payments.
Gross Profit Margin Ratio of Vodafone is 37.86% for the year 2008-
2009, means that Vodafone’s margin on sales before meeting expenses is
37.86%.
Net Profit Ratio of Vodafone is 26.13% for the year 2008-2009, which is
higher than the industry standards. This indicates efficiency in operations.
Return on Capital Employed Ratio of Vodafone is 27.15 for the year

2008-2009, which indicate that the company earns rupees 27.15 for every
rupee of capital employed in the business.
Return on Net Worth of Vodafone is 30.25 for the year 2008-2009,

which means it earns a profit of 30.25 rupees per rupee invested by the
investors.

BSNL
KEY RATIOS 9- 8- 7- 6- 5- 4- 3- 2- 1-
Mar Mar Mar Mar Mar Mar Mar Mar Mar
Debt-Equity 0.05 0.08 0.1 0.12 0.13 0.17 0.24 0.29

Ratio 0.04
Current Ratio 2.04 1.92 1.8 1.56 1.25 0.89 0.77 0.7 0.57
Turnover
Ratios
Fixed Assets 0.24 0.27 0.3 0.33 0.34 0.35 0.32 0.35 0.31
Inventory 10.4 12.2 13.9 14.5 11.6 7.39 7.57 7.61

7.32 7 2 1 8 4
Debtors 5.94 5.86 5.83 5.59 6.3 9.07 5.84 5.09 5.22
Interest Cover 6.1 11.2 8.53 210. 76.8 2.08 10.1 3.72
Ratio 3.82 3 77 7 8
PBIDTM (%) 33.8 46.4 52.2 52.4 47.2 53.0 40.7 56.8 41.8
4 1 8 1 3 5 5 3
PBITM (%) 16.4 25.8 26.4 18.4 21.6 2.99 20.8 8.76
5.68 6
PBDTM (%) 43.7 49.9 49.3 47.1 52.7 39.3 54.7 39.4
32.3 4
CPM (%) 39.2 48.9 50.6 54.4 45.6 38.6 53.2 39.4
30.0 6
APATM (%) 9.3 22.5 24.7 25.6 14.1 0.84 17.2 6.4
1.9 9
ROCE (%) 1.89 5.84 10.0 11.4 8.17 10.0 1.15 8.6 3.49
RONW (%) 2.92 9.34 11.9 13.0 8.44 0.44 9.58 3.29
0.71 3
Table 7.5: Key Ratios of BSNL.

Debt Equity Ratio of BSNL is 0.04 for the year 2008-2009 which means
that company is not using much of debt instruments, it is relying more on
the shareholders funds. This also indicates the company’s assets are
primarily financed through equity.
Current Ratio of BSNL is 2.04 for the year 2008-2009. This indicates that
the company‘s current assets are sufficient to pay off its current liabilities.
Fixed Assets Turnover Ratio of Supreme telecommunication is 0.24 for

the year 2008-2009. This ratio is higher than the industry standards,
which indicates that assets are being fairly utilized by the company.
Inventory Turnover Ratio of BSNL is 7.32 for the year 2008-2009. So

the stock velocity of BSNL is 49.86. Therefore, BSNL takes on an average
50 days to rotate its stock.
Debtor Turnover Ratio of BSNL is 5.94 for the year 2008-2009. So the
debtor velocity is 61.29 days i.e. BSNL takes on an average 61 days to
collect its receivables. The debtor turnover ratio is higher than the
industry standards.
Interest Coverage Ratio of BSNL is 6.1 for the year 2008-2009, which
means that BSNL earns profit which is 6.1 times interest obligations. So
the company is comfortable with regard to interest payment.
Gross Profit Margin Ratio of BSNL is 33.84 for the year 2008-2009,
means that BSNL is making a profit before interest, depreciation and tax
of 33.84%. BSNL being a public sector company has been able to generate
gross profit higher than the industry standards.
Net Profit Ratio of BSNL is 1.9 for the year 2008-2009, which is lower
considering then industry standards. Better expense management is
required.
Return on Capital Employed Ratio of BSNL is 1.89 for the year 2008-
2009, which indicate that the company earns 1.89 rupee per rupee of
capital employed.
Return on Net Worth of BSNL is 0.71 for the year 2007-2008, which is
lower considering the industry standards. This indicates that the firm
earns a profit of 0.71 rupees per rupee invested by shareholders.

Supreme Telecommunications Ltd
Key ratios Mar 04 Mar 03 Mar 02 Mar 01 Mar 00 Mar 99
Debt-Equity
44.15 1.48 0.80 0.50 1.05 1.41
Ratio
Current Ratio 2.53 4.25 3.18 2.00 1.54 1.67
Turnover
Ratios
Fixed Assets 4.45 8.39 11.07 14.88 14.51 13.79
Inventory 5.35 11.15 17.30 23.89 28.17 24.54
Debtors 0.83 1.34 1.57 1.77 1.93 2.45
Interest
-4.67 0.19 1.46 3.08 3.64 1.94
Cover Ratio
PBIDTM (%) -84.97 3.82 9.18 13.77 13.94 8.78
PBITM (%) -87.43 1.99 7.62 13.07 13.38 8.06
PBDTM (%) -103.67 -6.88 3.95 9.52 10.26 4.61
CPM (%) -108.17 -6.88 3.14 5.23 6.34 3.25
APATM (%) -110.63 -8.72 1.59 4.53 5.78 2.53
ROCE (%) -72.32 2.31 11.91 33.38 52.29 32.63
RONW (%) -4,131.39 -25.06 4.47 17.33 46.04 24.48
Table 7.6: Key Ratios of Supreme Telecommunication Ltd.
Debt Equity Ratio of Supreme telecommunication is 44.15 for the year

2008-2009 which means that company is employing a lot of debt in its
capital structure. This indicates that the company’s assets are primarily
financed through debt instruments.

Current Ratio of Supreme telecommunication is 2.53 for the year 2008-
2009. This indicates that the company‘s current assets are sufficient to
pay off its current liabilities.
Fixed Assets Turnover Ratio of Supreme telecommunication is 4.45 for

the year 2008-2009. This ratio is higher than the industry standards. This
indicates that assets are being fairly utilized by the company.
Inventory Turnover Ratio of Supreme telecommunication is 5.35 for the

year 2008-2009. So the stock velocity of Supreme telecommunication is
68.22. Therefore, Supreme telecommunication takes on an average 68
days to rotate its stock.
Debtor Turnover Ratio of Supreme telecommunication is 0.83 for the

year 2008-2009. So the debtor velocity is 439.79 days. The ratio is not
very favourable considering the industry standards.
Interest Coverage Ratio of Supreme telecommunication is -4.67 for the

year 2008-2009, which means that Supreme telecommunication‘s profits
are not sufficient to meet its interest obligations.
Gross Profit Margin Ratio of Supreme telecommunication is -84.97 for

the year 2008-2009, means that Supreme telecommunication is making a
loss.
Net Profit Ratio of Supreme telecommunication is -110.63 for the year

2008-2009. The performance of the company is very poor considering the
industry standards.
Return on Capital Employed Ratio of Supreme telecommunication is

-72.32 for the year 2008-2009, which indicate that the company’s return
on capital employed is negative.
Return on Net Worth of Supreme telecommunication is for the year

2007-2008, is negative.

HFCL Infotel Ltd
09 08 07 06 05 04 03 02 01 00
Debt-Equity 66.6 14.6

0.00 0.00 0.00 8.41 4.71 2.08 1.88 2.86
Ratio 1 2
Current Ratio 0.14 0.19 0.26 0.31 0.24 0.20 0.47 2.90 3.30 3.89
Turnover
Ratios:
Fixed Assets 0.17 0.20 0.24 0.27 0.25 0.20 0.18 0.18 0.27 0.43
110. 240. 11.3

Inventory 0.00 0.00 0.00 0.00 0.55 0.61 0.61
13 46 5
12.9 29.0
Debtors 6.00 6.15 6.82 8.32 9.52 2.87 1.96 5.23
7 8
- - - - -
Interest Cover -1.18 -1.17 -0.74 0.05 1.21
0.82 0.56 0.49 0.64 0.79
12.5 25.8 28.5 18.3 10.8 - 39.2 75.0

PBIDTM (%) 1.84 5.12
6 0 5 8 5 1.57 5 8
- - -
18.9 11.5 12.0 23.1 44.7 52.5
PBITM (%) 35.8 30.6 46.8 2.29
2 5 4 9 9 2
1 7 2
- - -
10.4 17.7 58.3 - 31.5
PBDTM (%) 28.5 21.2 5.25 3.79 52.8
6 1 5 9.20 4
0 0 3
- - -
10.6 17.7 14.7 - 25.4
CPM (%) 28.7 21.4 5.09 3.64 54.6
9 1 1 9.86 5
3 8 5

- -
42.1 32.2 36.9 59.2 112. 57.9 46.8
APATM (%) 66.3 57.2 2.89
6 6 5 7 32 3 2
8 7
14.6
ROCE (%) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
3
RONW (%) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3.11
Table 7.7: Key Ratios of HFCL Infotel Ltd
The debt equity ratio of HFCL Infotel in the year 06-07 is 66.61. This
indicates that the company employs a lot of debt in its capital structure.
This ratio is very high when compared to the industry standards.
The current ratio of HFCL Infotel is 0.14. This indicates that it might
have problems in repaying its current liabilities through its current assets.
Their position is not satisfactory considering the industry standards.
Fixed Assets Turnover Ratio of HFCL Infotel is 0.17 for the year 2008-
2009. This ratio is lower than the industry standards. This indicates that
assets are not being utilized effectively by the company.
Inventory Turnover Ratio of HFCL Infotel is 110.13 for the year 2008-
2009. So the stock velocity of Supreme telecommunication is 3.31.
Therefore, Supreme telecommunication takes on an average 3 days to
rotate its stock.
Debtor Turnover Ratio of HFCL Infotel is 6 for the year 2008-2009. So

the debtor velocity is 60.83 days. The company on an average takes 60
days to collect its receivables.
Interest Coverage Ratio of HFCL Infotel is -1.18 for the year 2008-2009,
which means that Supreme telecommunication‘s profits are not sufficient
to meet its interest obligations.
Gross Profit Margin Ratio of HFCL Infotel is 1.84 for the year 2008-
2009, means that HFCL Infotel makes a profit of 1.84% before meeting its
expenses.
Net Profit Ratio of HFCL Infotel is -66.38 for the year 2008-2009. The
performance of the company is very poor considering the industry
standards. The company is not able to meet its expenses.

Tata Teleservices (Maharashtra) Ltd
Key Ratios
09 08 07 06 05 04 03 02 01 00
Debt-Equity 0.0 10. 2.2 0.7 0.3

0.00 0.00 0.00 0.52 0.44
Ratio 0 72 3 3 9
0.2 0.3 0.3 0.2 0.3

Current Ratio 0.28 0.31 0.25 0.31 0.14
3 7 7 0 1
Turnover Ratios
0.3 0.2 0.2 0.1 0.1

Fixed Assets 0.43 0.40 0.37 0.10 0.06
2 8 6 7 3
918. 769. 1,267. 0.0 0.0 0.0 0.0 0.0

Inventory 0.00 0.00
05 00 55 0 0 0 0 0
7.3 4.4 4.4 8.8 8.6 10.9

Debtors 8.78 9.18 8.63 8.24
5 4 6 5 1 5
- - - - -
Interest Cover
0.48 0.28 -0.74 2.6 2.4 1.2 1.0 1.0 -0.75 -1.83
Ratio
9 3 1 9 7
- - -
30.5 28.5 7.1 9.1 27. 12.
PBIDTM (%) 22.31 7.0 12.1 179.
5 2 1 4 33 34
4 0 64
-
35. 46. 24. 29. 30. 273.
PBITM (%) 7.54 2.78 -9.40 64.3
98 30 76 78 33 72
3
- -
14.8 18.4 26. 11. 0.1 16. 329.
PBDTM (%) 9.69 6.2 97.8
5 2 11 24 0 14 27
4 2
- -
14.7 18.3 26. 11. 0.1 16. 329.
CPM (%) 9.64 6.3 97.8
9 7 11 24 0 14 27
2 2
49. 65. 45. 57. 58. 150. 423.

APATM (%) -8.22 -7.37 -22.08
41 37 13 01 81 05 35

0.0 0.0 0.0 0.0 0.0
ROCE (%) 0.00 0.00 0.00 0.00 0.00
0 0 0 0 0
0.0 0.0 0.0 0.0 0.0

RONW (%) 0.00 0.00 0.00 0.00 0.00
0 0 0 0 0
Table 7.8: Key Ratios of Tata Teleservices Ltd.
The debt equity ratio of Tata Teleservices in the year 2005-06 is

10.72. This indicates that the company employs a lot of debt in its capital
structure. This ratio is high considering the industry standards.
The current ratio of Tata Teleservices is 0.28. This indicates that it

might have problems in repaying its current liabilities through its current
assets. Their position is not satisfactory considering the industry
standards.
Fixed Assets Turnover Ratio of Tata Teleservices is 0.43 for the year
2008-2009. This ratio is lower than the industry standards. This indicates
that assets are not being utilized effectively by the company.
Inventory Turnover Ratio of Tata Teleservices is 918.05 for the year

2008-2009. So the stock velocity of Supreme telecommunication is 0.397.
Therefore, Tata Teleservices takes less than a day to rotate its stock.
Debtor Turnover Ratio of Tata Teleservices is 8.78 for the year 2008-
2009. So the debtor velocity is 41.57 days. The company on an average
takes 41.57 days to collect its receivables.
Interest Coverage Ratio of Tata Teleservices is 0.48 for the year

2008-2009, the position of the company considering the industry
standards.
Gross Profit Margin Ratio of Tata Teleservices is 30.55 for the year
2008-2009, means that HFCL Infotel makes a profit of 30.55% before
meeting its expenses.

Net Profit Ratio of Tata Teleservices is -8.22% for the year 2008-2009.
The performance of the company is very poor considering the industry

Sify Ltd
Mar Mar Mar Mar Mar Mar

Mar 97
03 02 01 00 99 98
Key Ratios
1.6
Debt-Equity Ratio 0.00 0.00 0.01 0.05 1.58 9.00
4
Long Term Debt-Equity 1.6

0.00 0.00 0.01 0.05 1.58 9.00
Ratio 4
14.8 0.6
Current Ratio 0.45 3.91 9.52 2.18 0.28
7 9
Turnover Ratios
0.0
Fixed Assets 0.63 0.54 0.67 0.97 0.44 0.00
0
53.7 0.0
Inventory 51.70 32.85 31.63 30.41 0.00
8 0
0.0
Debtors 4.67 2.97 3.06 4.69 4.40 0.00
0
187.5 906.4 125.8 0.0

Interest Cover Ratio -7.77 -6.23 0.00
6 6 3 0
493.3 162.3 14.5 106.0 0.0

PBIDTM (%) -68.79 0.00
7 4 2 9 0
531.1 195.2 38.3 180.1 0.0

PBITM (%) -96.59 0.00
1 7 1 7 0
493.9 163.8 19.4 135.0 0.0

PBDTM (%) -69.31 0.00
6 9 5 1 0
493.9 163.8 19.4 135.0 0.0

CPM (%) -69.31 0.00
6 9 5 1 0

531.7 196.8 43.2 209.0 0.0
APATM (%) -97.11 0.00
0 2 4 9 0
0.0
ROCE (%) -48.52 0.00 0.00 0.00 0.00 0.00
0
0.0
RONW (%) -48.82 0.00 0.00 0.00 0.00 0.00
0
Table 6.9: Key Ratios of Sify Ltd.
The debt equity ratio of Sify ltd in the year 2001-02 is .01. This
indicates that the company employs a lot of debt in its capital structure.
This ratio is high considering the industry standards.
The current ratio of Sify ltd is 0.45. This indicates that it might have
problems in repaying its current liabilities through its current assets. Their
position is not satisfactory considering the industry standards.
Fixed Assets Turnover Ratio of Sify ltd is 0.63 for the year 2003-2004.
This indicates that assets are not being utilized effectively by the
company. However, the ratio is in line with the industry standards.
Inventory Turnover Ratio of Sify ltd is 51.74 for the year 2003-2004.
So the stock velocity of Supreme telecommunication is 7.054. Therefore,
Sify ltd takes about 7 days to rotate its stock.
Debtor Turnover Ratio of Sify ltd is 4.67 for the year 2003-2004. So
the debtor velocity is 78.15 days. The company on an average takes
78.15 days to collect its receivables.
Interest Coverage Ratio of Sify ltd is -187.56 for the year 2003-
2004.The company’s profits are not sufficient to meet its interest
obligation.
Gross Profit Margin Ratio of Sify ltd is -68.79 for the year 2003-2004,
means that Sify ltd l makes a loss of 30.55% even before meeting its
expenses.
Net Profit Ratio of Sify ltd is -97.11% for the year 2003-2004. The
performance of the company is very poor considering the industry

7.5 Inter Company analysis:
7.5.1 TOP 5 Players:

(Rs in Crs)
Parameter IDEA Vodafon

s Bharti Reliance Cellular e BSNL
Enterprise 1,62,852.9
Value 2 1,25,007.91 33906.72 0 0
32359.
Sales 25,761.11 14792.05 6719.99 2733.76 5
EPS 32.9 12.4 3.96 7.06 4.16
Market
Capitalizati
on 156785.52 32683.76 18504.99 0 0
Table 7.10: Snap shot of top 5 players
• Bharti Airtel has the highest enterprise value among the top 5 players in the
market. Reliance Communications stands next to Bharti Airtel followed by IDEA.
• However, in terms of sale BSNL leads the other players. This is because of wider
coverage and its presence in the rural areas.
• The market capitalization of Bharti Airtel is the highest in the telecom sector
followed by Reliance.
• The Earnings per Share of Bharti Airtel is the highest among all the telecom
players in the market followed by Reliance and Vodafone.
7.5.2 BOTTOM 5 PLAYERS:
Paramete Tata Shyam

rs Supreme HFCL Tele Sify telelink
Enterprise 7,410.4
Value 0 1208.26 0 0 0
Sales 51.16 223.57 1941.68 170.87 128.54

EPS 0 6 24 0 0
Market
Capitaliza
tion 0 364.91 4505.85 0 0
Table 7.11: Snap shot of bottom 5 players.
• Tata Tele has the highest enterprise value among the five companies
followed by HFCL.
• Tata Tele reports the highest sale among the 5 players. HFCl ranks 2 in
terms of sales followed by Sify.
• The earnings per share of Tata tele is the highest followed by HFCL.
• The market capitalisation of Tata Tele is the highest followed by HFCL.

Future Outlook

Future Outlook
Industry on High Growth Track

The telecom industry has been growing at a CAGR of 40 per cent during
2003-2008, with total subscriber growing at an average of 9.5 million
subscribers per month over the last year. The subscriber base totaled to
346.89 million in December 2008, and is expected to be 500 million and
800 million by 2010 and 2012 respectively as per TRAI. The ARPU for the
industry is INR 240, which is among the lowest in the world.
Budget 2010
• Budget Proposals
1. Full exemption from basic customs duty and CVD to components for
manufacture of battery chargers.
2. Components of Hands-free headphones of mobile handsets
including cellular phones are also fully exempt from customs duty
and CVD.
3. The validity of the exemption from special additional duty on mobile
phones is being extended till March 31, 2011.
4. The Minimum Alternate Tax (MAT) has been increased from 15% in
2009-10 to 18% in 2010-11.
• Budget Impact
1. The exemption from basic customs duty and CVD to components for
manufacture of battery chargers and hands-free headphones of
mobile handsets will make the mobile phones cheaper which in turn
will have a positive impact on their demand.
2. The increase in MAT from 15% in 2009-10 to 18% in 2010-11 may

adversely impact the telecom service providers as they may have to
pay higher taxes.
• Rural Expansion & Services Abroad
The number of mobile users per 100 persons is described by tele density.
Currently, the tele density of the Indian telecom sector is 33.23 per cent,
whereas the TRAI expected it to reach around 45 per cent by 2010.
• Falling Handset Prices and Youth Population

Falling handset prices along with added features, makes the market more
attractive. Today, the handsets are available in just three-digit figures
with all necessary facilities. Young generation and living standard is also
one of the factors for the increase in sub-scriber base.
• Alarming Competition
The rising competition from new entrants in the industry, both domestic
and foreign play-ers along with new technologies and their core
competencies, will heat up the competition in the industry.
• Availability of Spectrum
The Government has allowed and framed the policies for introduction of
new technologies in the Indian telecom sector in the form of 3G and Wi-
max. The Department of Tele-com and TRAI are about to auction the
required 3G spectrum to various service providers. The scarcity of
spectrum and the price to be charged at the auction will purely be a
matter of time.
• Passive Infrastructure Sharing
The infrastructure sharing will encourage more efficient operations,

thereby resulting in significant cost savings. The company is also willing to
explore and share active infra-structure, based on guideline issued by
TRAI.
• Mobile Commerce to Become the Next Big Thing
Mobile commerce is the upcoming and growing trend. The increased use
of mobile phones for the purpose of banking, tele-booking, inquiries, and
other commercial ser-vices will lead to further increase in the revenues of
the companies. The increased use of such services is welcomed by the
users as it offers high utility and value for money.
• Mobile Number Portability to Become a Reality Soon
Indian mobile users will soon have the option to switch their service
providers without changing their mobile numbers. Implementation of
mobile number will motivate and stimulate the service providers to
constantly endeavor to further improve their quality of service in order to
retain existing customers and attain new subscribers.
• Falling ARPUs – Margins under Pressure
The revenues are showing a fall because of declining call tariff. However,
the profit mar-gins are stable because of rising subscriber base in the

industry. Every month, more than 9.5 million subscribers are added in the
last year.

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Introduction

Alliance Business School 2009-10 Page 1

‘Telecommunication’ is a term coming from Greek and meaning

The history of telecommunication industry started with the first public

In 1913 Kingsbury commitment telegraph was popular way of

In 1982 Modified final judgement (MFJ) , AT&T was requested to

Alliance Business School 2009-10 Page 2

1.2 HISTORY OF INDIAN TELECOMMUNICATIONS

Alliance Business School 2009-10 Page 3

Table – 1.1: History of the Indian Telecom Industry

1.3 OBJECTIVES OF THE STUDY

• To study the history and evolution of Telecom industry in India

Alliance Business School 2009-10 Page 4

➢ Techniques: To analyze the quantitative data, tool used

○ RATIO Analysis: The key ratios of major large telecom

i) Qualitative analysis of the data will be done by studying

➢ Techniques: To analyze the qualitative data, techniques

1.5 SOURCES OF DATA

Alliance Business School 2009-10 Page 5

Alliance Business School 2009-10 Page 6

Alliance Business School 2009-10 Page 7

I. Kewalramani (February 2009), in his article “Telecom Sector :

II. TRAI (June 2007), in its study paper on “Financial Analysis of

III. TRAI (2006), in the Consultation Paper “Issues Pertaining to Next

Alliance Business School 2009-10 Page 8

IV. TRAI (2010), in their Press Release “Signing of Memorandum

“Signing of Memorandum between TRAI and Ministry of Internal Affairs

V. Mani(2006), The growth performance of India’s

Alliance Business School 2009-10 Page 9

VI. Vrmani (2000) estimates the contribution of telecommunication (or

VII. Narinder (2004), in his article “Enhancing Developmental

Alliance Business School 2009-10 Page 10

Alliance Business School 2009-10 Page 11

Alliance Business School 2009-10 Page 12

The world telecommunications market is expected to rise at an 11 percent

Alliance Business School 2009-10 Page 13

In order to meet this burgeoning consumer demand for NGT applications,

Alliance Business School 2009-10 Page 14

Alliance Business School 2009-10 Page 15

Alliance Business School 2009-10 Page 16

3.3 GLOBAL PLAYERS

Alliance Business School 2009-10 Page 17

Key facts of AT&T (2009-2010)

• The nation's fastest 3G network serving 85.1 million customers and

Alliance Business School 2009-10 Page 18

3.3.3 Deutsche Telekom

Key facts of Deutsche Telekom (2009-2010)

• Lines in operation, telephone lines including IP-based lines,

Figure- 3.3 TRENDS IN WORLD TELECOM INDUSTRY

Alliance Business School 2009-10 Page 19

3.4 GLOBAL TRENDS

ITU’s latest statistics, published in the World in 2009: ICT facts

Alliance Business School 2009-10 Page 20

Source: ITU World Telecommunication/ICT Indicators Database

Figure 3.4 The world in 2009: Facts and Figure

Alliance Business School 2009-10 Page 21

Table-3.1 worldwide telecom statistics at a glance – 2010

telecom statistic forecasts

Population 6.9 billion

Fixed lines 1.4 billion

Mobile subscribers 5.1 billion

Mobile text messages sent 4.2 trillion