HOME ASSIGNMENT

OF ECONOMICS

ON TELECOM INDUSTRY

SUBMITED TO:- SHIKHA OJHA

SUBMITED BY:-BHARTI SAWLANIEnrl no. 0729 NAMITA BHAIRAVIYAEnrl no. 1823Section- D

INDEX

1. INTRODUCTION2. EVOLUTION OF INDUSTRY – 3. IMPORTANT MILESTONES4. PRE AND POST LIBERALISATION5. LIBERALISATION 6. NEED FOR LIBERALISATION 7. PRELIBERALISATION 8. HOW TELECOM TURNED FREE INDIA’S

ECONOMIC DREAM INTO REALITY (POST LIBERALISATION)

9. MAJOR PLAYERS• BSNL • BHARTI • MTNL • HUTCH • RELIANCE INFOCOMM

10. MAJOR MARKET TRENDS

11. SWOT ANALYSIS 12. UNIFIED LICENCING13. SPECTRUM CONTROVERSY

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ABSTRACT

Telecom industry has been revolutionized after the new national policy of 1991. The factor of the new national policy of 1991 that is LPG liberalization, privatization and globalization has change the face of the Indian economy as a whole. After the introduction of this policy, many modifications were made to the same policy in the following years.

Over the years, with the invention of telephone, the telecom industry has evolved and taken a whole new shape.

There is whole vast difference between what Indian economy as well as Indian telecom industry was before and after the introduction of the new industrial policy.

Private participation encouraged competition, and further led to efficient as well as cheap services with innovative offers, which were earlier unavailable when only public sector had the monopoly.

Still looking at the future prospect there’s a long road to travel yet for telecom players.

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INTRODUCTION

From an age old world view of being the land of snake charmers and tigers to the present day happening investment destination India now offers the world and image worth paying attention to.

The Indian mobile success story is quite dramatic. When the first mobile came to India the industry accused itself of being a late starter but analyzing closely it was a boon in disguise. India embraced cellular technology when 2G systems were already in place in most foreign countries and thus bypassed 1G technology thereby gaining access to a superior technology like 2G and India did not have to try this technology as most of the lesson learnt by the European deployments could be transferred to India. India embraced GSM nearly 8 years after it was taken up in Europe. Most of the equipments had already become very cheap by then. This allowed for mass deployment in the country.

Telecommunication forms and important base infrastructure for modern economies and has become an integral part of various activities of such economies. It plays and important role in developing a modern economic order by eliminating distances and the associated time constraints. Modern economic activities, whether associated with business activities or consumer lifestyle require transfer of large amount of data and are made possible only by the tremendous growth of telecommunication in recent times. The advent of modern telecommunication began with telegraph. The inaugration of commercial telegraph service was the first major technical undertaking using electricity thus began the telecommunications era that revolutionized the way in which people communicated and continued to influence there personal and economic lives around the world. This was followed by the invention of telephone by Alexander bell and Elisha gray in 1876.

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EVOLUTION OF INDUSTRY –

IMPORTANT MILESTONES

It took nearly 60 years in India to make telephone services available to the common man.

Year 1851- First operational landlines were laid by the government near Calcutta 1855 the govt of India granted license to the oriental telephone company to establish its exchanges at Bombay, Calcutta Karachi madras and Rangoon 1881- Telephone services introduced in India. 1882- India’s first undivided telephone exchange was incorporated in Bombay. 1883- Merger with the postal system. 1923- Formation of Indian radio Telegraph Company. 1932- Merger of ETC and IRT into the Indian radio and cable communication company IRCC. 1947- Nationalization of all foreign telecommunication companies to form the post, telephone and telegraph (PTT) a monopoly run by government’s ministry of communication 1985- Department of telecommunication DoT established and exclusive provider of domestic and long distance service that would be its own regulator separate from the postal system. 1986- Conversion of DoT into two wholly government owned companies: the Videsh Sanchar Nigam Limited (VSNL) for international communication and Mahanagar Telephone Nigam Limited (MTNL) for services in metropolitan areas. 1989-india was aspiring to have a telecom policy and to fulfill this a telecom commission was formed in this year and based on the commissions recommendations government created history by allowing private participation in telecom services from the year 1992. 1994-The govt decided to provide licences to 6 basic service operators, 8 cellular operators in the metros. 1995 DoT issues 33 licenses to 13 companies for GSM mobile services 1997- Telecom regulatory authority of India (TRAI) was created. 1999- Cellular services are launched in India. New national telecom policy was adopted. 2000- DoT becomes a corporation, Bharat Sanchar Nigam Limited) BSNL

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EquilibriumEquilibrium RumblingsRumblings Identity crisisIdentity crisis RefocusRefocusDynamicDynamic

competitioncompetition

2001200119991999199819981995-1995-19961996 1997199719941994 20002000 20022002 20032003UptoUpto

19941994

National Telecom National Telecom Policy, 1994Policy, 1994

20042004

Unified Licensing Unified Licensing RegimeRegime

State regulated firms

Strategy heavily influenced by Government and Regulators

Limited customer choice

Threats of privatisation

Fully adjusted marketplace

No distinction between incumbents & challengers

Wide range of customer choice

Normal market forces apply

Technological advances lead to substitutes

Niche players evolve / Call-back operators provide service

Regulators formedCompetition begins

Traditional assumptions challenged

Marketing and sales focus

Increasing competition

Losing key competencies

Competitors find niche or die out

Industry settlesGreater

emphasis on shareholder value

Focus on customer satisfaction

Life Cycle Stage of Indian Telecom

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New Telecom New Telecom Policy, 1999Policy, 1999

PRE AND POST LIBERALISATION

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LIBERALISATION

The liberal economic policies of the Indian government and the financial restructuring have also raised the level do average disposable income. Competition driven by regulatory initiatives and tech advancements and policy initiatives continues to push the growth to new levels. This trend was more viable in mobile and long distance services. The competitive pressure has also made service providers more innovative in their tariff offerings. Indian consumers have benefited immensely from low tariffs, which have also been a major factor for explosive growth in the sector. Today India is operating in a liberalized economy where information and communication tech are the key drivers of globalization. For a country at this stage of development has a surprisingly vibrant telecom industry. Research survey show that every 8 out of 10 citizens hold a telephone and starting from the ranks of businessman, who have crores of business to a 10th

class student own a telephone. Isn’t it amazing? Is this the same old India? Where are we? what lies ahead?

NEED FOR LIBERALISATION PRELIBERALISATION

The factors responsible for liberalization were as follows:

• Generally Poor Performance of Incumbent Operators • Technological Innovation • Role of ICT Sector in Economic Competitiveness • Business Demand for Advanced Services at Lower Rates (Expansion

of international business communications requirements, particularly • Internet-based services have dramatically increased. • Consumer Demand for Internet Services (Increasing Internet

penetration/usage by consumers creates pressure for low-cost, high-speed Internet access over IP networks.)

• WTO Pressures – “Join in or be left behind” (The combined effects of WTO agreements on basic telecom services and information technologies have set a global benchmark favoring liberalization; nations now risk falling behind economically if this benchmark is not met.)

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Critical Issues for Successful Liberalization

• Open and Transparent Regulation (WTO agreement requires that regulator be independent of state operator. In privatized environments, open and transparent regulatory processes may be most important requirement.)

• Economically Efficient Interconnection (Interconnection between operators, primarily with incumbent, must be transparent and cost-oriented; any subsidies must be explicit.)

• Pricing Flexibility for New Entrants; • Protection against Cross-subsidization by Incumbent (If some services

are not competitive, then regulator must be able to prevent cross subsidization of competitive services from monopoly service revenues.)

• Efficient Equipment Certification (Rapid technological innovation has created pressure for rapid sale and deployment of new ICT equipment. Process for testing and certification of ICT equipment must be flexible and streamlined to meet this market demand.)

• Effective Control over Abuse of Market Power (Regulator must have authority to police market behavior of industry; most often required relative to abuse of market power by incumbent operator.)

• Before lib the govt owned DoT enjoyed a monopoly and that resulted in its sluggish expansion and poor services. Tech upgradation was limited. The adoption of lib policy in India opened the door for expansion for telecom sector.

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HOW TELECOM TURNED FREE INDIA’S ECONOMIC DREAM INTO REALITY

(POST LIBERALISATION)

During the first war of independence in 1857, the biggest advantage the imperialists had over the revolutionaries was the telecom network, which helped them communicate revolutionaries’ moves and pre-plan strategy against them. By the last leg of freedom struggle, the nationalists had access to the same communication system. When India finally got its political freedom, it came with around 86,000 telephone connections. Today, the country is adding more than twice that number every day to its 250 million strong network, with 7 million new subscribers joining in July 2007. This connectivity has brought with it jobs and knowledge based exports of services that are driving the 9 per cent plus growth. When we celebrate the IT and software revolution, remember, it stands on a strong telecom backbone — in 1991, knowledge based exports stood at $40 million; today, the figure is around $40 billion. Take that further and you see how Tele-density of any country is directly related to its economic development. Until 15 years ago, it raised no eyebrows to see a 15-20 year wait for a new telephone connection in cities, with almost zero connectivity in large parts of rural areas. Department of telecommunications (DoT) under ministry of Post & Telegraph (P&T) was the sole telecom service provider. It’s a different landscape today and with six service providers in metros and category A circles, operators are chasing subscribers, turning scarcity into abundance, luxury into necessity. History of telecommunications in India can be broadly divided into two periods — before Liberalisation and post Liberalisation. Contrary to popular belief, Liberalisation in telecom equipment took place first and then followed Liberalisation in services. In the 1980s, Sam Pitroda played an important role in the development of telecom network. His first achievement was to convince the government about the significance of communications for socio-economic development of the country. His second major contribution was in developing indigenous switches and passing on the low cost (and no air-conditioners required) technology to local manufacturers, which helped bring down prices of switches and allow DoT to provide more connections within the same budget.

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His third achievement was in bringing PCO policy that was responsible for providing access to telephone to all even in far flung areas. With the formulation of New Telecom Policy in 1994 (NTP 94), a major step was taken in liberalization of telecom services. The policy permitted DoT to award licenses to private operators to offer telecom services. Thus, competition began in a field that was hitherto a government monopoly. NTP 94 also envisaged setting up Telecom Regulatory Authority of India, essential to ensure competition. NTP 94 was revised five years later and was replaced by NTP 99. This further liberalized telecom services and made licenses technology-neutral. As a result, India has became one of the most competitive markets in the world, with one of the lowest telephone tariffs in the world and with two telecom companies -Airtel and Reliance — among the top five most valued companies of India. That’s freedom.

Government initiatives

The government has taken many proactive initiatives which has provided a framework for the rapid growth of the telecom industry.

• Opening the industry for private sector participation.• 100 percent FDI is permitted in telecom equipment manufacturing

through the automated route.• FDI ceiling in telecom services has been raised to 74 percent.• Establishment of an independent regulator-the telecom regulatory of

India (TRAI)-for the telecom sector.• Introduction of a unified access licensing regime for telecom services

on a pan-India basis.• Implementation of new telecom policy (NTP99).• Introduction of calling party pay (CPP) regime and lowering of access

deficit coupled with introduction of revenue share regime in ADC.• Introduction of mobile number portability in a passed manner ,starting

with the fourth quarter of 2008.• Allowing service providers to share active infrastructure.

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FDI limit increased from 49% to 74%.

Virtually complete deregulation

Unified Access Service License

Interconnection Usage Charge (IUC)

Broadband Policy announced. Targets 20 million broadband subscribers by 2010.

Exemption from customs duty for import of MSCs (Mobile Switching Centre)

Policy Advantage

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MAJOR PLAYERS

There are three types of players in telecom services: · State owned companies (BSNL AND MTNL). · Private Indian owned companies (RELIANCE INFOCOMM,

TATA_TELESERVICES) · Foreign invested companies (HUTCHISON-ESSAR,BPL, SPICE)

1. BSNL

On oct.1, 2000, the department of telecom operations, GOI became a corporation and was named BSNL. It is now India’s leading telecommunication company and the largest public sector undertaking. It has a network of over 45 million lines covering 5000 towns with over 35 million telephone connections.

2. BHARTI Established in 1985, first Indian company to provide comprehensive telecom service provider in the country. Bharti televentures strategic objective is to capitalize on the growth opportunities the company believes are available in the telecommunications market and consolidate its position to be the leading integrated communications services providers in key markets in India, with a focus on providing mobile services.

3. MTNL MTNL was set up on 1st April, 1986 by the government of India to upgrade the quality of telecom services, expand the telecom network, introduce new services and to raise revenue for telecom development needs of India’s key metros. It has over 5 million subscribers and 329372 mobile subscribers.

4. HUTCH It presents in India dates back to late 1992 when they worked with local partners to establish a company licensed to provide mobile telecommunication services in Mumbai. Commercial operations began in November 1995. With the completion of acquisition of BPL mobile

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cellular limited in jan06 it now provides mobile services in 16 of the 23 defined license areas across the country.

5. RELIANCE INFOCOMM

Reliance offers a complete range of telecom services covering mobile and fixed line telephone. National and international long distance services data services and wide range of value added services. It was first launched in December 28, 2002.

Market Share of Major Players

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Investment

The booming domestic telecom market has been attracting accelerating amount of investment during april2000 to march 2008, cumulative FDI inflows into the Indian telecommunications sector amounted to US$3.84 billion, accounting for 6.81 percent of the total FDI inflows into the country. In fact, the surge in mobile services market is likely to see investment worth about US$24 billion by 2010, going by industry estimates.

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MAJOR MARKET TRENDS

The telecoms trends in India will have a great impact on everything from the humble PC, internet, broadband (both wireless and fixed), cable, handset features, talking SMS, IPTV, soft switches, and managed services to the local manufacturing and supply chain.This report discusses key trends in the Indian telecom industry, their drivers and the major impacts of such trends affecting mobile operators, infrastructure and handset vendors.

Higher acceptance for wireless services

Indian customers are embracing mobile technology in a big way (an average of four million subscribers added every month for the past six months itself). They prefer wireless services compared to wire-line services, which is evident from the fact that while the wireless subscriber base has increased at 75 percent CAGR from 2001 to 2006, the wire-line subscriber base growth rate is negligible during the same period. In fact, many customers are returning their wire-line phones to their service providers as mobile provides a more attractive and competitive solution. The main drivers for this trend are quick service delivery for mobile connections, affordable pricing plans in the form of pre-paid cards and increased purchasing power among the 18 to 40 years age group as well as sizeable middle class – a prime market for this service. Some of the positive impacts of this trend are as follows. According to a study, 18 percent of mobile users are willing to change their handsets every year to newer models with more features, which is good news for the handset vendors. The other impact is that while the operators have only limited options to generate additional revenues through value-added services from wire-line services, the mobile operators have numerous options to generate non-voice revenues from their customers. Some examples of value-added services are ring tones download, coloured ring back tones, talking SMS, mobisodes (a brief video programme episode designed for mobile phone viewing) etc. Moreover, there exists great opportunity for content developers to develop applications suitable for mobile users like mobile gaming, location based services etc. On the negative side, there is an increased threat of virus – spread through mobile data connections and Bluetooth technology – in mobile phones, making them unusable at times. This is good news for anti-virus solution providers, who will gain from this trend.

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Economic Analysis - Factors

Demand • GDP growth (+) • Population growth – especially growth in middle class of developing

nations (+) • Unemployment rate (-) • Personal Income (+)

Supply• Energy Prices – increase cost of operations (-)• Commodity Prices – increase price of inputs (-)• Foreign Exchange Rates – reduces profits from international operation

(+/-)• Inflation – increase input costs (commodities, labor, raw materials) (-)

SWOT ANALYSIS

Strengths

• Huge wireless subscriber potential • Fastest growing mobile market in the world • Consumers are ready to pay for cutting edge services. • India possesses cheap labor to attract foreign investment • Telecom software, telecom professionals, telecom infrastructure and

telecom services are the key players in shaping today’s economy. • Revenue sharing strategies are leading to mergers and acquisitions,

helping companies to enter new business opportunities and generate employment boosting the country’s economy.

• Govt has started rules for relaxing rules for foreign participants. • Lowest tariff rates in the world.

Weaknesses

• Market strongly regulated by govt body- the telecom authority of India.

• Existence of entry barriers for private companies

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• High costs of services provision • Low income country like India cannot afford to replicate expensive

telecom infrastructure.

Opportunities

• India as Asia’s third largest economy is adding at least 1mn new mobile phone users every month.

• Mobile phone user’s rate hitting a saturation point in big cities. • Income levels in the rural areas rising due to robust agricultural output • Share of the rural market in the country’s mobile population is

however less than 15%. • Timely policy and regulatory initiatives taken by the govt to

encourage foreign players • Increased availability of bandwidth has opened to new schemes

making efficient usage providing value added services and generating profits.

• Foreign investment in the form of equity or tech

Threats

• High level of risk, uncertainty and cost associated with cellular sector • Weak intellectual property rights (IPR) protection • Software and digital content piracy. • Political instability • Cost of handset also deters a lot of bias from opting for the service • China’s early liberalization and the fast growing economy may prove

to be a hindrance for India.

As expected the average revenue [per user in the rural region (ARPU) in the rural region will be less than rs.200 pricing will be a key for all operators. Another issue that need some thought is that India still has about 80000 villages without electricity over 25000 of which have little chance of being connected to the power grid in conventional way. Lack of three phase power supply and inaccessibility to these remote villages has become a major obstacle in setting up telecom infrastructure sites. The country would require about 3.3lakh towers as against present 1lakh tower by the proposed time.

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From the economic perspective the true key challenges for equipment providers are quick and cost effective roll out of networks in rural area , in the context of declining equipment prices and simultaneously investing in creating products/situations that enable viable business models.

UNIFIED LICENCING

But perhaps the biggest – and, until recently, most intractable – regulatory problem has been the drawn-out battle over “limited mobility” telephony. This imbroglio began in 1999, when MTNL sought permission from TRAI to provide CDMA-based WLL services with “limited mobility.” GSM cellular operators were soon up in arms, arguing that “limited mobility” was simply a backdoor entry into their business. Moreover, fixed operators had paid lower license and spectrum fees than cellular ones; were not required to pay access charges for cell-to-fixed calls (unlike their cellular counterparts); and, amidst accusations of cross-subsidization, were charging considerably lower rates than the cellular operators.

The resulting conflict dragged on in the courts and in the political arena for years. Fixed operators including new entrants Reliance and Tata Teleservices claimed that they were being prevented from providing a cheap service that would drive penetration and be of benefit to the “common man”; cellular players bitterly opposed what they perceived as unequal regulatory treatment for two kinds of operators who were in fact offering the same service. The real victim, of course, was the Indian telecommunications market, which suffered from investor perceptions of regulatory confusion and operator in-fighting. In late 2002, for example, thousands of mobile users in New Delhi were for a time cut off from the fixed-line network when MTNL shut down interconnection for cellular companies. (MTNL later attributed the incident to a “technical snag.”)

It was not until late 2003 that the issue was finally resolved, under considerable government pressure, when cellular operators agreed to withdraw their many cases against the fixed-line operators. Fixed operators would in effect be allowed to enter the mobile business; in return, the government granted cellular players several concessions, including lower revenue-share arrangements estimated to total over $210 million. Perhaps most notably, the government announced its intention to adopt a “unified

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access licensing” regime, which would in the future provide a single, technology-neutral license for fixed and cellular operators. The hope is that this new license category will prevent a repeat of the recent controversy, and allow new technologies to enter the Indian market without requiring a wholesale rewrite of licensing laws.

Policy Horizon

With the apparent resolution of the “limited mobility” controversy, one of the darkest clouds over India’s telecom market has apparently lifted. Although some questions remain regarding the details of the new “unified licenses,” the hard-won peace between cellular and fixed players is aconsiderable achievement, and should set the stage for rapid growth in the industry.

Several other impending developments also justify a measure of optimism. Although in early 2004 the government failed at the last minute (against expectations) to hike FDI limits in telecom, indications are that the ceiling on foreign investment could be lifted to 74% sometime after the elections, due in April/May. A divestment of MTNL is also possible. There is also the likelihood of continued tariff rebalancing, with international and long-distance rates expected to fall further; local rates are unlikely to be increased by much, given the political sensitivities of doing so.

Finally, TRAI continues to work on a new universal service policy -- a development that many feel is urgently needed given low rural penetration rates (approximately 1.41 per hundred), and the failure of private operators to fulfill the rural telephony requirements included in their originallicenses.

Probably the single most important development on the horizon is a move towards converged regulation. In 2001, the government announced its intention to pass a Communications Convergence Bill, which would bring telecommunications, broadcasting, cable and Internet under a single regulator, the Communications Commission of India (CCI). Inspired by the emergence of “super-regulators” in several countries (e.g., UK and Malaysia), the bill has undergone several drafts, but at this point appears stalled in the legislative process. While its passage still seems possible, it is also possible that the government will take a more incremental approach

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towards converged regulation. In early 2004, for example, the government granted TRAI (whose purview was hitherto restricted to telecommunications) limited authority in the cable TV industry, asking it to resolve the confusion over a new payment system. Likewise, the decision to implement the “unified” licensing can also be seen as a gradual step in the direction of converged licensing.

SPECTRUM CONTROVERSY

The technical offshoot of the Department of Telecom (DoT), Telecom Engineering Centre (TEC), has recently recommended that telecos (telecom companies) must increase their subscriber base between 4 and 15 times, if they want it increase their spectrum. Earlier, the telecom regulator TRAI had suggested that the subscriber- based spectrum allocation norms be tightened by two to six times.

Spectrum is the radio frequencies that enable wireless communications, and on which all mobile services operate. The enhanced subscriber-linked criterion for spectrum allocation is going to bar telecom operators like Bharti Airtel, Vodafone, Idea Cellular, Bharat Sanchar Nigam and Reliance Communications from getting additional spectrum in their existing circles for a considerable period. DoT has also decided to continue with the first-come-first-served policy for allocation of licence.

The new applicants include DLF, AT&T, Videocon, Hindujas, Sterlite Group, Ispat and Unitech. Further, DoT has accepted the TRAI’s recommendation that operators who get beyond 10 MHz of spectrum for GSM and 5 MHz for CDMA must pay an additional ‘spectrum enhancement charge’. DoT has also upheld the policy that mobile licences are technology- neutral, implying that any operator can use either GSM or CDMA equipment to run networks.

Recommendations The DoT’s decision implies that the existing operators will get additional spectrum if they increase their minimum number of subscribers. Under the earlier policy, a GSM operator in Delhi and Mumbai who had 10 MHz of spectrum was required to have 1.6 million customers to be eligible to get 12.4 MHz of radio frequency. It means that TRAI had recommended the customer base to be increased to 3 million, and now, TEC has proposed it to

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be increased further to 13.3 million. According to the TEC, in a network, for example, New Delhi, where the demand for mobile services is huge, a telecom operator has to have 600,000 subscribers to get a hand of 4.4 MHz of spectrum, while for the next band of 6.2 MHz it should have 1.9 million subscribers.

What does it mean for telecom players?

The excessive hike in subscriber numbers is supposed to deprive the existing GSM operators of spectrum and to facilitate a priority entry of select players into GSM. The capex ( capital expenditure) of all GSM operators will also increase immensely, as each would be required to increase its base stations and networks to fulfill the condition of more users under the existing spectrum. GSM operators account for 75 percent of mobile services in India, and due to DOT’s move, their payouts to the governments will increase significantly. The revised subscriber-based spectrum allocation will make it difficult for Bharti as well as other GSM operators such as Vodafone and Idea to get additional spectrum in their existing circles.

At the same time, DoT’s decision not to auction spectrum and follow the first-come-first-served norm will result in the other existing operators getting spectrum in circles where they are not present.

DoT has also announced that it would permit existing players to expand their networks by using alternate wireless technologies. This means that telcos which currently use GSM technologies for providing cellular services can now use CDMA technology also and vice versa. But, GSM players have no plans of offering CDMA services.

On oct.1,2000 , the department of telecom operations, GOI became a corporation and was named BSNL. It is now india’s leading telecommunication company and the largest public sector undertaking. it has a network of over 45 million

• The opening up of India’s internal long-distance market in 2000, and the subsequent drop in long-distance rates as part of TRAI’s tariff rebalancing exercise;

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• The termination of VSNL’s monopoly over international traffic in 2002.

• The partial privatization of the company that same year, with the Tata group assuming a 25% stake and management control;

• The gradual easing of the original duopoly licensing policy, allowing a greater number of operators in each circle; • • The introduction in 2003 of a Calling Party Pays (CPP) system

for cell phones, despite considerable opposition (including litigation) by fixed operators;

All of these events have created an impressive forward-momentum in Indian telecommunications, resulting in a vigorously competitive and fast-growing sector. India has also suffered from its fair share of regulatory hiccups.

MERGERS

Demand for new spectrum as the industry grows and the fact the spectrum allocation in done on the basis of number of subscribers will force companies to merge so as to claim large number of subscribers to gain more spectrum as a precursor to the launch of larger and expanded services. However it must also be noted that this may very well never happen on account of low telecom penetration.

NEW CIRCLES

As mentioned earlier there is a significant number of tier-2 and tier 3 cities that can accommodate more players we expect aggressive response by the companies to such opportunities as and when they are created.

CONSTRAINTS

• Slow pace of the reform process.• It would be difficult to make in-roads into the semi-rural and rural

areas because of the lack of infrastructure. The service providers have to incur a huge initial fixed cost to make inroads into this market. Achieving break-even under these circumstances may prove to be difficult.

• The sector requires players with huge financial resources due to the above mentioned constraint. Upfront entry fees and bank guarantees

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represent a sizeable share of initial investments. While the criteria are important, it tends to support the existing big and older players.

• Financing these requirements require a little more liberal approach from the policy side. Problem of limited spectrum availability and the issue of interconnection charges between the private and state operators.road ahead

The year 2008 saw their Indian telecom industry touching the much anticipated 250mn wireless subscribers mark. However the next challenges to achieve 500mn mobile customers by 2010. Service providers have already pulled out their socks and have committed not to leave any stone unturned. The present day rural India, with a substantial improvement in purchasing power, presents a growing potential for telecom operators. India is likely to be the second largest mobile market in the BRIC nations with 560 mn mobile users representing the nxt great growth curve for both mobile and interactive market industries also private ector has become the dominant player in industry while public sector companies added 53.6mn subscribers during 1998-2007, while Private companies have added up whopping 133.58mn subscribers.

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ROAD AHEAD

The year 2008 saw their Indian telecom industry touching the much anticipated 250mn wireless subscribers mark. However the next challenges to achieve 500mn mobile customers by 2010. Service providers have already pulled out their socks and have committed not to leave any stone unturned. The present day rural India, with a substantial improvement in purchasing power, presents a growing potential for telecom operators.

Howver with the telecom tariff coming down to the lowest level there is ample scope for the expansion of telecom networks in these network.

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REFERENCES

• Google.com• Search engines• Voice and data magazine• Industry trends• Indian telecom industry-trends and cases by Nasreen Taher.• Telecommunication in India – emerging scenario by

Dhandapani Alagiri.

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