Indian Telecom Industry

Class of PGDM 2008-10

Class of PGDM 2008-10

Technical: “Telecom in the real sense means transfer of information between two distant points in space.”

What is Telecommunication

Managerial: “Telecom is a huge and varied bastion of technologies, companies, services and politics that is truly global in nature.”

1881 Telecom Services Introduced in India.

1947 Posts, Telegraph and Telephones(PTT) come under the aegis of the Ministry of Communication.

1985 The Department of Telecommunication(DoT) comes into existence which would be a self regulator.

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

HISTORY

Class of PGDM 2008-10

1996 Cellular Services launched in India. Introducing private players in the market.

1997 Telecom Regulatory Authority of India (TRAI) formed.

2000 DoT becomes a corporation, Bharat Sanchar Nigam Limited (BSNL).

2005 Foreign Direct Investment(FDI) increased to 74%.

2008 India becomes 2nd largest Telecom Market in the World.

HISTORY

Class of PGDM 2008-10

Class of PGDM 2008-10

Pre-Liberalization Era

0

2

4

6

8

10

12

14

16

1991 1992 1993 1994 1995 1996

Supply

DemandMill

ion

tele

phon

es

1991-96

Winds of Change…

Rajiv Gandhi Sam Pitroda

Class of PGDM 2008-10

Class of PGDM 2008-10

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20070

5

10

15

20

25

30

35

Urban Rural Total

Tele

dens

ity (%

)

Teledensity - Urban vs. Rural

Class of PGDM 2008-10

Major Players

Class of PGDM 2008-10

External FactorsDefinition: “Factors that affect an industry, which are outside its jurisdiction are called External Factors.”

They Include:

Government PoliciesTechnologicalCompetition/ConsolidationForeign Direct InvestmentInfrastructureEntry of New Players

Organized RetailEnvironmental ConcernsSubscribersGlobal ScenarioSpectrumStock Market

Class of PGDM 2008-10Class of PGDM 2008-10

Government PoliciesTelecom Regulatory Authority of India (TRAI).

Telecom Dispute Settlement and Appellate Tribunal (TDSAT).

Spectrum.

Unified Licensing Policy(ULP).

Private OFC Networks (PSU).

Vested interests of policy makers in promoting various communication forms.

Class of PGDM 2008-10

Spectrum Spectrum has become one of the scarcest resource today.

Players buying spectrum so that they can sell it later at higher prices.

Limited spectrum unlimited demand (same spectrum, multiple technologies).

Bureaucratic delay in release of defence allocated spectrum.

Current technologies not spectrum efficient.

Class of PGDM 2008-10

TechnologicalAvailability of inexpensive mobile handsets.

Data Communication, smart phones, multi-technology handsets.

CDMA and GSM.

Wireless and emerging technologies. (GPS, DTH, IPTV, mobile TV).

Mobile Banking and Credit Services.

Class of PGDM 2008-10

Competition and Consolidation10 major, 2 minor players.

New licensees from real estate to electronics majors.

Idea acquiring Spice, Vodafone Hutch BPL.

MNCs (Virgin, Verizon, AT&T, BT, Deutsche).

¢10, falling ARPU.

Class of PGDM 2008-10

Foreign Direct Investment(FDI)

Initially 26% then 49% and now 74%.

For NLD and ILD Networks 100% FDI allowed.

In manufacturing sector 100% FDI.

Being a strategic sector, the investment from dubious sources or potent threatening nations alarming.

Threat for domestic players.

Class of PGDM 2008-10

Environmental ConcernsRadiation hazards.

Laying cables causing damage to environment.

Health hazards due to overuse of mobile phones.

E-wastes.

Ecological imbalance

Class of PGDM 2008-10

Stock MarketListed telecom players getting good valuation, attracting lot of investors.

Ready availability of funds by share liquidation.

Global PE and venture capitalists interested in Indian telecom growth story (Warburg Pincus).

Emerging telecom players have opportunities to list overseas stock exchanges like London Stock Exchange.

Unlocking share holders value by listing tower businesses (Reliance Infratel)

Class of PGDM 2008-10

InfrastructureInfrastructure Sharing.

Infrastructure acquiring.

Stand alone tower companies.

SEZ for telecom hardware manufacturing.

OFC and under-sea cable sharing.

Class of PGDM 2008-10

Entry of New PlayersMNCs trying to get in to the Indian market with industry incoherent domestic players.

Similar to aviation sector, irrational competition leading to bloodbath.

Companies with dubious origins can hamper the telecom growth story (Swan and Cheetah).

Buy today sell tomorrow.

Increased competition tending towards perfect competition thus, Second Telecom Revolution in the making.

Class of PGDM 2008-10

Organized RetailOrganized mobile retail chains like Hotspot, Subhiksha Mobile, The Mobile Store etc.

Every mile PROs in urban and semi-urban areas.

Corporate and Speciality plans for customers.

Mobile retail vans and door to door plans selling.

Easy recharge and bill collection.

Class of PGDM 2008-10

SubscribersEasy access to multiple customer plans. Call rates cheaper than peanuts.

Value added services.

Mobile phones have become today’s necessity as compared to luxury of the 90’s.

Impulsive buying due to demographic dividend.

Multi-phone carrying trends (Using features of many SP’s together).

Class of PGDM 2008-10

Global ScenarioDeveloped markets stagnant growth, so next move towards 3rd world countries.

Old technologies being dumped into developing markets.

New technologies being researched and implemented (3G and B3G)

ITU, unification and compatibility of all technologies.

Global alliances to lay inter-continental submerged cables.

From Kashmir to Kanyakumari…

Empowering and Integrating

The Indian Telecommunication Industry…