measure the market size of non-branded mobile
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CHAPTER -1
INDUSTRY
PROFILE
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CHAPTER 1INDUSTRY PROFILE
1.1 INDUSTRYOVERVIEW1.1.1 History
Information technology dates back to 5000BC, when people started using alphabets as a medium
of communication. However, its actual emergence started with the first ever use of the computer.
The real modern mechanical computer was conceived in 1822 by Charles Babbage. Then came
the electromechanical age in 1840s with the discovery of different ways to harness electricity and
the information was converted into electric impulses. This led to the beginning of
telecommunication and telegraphy in late 1800s. As the loading coil and vacuum tube made
possible the early telephone network, the wireless revolution began only after low cost
microprocessors and digital switching became available.
Since then, four generations of computers have evolved. Each generation represented a step that
was characterized by hardware of decreased size and increased capabilities. The first generation
used vacuum tubes, the second transistors, and the third integrated circuits. The fourth (and
current) generation uses more complex systems such as very large-scale integration or System -
on- a - chip.
Mobile rigs were the beginning of mobile phones for use in vehicles such as taxicab radios, two
way radios in police cruisers, and the like. A large community of mobile radio users, known as
the mobileers, popularized the technology that would eventually give way to the mobile phone.
The concept of using hexagonal cells for mobile phone base stations was invented in 1947 by
Bell Labs engineers at AT&T and was further developed by Bell Labs during the 1960s.
One of the first truly successful public commercial mobile phone networks was the ARP network
in Finland, launched in 1971. The first hand held mobile phone to become commercially
available was the Motorola DynaTAC 8000X, which received approval in 1983. Until the late
1980s, most mobile phones were too large to be carried in a jacket pocket, so they were usually
permanently installed in vehicles as car phones. With the advance of miniaturization and smaller
digital components, mobile phones got smaller and lighter.
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1.1.2 Current scenario
Mobile phones have gained a lot of popularity and are the considered to be great multimedia
tools. Mobile phones are being used for entertainment purposes due to the introduction of new
features every day. They have become more than just call making and receiving devices. Mobilephone handsets now have more business-friendly applications that can enhance anybodys
business. With emerging technology, mobile phones have become more than communication
devices; they are the tools to stay ahead of competitors and peers in the present times. Soon
mobile phones will evolve from communication tools to integrated communication devices,
media terminals, credit cards, and remote controls.
1.1.3 Growth
This rapid growth has been possible due to various proactive and positive decisions of the
Government and contribution of both by the public and the private sector. The rapid strides in the
telecom sector have been facilitated by liberal policies of the Government that provide easy
market access for telecom equipment and a fair regulatory framework for offering telecom
services to the Indian consumers at affordable prices.
1.1.4 Wire line vs. Wireless
It has also undergone a substantial change in terms of mobile versus fixed phones and public
versus private participation. The preference for use of wireless phones has also been predominant
in the sector.
Participation of the private entities in the telecom sector is rapidly increasing rate there by
presenting the enormous growth opportunities. There is a clear distinction between the Global
Satellite Mobile Communication (GSM) and Code Division Multiple Access (CDMA)
technologies used and the graph below shows the divide between the two.
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1.2GLOBAL MOBILE HANDSET MARKETThe phenomenal rise of the mobile phone has seen its image change from a yuppie status symbol
to a daily essential. Along the way, it has created thousands of jobs, changed the way we do
business, and made an awful lot of money for investors. Today Key Handset technologiesinclude GSM, CDMA, and, Wi-Fi VoIP, TDMA, 3G, 4G and Bluetooth. Worldwide mobile
phone sales cruise to 990.8 million units in 2006, up a hefty 21.3% from 2005s 816.6 million
units. The estimated growth figures are6.4% in 2007, 4.8% in 2008 and 2.6% in 2009.
Notwithstanding the gradual decline in the growth figures, the annual handset sales are predicted
to reach more than US $ 3 Billion by 2009.The total number of mobile phone subscribers in the
world was estimated at 2.14 billion in 2005.
Around 80% of world's populations have mobile phone coverage as of 2006. This figure isexpected to increase to 90% by the year 2010. With the periodic introduction of new features and
multimedia tools in the mobile handsets due to technological advances, more and more people in
the Asian continent fancy buys them. There are many diversities and complexities in the Asian
mobile handset market due to types of customers, government regulations, regional/geographical
wireless infrastructure, and the purchasing power. Basically, the Asian market looks at the
mobile handsets as status symbols. The market is seen best for the low-end phones, but there is a
huge rise in the demand for flashier and costlier phones. India, China, Korea, and Malaysia are
fast evolving as the biggest markets for mobile handsets and in coming years they will mainly
carry on the global handset sales.
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1.3SEGMENT WISE STATUS1.3.1 Wire line Services
With increasing penetration of the wireless services, the wire line services in the country are
becoming stagnant.
On the other hand, Broadband demand has picked up and promises to stabilize fixed line growth.
1.3.2 GSM Sector
In terms of the Global System for Mobile Communication (GSM) subscriber base this now
places India third after China and Russia. China had 401.7 million GSM subscribers
GSMServiceProvider
Reliance
Bharti
Dokomo
MTNL
Airtel
Spice
Vodafone
Idea
Aircel
BSNL
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1.3.3 CDMA Services
CDMA technology was introduced in India as a limited mobility solution. The introduction of
CDMA services has created competition, lowered tariffs and offered many citizens access to
communication services for the first time.
1.3.4 Internet Services
Internet services were launched in India on August 15, 1995. In November 1998 the government
opened up the sector to private operators. A liberal licensing regime was put in place to increase
Internet penetration across the country.
The growth of IP telephony or grey market is also a serious concern. Government loses revenue,while unlicensed operation by certain operators violates the law and depletes licensed operators
market share.
New services like IP-TV and IP-Telephony are becoming popular with the demand likely to
increase in coming years. The scopes of services under existing ISP license conditions are
unclear.
1.4MANUFACTURE OF TELECOM EQUIPMENTSEGMENTRising demand for a wide range of telecom equipment, particularly in the area of mobile
telecommunication, has provided excellent opportunities to domestic and foreign investors in the
manufacturing sector. The last two years saw many renowned telecom companies setting up their
manufacturing base in India. Ericsson has set up GSM Radio Base Station Manufacturing facility
in Jaipur. Elcoteq has set up handset manufacturing facilities in Bangalore. Nokia set up its
manufacturing plant in Chennai. LG Electronics set up plant of manufacturing GSM mobile
phones near Pune.
The Government has already set up Telecom Equipment and Services Export Promotion Forum
and Telecom Testing and Security Certification Centre (TETC). A large number of companies
like Alcatel, Cisco have also shown interest in setting up their R&D centers in India. With above
initiatives India is expected to be a manufacturing hub for the telecom equipment.
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1.5MAJOR GLOBAL PLAYERSCompany 2010 Market Share (%)
Nokia 42
Samsung 16.2
Sony Ericson 13.8LG 7.9
Motorola 3.1
Other 17
Total 100
Nokia Corporation is currently the world's largest manufacturer of mobile telephones. It
produces mobile phones for every major market and protocol, including GSM, CDMA, and W-
CDMA (UMTS). The corporation also produces telecommunications network equipment for
applications such as mobile and fixed-line voice telephony, ISDN, broadband access, voice over
IP, and wireless LAN.Nokia's Mobile Phones division provides the general public with mobile
voice and data products across a wide range of mobile devices. The division aims to target
primarily high-volume category sales of mobile phones and devices, with consumers being the
most important customer segment. Nokia believes that design, brand, ease of use and price are
mainstream mobile phones' most important considerations to customers. Nokia's product
portfolio includes camera phones with features such as megapixel cameras which appeal to the
mass market.
Motorola is an American multinational communications company based in Schaumburg, Illinois,
a Chicago suburb. Most of Motorola's products have been radio-related, starting with a battery
eliminator for radios, through the first walkie-talkie in the world, defense electronics, cellular
infrastructure equipment, and mobile phone manufacturing. Motorola has recently been
regaining market share in the cellular-phone business from Nokia, Samsung, and others due to
stylish new cellular phone designs.
Samsung Electronics is one of the world's largest IT companies by revenue. The company also
claims to be having the highest brand value among consumer electronics companies.
Headquartered in Seoul, South Korea, it is part of the Korean Samsung Group, operating in
approximately over 100 countries. It is the number 1 mobile phone manufacturer in Asia.
Sony Ericsson is a joint venture established in 2001 by the Japanese consumer electronics
company Sony Corporation and the Swedish telecommunications company Ericsson to make
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mobile phones. Both companies have stopped making their own mobile phones. The reason for
this merger is to combine Sony's consumer electronics expertise with Ericsson's technological
leadership in the communications sector. The company's global management is based in
Hammersmith, London. It also has research & development teams in Sweden, Japan, China,
Canada, the Netherlands, the United States, India and the United Kingdom.
LG Electronics is one of the world's leading electronics companies. It is part of the Korean LG
Group, operating in approximately 80 countries. Its mobile phones division provides CDMA,
GSM, 3G Handsets.
BenQ-Siemens is the mobile communications subsidiary of Taiwanese BenQ Corp... The
division was formed out of BenQ's acquisition of the struggling Siemens mobile group in 2005.
The stated goal of the company is to pull together BenQ's lifestyle experience, their renowned
design team and Siemens' engineering capabilities to create a new leader in the mobile
communications arena. The newly-formed company won the most of design awards in 2006, and
also won many design awards in Germany's reddot competition.
1.6MAJOR PLAYERS IN INDIAThe major players in the handsets segment in India include Nokia, Motorola, Sony Ericsson,
Samsung, LG, Philips, Panasonic, Bird, Sagem and BenQ. Nokia has retained the top slot in
Indian market with 70 % share, while US giant Motorola has 15 % share and Sony Ericsson has
gained around 8% share this year. Samsung has 5% share and LG has 1.8% share.
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1.7MOBILE HANDSET MARKET IN INDIAThe cell phones industry has shown a remarkable growth in the last decade. In 1989 the number
of its subscribers was zero in India. Indias love affair with cell phones started in the mid -1990s,
as the mobile revolution took hold and India had just 10 million mobile and landline connections.Delhi was the first state to launch cell phones in India. Growth then soared in the last four years
due to regulatory change and falling costs of calls and handsets. Indias wireless market is a test
bed for alternative infrastructure, handsets, billing systems, business models and marketing
strategies that will likely prove applicable to other developing countries.
On a numerical basis, India is the biggest growth market adding about 6 million cell phones
every month. CAGR for mobile phones is 86% in India. It is one of the fastest growing mobile
markets in the world; in April 2006 mobile subscriber base crossed 100 million marks. This hasbeen accomplished by rethinking handsets, network infrastructure, enhanced services and
content. More than two-third of mobile subscriptions are with GSM operators and rest with
CDMA. India has one of the lowest mobile phone tariffs in the world resulting in low Average
Revenue per User (ARPU) of 9.04 USD per year (CDMA 5.74 USD and GSM 8.89 USD).
Indian land area covered by mobile networks is approx. 30%. CAGR of Mobile Market Value
for 2004- 2009 is 36.9%.With 156.31 million cell phones; teledensity in the country is still low at
17.45%. Fewer than eight in every 100 Indians use mobiles, compared with China's 30 per cent.
In India, about 13 percent of people have cell phones which have increased from 8% in 2005 and
are expected to reach 40 percent within a few years. A lack of investment in the infrastructure
needed to support landline services means there are only 50 million fixed-lines users in the
country, leaving the stage set for mobile operators. India is expected to have the third largest
mobile user base, behind China and the US, by the year end and will become the second largest
market of mobile handsets by 2010. Indian cellular market would account for 11% of the overall
Asia Pacific and Japan market by 2009 and is expected to reach 500 million subscribers by end
of 2010 with CAGR of 33.7% for 2004- 2010.
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1.7.1 Indias mobile subscriber base
1.8POLICY AND INITIATIVES1.8.1 Regulatory Framework
The Telecom Regulatory Authority of India (TRAI) was set up in March 1997 as a regulator for
Telecom sector. The TRAIs functions are recommendatory, regulatory and tariff setting in
telecom sector.
Telecom Disputes Settlement and Appellate Tribunal (TDSAT) came into existence in May,
2000. TDSAT has been empowered to adjudicate any dispute
Between a licensor and a licensee Between two or more service providers Between a service provider and a group of consumers Hear and dispose of appeal against any direction, decision or order of TRAI
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Tariffs for telecommunication services have evolved from a regime where tariffs were
determined by Telecom Regulatory Authority of India to a regime where tariffs are largely under
forbearance. TRAI intervenes by regulating the tariffs for only those services, the markets of
which are not competitive.
Universal Service Obligation Fund (USOF) exclusively for meeting the Universal Service
Obligation was established in April, 2002. The Universal Service Levy is presently 5 per cent of
the Adjusted Gross Revenue (AGR) of all telecom service providers except the pure value added
service providers like Internet, Voice Mail, E-Mail service providers etc. Indian Telegraph Act
has been amended in October2006 to provide support for all telegraph services including mobile
and broadband to bridge the digital divide.
With the introduction of the Unified Access Licensing Regime, operators can offer telecom
access services to consumers in a technology neutral manner, subject to fulfilling certain
conditions. Introduction of this regime has also broken the legal/regulatory impasse between the
cellular and basic service providers. Issuance of Intra-Circle Merger and Acquisition Guidelines
provide investors an opportunity to take stakes in existing telecom operations.
1.8.2 Government Initiatives
The Government has taken the following main initiatives for the growth of the Telecom Sector:
All telecom services have been opened up for free competition for unprecedented growth. 217 (Information Technology Agreement) ITA-I items are at zero Customs Duty. Specified
capital goods and all inputs required to manufacture ITA-I, items are at zero Customs Duty.
Availability of low cost mobile handsets. The international Long Distance Services (ILDS) opened with effect from April 2002.
Calling Party Pays (CPP) regime was implemented with effect from 1st May.
Guidelines for Unified Access Service License regime were issued in November 2003, 27licenses out of 31 Basic Service Licenses were converted to Unified Access Service
Licenses.
In April 2004, license fee for Unified Access Service Providers (UAS) was reduced by 2 percent.
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License fee for infrastructure Provider-II reduced from 15 per cent to 6 per cent of theAdjusted Gross Revenue and spectrum charges between 2 to 4 per cent in June 2004.
Entry fee for NLD licenses was reduced to Rs. 2.5 Crore from Rs. 100 Crore. Entry fee forILD reduced to Rs. 2.5 Crore from Rs. 25 Crore.
Lease line charges have been reduced to make the bandwidth available at competitive pricesto facilitate growth in IT enabled services.
One India plan i.e. single tariff of Re. 1/-per minute to anywhere in India was introducedfrom 1st March 2006 by the Public Sector Undertakings. This tariff was emulated by most of
the private service providers also. This scheme has led to death of distance in
telecommunication and is going to be instrumental in promoting National Integration further.
The robust telecom network has also facilitated the expansion of BPO industry that is having500,000 employees now and adding 400 employees per day.
Annual license fee for National Long Distance (NLD), International Long Distance (ILD),Infrastructure Provider-II, VSAT commercial and Internet Service Provider (ISP) with
internet telephony (restricted) licenses was reduced to 6 per cent of Adjusted Gross Revenue
(AGR) with effort from Jan 2006.
The Governments policy is neutral on use of technology by telecom service providerssubject to availability of scarce resources such as spectrum etc.
License Fees 6-10 per cent of Adjusted Gross Revenue (AGR).
1.8.3 Foreign Direct Investment Policy
Foreign Direct Investment (FDI) was permitted in the telecom sector beginning with the telecom
manufacturing segment in 1991 - when India embarked on economic liberalization. FDI is
defined as investment made by non-residents in the equity capital of a company. For the telecom
sector, FDI includes investment made by Non-Resident Indians (NRIs), Overseas Corporate
Bodies (OCBs), foreign entities, Foreign Institutional Investors (FIIs), American Depository
Receipts (ADRs)/Global Depository Receipts (GDRs) etc.
Present FDI Policy for the Telecom sector:
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In Basic, Cellular Mobile, National Long Distance, International Long Distance, Value Added
Services and Global Mobile Personal Communications by Satellite, FDI is limited to 49 per cent
(under automatic route) subject to grant of license from the Department of Telecommunications
and adherence by the companies (who are investing and the companies in which investment is
being made) to the license conditions for foreign equity cap and lock-in period for transfer and
addition of equity and other license provisions.
Foreign Direct Investment up to 74 per cent permitted, subject to licensing and security
requirements for the following:
o Internet Service (with gateways)o Infrastructure Providers (Category II)o Radio Paging Service
FDI up to 100 per cent permitted in respect to the following telecom services: - ISPs not
providing gateways (Both for satellite and submarine cables)
o Infrastructure Providers providing dark fiber (IP Category I)o Electronic Mailo Voice Mail
The above is subject to the following conditions:
FDI up to 100 per cent is allowed subject to the condition that such companies would divest 26
per cent of their equity in favor of Indian public within 5 years, if these companies are listed in
other parts of the world.
The above services would be subject to licensing and security requirements, wherever required.
Proposals for FDI beyond 49 per cent shall be considered by Foreign Investment Promotion
Board (FIPB) on a case-to-case basis.
In the manufacturing sector 100 per cent FDI is permitted under the automatic route.
In Basic, Cellular Mobile, paging and Value Added service, and Global Mobile Personal
Communications by Satellite, FDI is permitted up to 49 per cent (under automatic route) subject
to grant of license from Department of Telecommunications
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Foreign direct investment up to 74 per cent permitted, subject to licensing and security
requirements for the Internet Service (with gateways), Infrastructure Providers (category-II), and
Radio Paging Service
FDI up to 100 per cent permitted in respect of
o ISPs not providing gateways (both for satellite and submarine cables),o Infrastructure Providers providing dark fiber (IP Category I);o Electronic Mail; ando Voice Mail
FDI up to 49 per cent is also permitted in an investment company, set up for making investment
in the telecom companies licensed to operate telecom services. Investment by these investment
companies in a telecom service company is treated as part of domestic equity and is not set of
against the foreign equity cap.
Manufacturing - 100 per cent FDI is permitted under automatic route.
FDI is subject to the following conditions
FDI up to 100 per cent is allowed subject to the conditions that such companies would divest 26
per cent of their equity in favor of Indian public in 5 years, if these companies are listed in other
parts of the world.
The above services would be subject to licensing and security requirements, wherever required.
Proposals for FDI beyond 49 per cent shall be considered by FIPB on case to case basis.
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1.9COMPETITION OVERVIEW1.9.1 Major Players
There are three types of players in telecom services:
1) State owned companies (BSNL and MTNL)2) Private Indian owned companies (Reliance Infocomm, Tata Teleservices,)3) Foreign invested companies (Hutchison-Essar, Bharti Tele-Ventures, Escotel, Idea
Cellular, BPL Mobile, Spice Communications)
1.9.1.1 Bharat Sanchar Nigam Limited (BSNL)
Name Bharat Sanchar Nigam Limited (BSNL)
Year ofEstablishment
2000
Company
Profile
Bharat Sanchar Nigam Ltd. is World's 7th largest Telecommunications
Company providing comprehensive range of telecom services in India: Wire
line, CDMA mobile, GSM Mobile, Internet, Broadband, Carrier service,
MPLS-VPN, VSAT, VoIP services, IN Services etc. Within a span of five
years it has become one of the largest public sector units in India.
Global
Presence/
Marketing
Network
It has a network of over 45 million lines covering 5000
Network towns with over 35 million telephone connections.
Future Prospect BSNL plans to expand its customer base from present 47 million lines to 125
million lines and infrastructure investment plan to the tune of Rs. 733 crores
(US$ 16.67 million) in the next three years.
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1.9.1.2 Mahanagar Telephone Nigam Limited (MTNL)
Name Mahanagar Telephone Nigam Limited (MTNL)
Year of
Establishment
1986
Company
Profile
MTNL was set up by the Government of India to upgrade the quality of
telecom services, expand the telecom network, and introduce new services and
to raise revenue for telecom development needs of Indias key metros. MTNL
with a market share of about 13% of the National telecom Network has a
customer base of 5.92 million. The Govt. of India currently holds 56.25%
stake in the company.
Acquisitions /
Strategic
Alliances
MTNL has formed a Joint Venture company in Nepal by the name of United
Telecom Ltd. (UTL) in collaboration with Telecom Consultants India Limited
(TCIL) in 2001 for providing WLL based basic services in Nepal. MTNL has
set up its 100% subsidiary .Mahanagar Telephone Mauritius Limited.
(MTML) in Mauritius, for providing basic, mobile and international long
distance
1.9.1.3 Videsh Sanchar Nigam Limited (VSNL)
Name Videsh Sanchar Nigam Limited (VSNL)
Year of
Establishment
1986
Company
Profile
The Videsh Sanchar Nigam Limited (VSNL) a wholly Government owned
corporation. The company operates a network of earth stations, switches,
submarine cable systems, and value added service nodes to provide a range of
basic and value added services and has a dedicated work force of about 2000employees. VSNL's main gateway centers are located at Mumbai, New Delhi,
Kolkata and Chennai.
Global
Presence/
The company has 52 subsidiaries in 21 countries as well as operations across
four continents.
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Marketing
Network
Acquisitions /
Strategic
Alliances
VSNL acquired Nasdaq-listed Teleglobe International Holdings Ltd for $239
million in 2005 Videsh Sanchar Nigam Ltd acquired Tyco Global Network,
submarine cable system, for USD 130 million in 2005
Future Prospect The company plans to expand its wholesale voices services across the EU, to
effectively enable enterprise customers and retail voice carriers to connect to
India. VSNL is adding its capacity to meet the overwhelming demand for
connectivity to India in the wholesale voice services domain. The company is
also offering flexible agreements and charging methods to meet the growing
demands of the wholesale voice market
1.9.1.4 Bharti
Name Bharti
Year of
Establishment
1985
Company
Profile
Bharti Tele-Ventures Limited was incorporated on July 7, 1995 for promoting
investments in telecommunications services. Its subsidiaries operate telecomservices across India. Bhartis operations are broadly handled by two
companies: the Mobility group and the Infotel group.
Global Presence/
Marketing
Network
The company has 52 subsidiaries in 21 countries as well as operations across
four continents. The mobile business provides mobile & fixed wireless
services using GSM technology across 23 telecom circles while the Airtel
Telemedia Services business offers broadband & telephone services in 94
cities.
Acquisitions /
Strategic
Alliances
Bharti Telecom and British Telecom formed a 51%:49% joint venture, Bharti
BT Internet for providing Internet services, in 1998 Bharti Tele-Ventures
acquired an effective 32.36% equity interest in Bharti Mobile (formerly JT
Mobiles), the cellular services provider in Karnataka and Andhra Pradesh
circles in 1999 Bharti Telesonic entered into a joint venture, Bharti Aquanet,
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With SingTel for establishing a submarine cable landing station at Chennai in
2001 A 50:50 joint venture between Bharti and SingTel, to undertake the
largest infrastructure project between Singapore and Indian companies in
2001
Future Prospect Bharti Airtel company is planning to set up 3000 more towers as part of
enhancing their rural coverage and will now focus on rural and semi-urban
areas.
1.9.1.5 Reliance Communication
Name Reliance Communications
Year of
Establishment
1999
Company
Profile
Reliance Telecom's cellular services are available in 340 towns within its
eight-circle footprint. Reliance Infocomm also offered for the first time in
India, mobile data services through its R World mobile portal. This portal
leverages the data capability of the CDMA 1X network. Reliance Infocomm
offers a complete range of telecom services covering mobile and fixed line
telephony including broadband, national and international long distanceservices, data services and a wide range of value added services and
applications aimed at enhancing productivity of enterprises and individuals.
Global
Presence/
Marketing
Network
Reliance Communications has IP-enabled connectivity infrastructure
comprising over 150,000 kilometers of fiber-optic cable systems in India, the
US, Europe, Middle East, and the Asia Pacific region.
Acquisitions /
Strategic
Alliances
International wholesale telecommunications service provider, FLAG Telecom
amalgamates with Reliance Gateway, a wholly owned subsidiary of Reliance
Infocomm in 2004
1.9.1.5 Tata Teleservices
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Name Tata Teleservices
Year of
Establishment
1996
Company
Profile
Tata Teleservices is a part of the $12 billion Tata Group, which has 93
companies, over 200,000 employees and more than 2.3 million shareholders.
Tata Teleservices bouquet of telephony services includes Mobile services,
Wireless Desktop Phones, Public Booth Telephony and Wire line services.
Other services include value added services like voice portal, roaming, post-
paid Internet services, 3-way conferencing, group calling, Wi-Fi Internet,
USB Modem, data cards, calling card services and enterprise services.
Global
Presence/
Marketing
Network
Tata Teleservices has presence in across 19 circles that includes Andhra
Pradesh, Chennai, Gujarat, Karnataka, Delhi, Maharashtra, Mumbai, Tamil
Nadu, Orissa, Bihar, Rajasthan, Punjab, Haryana, Himachal Pradesh, Uttar
Pradesh (E), Uttar Pradesh (W), Kerala, Kolkata, Madhya Pradesh and West
Bengal.
Acquisitions /
Strategic
Alliances
Tata Teleservices has acquired Hughes Tele.com (India) Limited [now
renamed Tata Teleservices (Maharashtra) Limited] in 2002
Future Prospect The company is also expanding its footprint, and has paid Rs. 4.17 billion($90 million) to DoT for 11 new licenses under the IUC (interconnect usage
charges) regime.
1.9.1.5 Vodafone
Name Vodafone
Year of
Establishment
Acquired majority stake in Hutch Essar in India, by buying
out complete stake of Hutch in 2007, Essar is still minority
stakeholder in company
Company
Profile
Vodafone Essar in India is a subsidiary of Vodafone Group Plc. and
commenced operations in 1994 when its predecessor Hutchison Telecom
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acquired the cellular license for Mumbai. Vodafone Essar now has operations
in 16 circles covering 86% of India's mobile customer base, with over 45.78
million customers. Vodafone Essar, under the Hutch brand, has been named
the 'Most Respected Telecom Company', the 'Best Mobile Service in the
country' and the 'Most Creative and Most Effective Advertiser of the Year'.
Global Presence/
Marketing
Network
It has operations in 25 countries across 5 continents and 40 partner networks
with over 200 million customers worldwide.
Future Prospect Vodafone Essar is expecting to touch over 35 million customers across
400,000 shops and thousands of hutchs own employees along with
employees of its business associates.
1.9.1.5 Idea
Name Idea
Year of
Establishment
1995
Company
Profile
Idea Cellular is part of the Aditya Birla Group, which is India's first truly
multinational corporation. Aditya Birla Nuvo Ltd. holds 35.7 per cent, Birla
TMT Holdings Ltd. 44.9 per cent, Grasim 7.5 per cent, and Hindalco 10.1 per
cent in Idea.
Global
Presence/
Marketing
Network
Has a customer base of over 17 million, IDEA Cellular has operations in
Delhi, Maharashtra, Goa, Gujarat, Andhra Pradesh, Madhya Pradesh,
Chattisgarh, Uttaranchal, Haryana, UPWest, Himachal Pradesh and Kerala.
Acquisitions /
Strategic
Alliances
Merged with Tata Cellular Limited in 2001, thereby acquiring original license
for the Andhra Pradesh Circle Acquired RPG Cellular Limited and
consequently the license for the Madhya Pradesh (including Chattisgarh)
Circlein 2001 In 2004 acquired Escotel, incumbent cellular service provider
in Haryana, UP(W) & Kerala and new licensee in HP Acquired Escorts
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Telecommunications Limited (subsequently renamed as Idea
Telecommunications Limited) in 2006 Merger of seven subsidiaries with Idea
Cellular Limited in 2007
Future Prospect Idea also plans to enter rural and neglected circles as a strategy to gain
subscribers. Other advancements in the telecom industry will help it cut costs
- use of e-mail to send bills to customers; sharing cell sites; smaller base
transmission stations that will mean lesser infrastructure requirements and
expenses and independent tower operators. Along with its plan to go for a
national long distance license, it will also look at international long distance
in the near future.
1.10CHALLENGES AND OPPORTUNITIES1.10.1 Opportunities
The telecom sector has been one of the fastest growing sectors in the Indian economy in the past
4 years. This has been witnessed due to strong competition that has brought down tariffs as well
as simplification of policy environment that has promoted healthy competition among various
players...
The mobile sector alone has been growing rapidly and has emerged as the fastest growing market
in the whole worlds. Currently of a size nearing 70 million (GSM and CDMA), this sector is
expected to reach a size of nearly 200 million subscribers by financial year 2008.
The government has eased the rules regarding inter circle and intra circle mergers. This has led
to a slew of mergers and acquisitions in the recent past. Also as the sector is moving closer to
maturity, further consolidation is a reality and this will lead to the survival of more profitable
players in this segment
In order to further promote the use of Internet in the country the government is taking proactive
steps to develop this sector with the help of the various players in this segment. For this purpose,
the use of broadband technology is being mooted and this will go a long way in improving the
productivity of the Indian economy as well as turn out to be the next big opportunity for telecom
companies after the mobile communications segment
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Non-voice services and VAS are the gold mines. The big takeoff is expected with the rollout of
3G services in early 2007, once the spectrum issues are sorted out.
Internet users base fast reaching near the English speaking population base. Local language and
content required for further growth
Infrastructure equipment cost is down to a fraction of what prevailed just a few years ago.
Operators can plan better expansion plan now
Increased viability for the operators to expand to semi-urban and rural markets, hence, accelerate
growth further
Its not without reason that India is tipped to be the worlds third-largest economy by 2050! No
wonder if it happens much earlier Investors can look to capture the gains of the Indian telecom
boom and diversify their operations outside developed economies that are marked by saturated
telecom markets and lower GDP growth rates.
I. At a time when global telecom majors are struggling to cope with their losses and therollout of 3G networks, which has been a non-starter for close to a year now; India, with
its telecom success story, represents an attractive and lucrative destination for invest men.
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CHAPTER -2
COMPANY
PROFILE
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CHAPTER 2COMPANY PROFILE
2.1 MICROMAX MOBILES
2.1.1 Corporate Profile
Micromax Mobiles is one of the leading mobile companies in the World today. According to
Strategy Analytics Global Handset vendor market share report, it is the 12th largest mobile
brand in the World with a global market share of 1% and close to 8% market share in India. With
an in-depth understanding of rapidly changing consumer preferences coupled with the use of
advanced technologies, Micromax has been able to differentiate itself from the competitors
through innovation and design. The brand took on the leaders in the category with specificproducts that addressed different customer needs. The company has focused their efforts towards
creating life-enhancing mobile phone solutions and wireless technologies that cater to the
increasingly evolving needs of mobile users in India. Micromax aims to be a billion dollar
company with a significant double digit market share by 2014. Driving the next phase of growth,
the company is expanding aggressively in India and globally.
2.1.2 Journey of a Homegrown Brand
Micromax started as an IT software company in the year 2000 working on embedded platforms.
By 2008, it entered mobile handset business and by 2010 became the largest Indian domestic
mobile handsets company. This transformation was steered by four friends who divided
responsibilities on functional lines, which havent changed since: Rajesh Agarwa l, 47, Managing
Director, Rahul Sharma, 37, Executive Director, Vikas Jain, 37, Business Director, and Sumeet
Arora, 37, Chief Technology Officer. Through its emphasis on adapting to the changing market
dynamics, introducing feature-rich phones and smartphones that are innovative and unique,
Micromax has today become a brand to reckon with.
Today, Micromax has presence across India and global presence in Bangladesh, Nepal, Sri-
Lanka, Maldives, UAE, Kingdom of Saudi Arabia, Kuwait, Qatar, Oman, Afghanistan and
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Brazil. Micromax sells around 1.3 million mobiles handsets every month, with a presence in
more than 500 districts through 100,000 retail outlets in India.
2.1.3 Market Overview
We believe a number of factors have contributed to and will continue to drive growth in the
Indian telecom and handset market, including the following:
Macroeconomic growth, rising incomes and increasing consumer spending Indias real GDPis expected to grow at a combined annual growth rate (CAGR) of 7.3% from 2005 to 2025.
During the same period, income levels will almost triple and Indias middle class is expected
to increase over ten times to 583 million people in 2025. This is expected to lead to changing
consumer preferences in both urban and rural markets with consumer spending on
communications expected to be one of the fastest expanding categories of spending with
growth of over 13.4% per year taking the market size to ` 4,2888 billion by 2025 (Source:
The McKinsey Report).
Favorable demographics, While Indias economic growth unfolds, the population of India isexpected to continue to consist mostly of working age people between the ages of 15-59 with
urbanization levels reaching approximately 31% by 2015 and 38% by 2026 (Source: Report
of the National Commission on Population (May 2006)).
Wireless penetration, Low overall mobile penetration indicates a latent potential for growthin India. TRAI estimates that urban mobile teledensity will reach 125% by March 2014, with
urban mobile subscribers reaching 572 million, and that rural mobile teledensity will reach
60% by March 2014, with rural mobile subscribers reaching 468 million.
Replacement cycle, The growth in the Indian mobile handset market is likely to be driven bythe replacement handset market rather than new user additions. The replacement market is
expected to grow from 118 million handsets for the twelve month period ended December31, 2010, constituting 62.77% of overall Indian mobile handset market, to 359 million
handsets for the twelve month period ended December 31, 2014, constituting 89.30% of
overall Indian mobile handset market. Furthermore, within the replacement handset market,
the medium ASP device market is likely to grow the fastest (Source: Analysis Mason).
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3G businesses, 3G service is an emerging technology in India and certain other marketswhere we distribute our products. 3G technology provides growth opportunities through
multiple avenues including up gradation to 3G compatible mobile handsets and mobile data
cards.
Value added services (VAS). Going forward, the demand for more sophisticated andinnovative e-mail and multimedia based services, as well as gaming, music and video related
offerings is likely to fuel growth in VAS. We believe the advent of 3G will also add impetus
to the growth of the VAS market due to 3G's faster network capabilities. These trends are
likely to increase the demand for more sophisticated mobile devices.
2.1.4 Product Overview
We believe that consumers in India have unique preferences with respect to mobile handsets
such as long battery life, dual GSM capability, low-cost QWERTY phones, universal remote
control and gaming phones. Our strategy focuses on innovating, designing and using the latest
technologies to develop products at affordable prices. In addition, we also focus on developing
higher value premium products targeted at urban populations.
We believe that we differentiate ourselves from our competitors through innovation and design,
use of advanced technologies and in-depth understanding of rapidly changing consumer
preferences in India, which have enabled us to develop several new product categories that
address unique customer needs. We believe that our product development capabilities have
enabled us to establish ourselves as an innovative Indian mobile handset company. Our
marketing strategy focuses on the unique functionalities of our products to further develop our
reputation for innovation. Since our entry into the Indian mobile handset market in India in
January 2008, we have introduced more than 40 distinct mobile handset models, and as of
August 31, 2010, we sell more than 30 distinct mobile handset models. Our key mobile handset
product categories include:
Long life battery mobile phones, we offer marathon battery mobile phones that have a 30-daybattery life in standby mode;
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Dual reception mode handsets, we currently offer GC400 and GC275 handset models that areGSM-CDMA combination phones and can function using either technology;
QWERTY keypad mobile phones, we currently offer eight handset models in this category; Utility phones. Our handsets in this product category have an LED flashlight, FM radio and
color screen. We currently offer six models in this category;
Multimedia mobile phones, our multimedia mobile phones provide superior sound qualitywith powerful speakers and also have an in-built motion sensor, camera and wireless FM
antenna. We currently offer six handset models in this category;
Universal remote control mobile phone, our X235 phone is programmable as a universalremote control for televisions, air conditioners, and DVD and VCD players;
Gaming mobile phone, our Gameolution phone also functions as a wireless, motion-sensingcontroller for computer games and is capable of converting a computer into a gaming device;
Smart phones, Our W900 phone is a Microsoft Windows compatible mobile phone, withvoice assisted GPS navigation capability and maps provided by "Map my India";
3G mobile phones, We were the first mobile handset company to provide operator branded3G mobile handsets in India (Source: MTNL);
Gravity phones, our handsets in this product category are gravity sensor enabled and enablethe user to change mobile networks by rotating the handset. We offer two models in this
category.
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2.1.5 Product Innovation
Micromax product portfolio embraces more than 60 models today, ranging from feature rich,
dual-SIM phones to QWERTY, touch-enabled smart-feature phones and 3G Android
smartphones designed for younger consumers in suburban and urban markets.
Some of the industry firsts devices launched by Micromax since inception are:
1) First Long Battery Life Phone with 30 days battery back upo X1i Marathon Battery phone with 30 days standby time & 17 days Talk time
2) First Dual SIM Dual mode active Phone (GSM+CDMA)o Micromax GC400 is the first GSM + CDMA Mobile phone
3) First Gaming Deviceo G4 Gamolution phone with motion sensor gaming like Wi-fi
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4) First Womens Line of Deviceso Q55 Bling phone- First womens phone with a swivel form and Swarovski
navigation keys
5) First Universal Remote Control Phoneo X235 With Universal Remote Control for TV, DVD, AC in your phone
6) First phone with built-in blue tootho Micromax X450 Van Gogh A stylish phone that integrates a detachable
Bluetooth headset in its sleek design
7) First Superfone with Gesture Controlo Created a new category called Superfone with Gesture Control, powered with
1GHz dual core NVIDIA Tegra 2 Processor
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2.1.6 Marketing
Driven by growing aspirations of the Indian mobile users, Micromax has geared up to bring
about a paradigm shift in the way cell phones are used by introducing groundbreaking mobile
solutions technology. When Micromax entered the segment, it followed a simple strategy of
bringing innovative products for the consumers and coupled it with smart marketing. The
companys success could be attributed to the Out of the Box thinking and thus providing
Innovative & insightful products to the masses. At Micromax, the target audience is youth who
want innovative, stylish phones that are affordable. Today the mobile phone category is driven
by youth, with about 60% of the users under the age group of 20-40 yrs. and Micromax utilizes
every opportunity to connect with the youth. Micromax understands that building connect is all
about being involved with the customers and also giving them the value for money. Through
their products and innovative campaigns, they aim to provide value additions to the Micromax
users and have him or her involved by creating unique brand proposition.
2.1.7 Distribution Network
Micromax has a 3 tier distribution network in India, which extends across 65 super distributers,
500 micro distributors and over 100,000 retailers. To enhance brand cognizance and retail
strength, Micromax has a chain of exclusive retail outlets, owned by third party.
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2.2 BEETEL MOBILES
2.2.1 History
Beetel Teletech Limited comes from the Bharti Enterprises Group, founded in 1976, by Sunil
Bharti Mittal. Beetel is a leading technology brand offering contemporary solutions for modern
Indias connectivity and IT needs. It offers innovative and relevant products in Mobile phone, IT
peripherals and Wire-line telephone segments under the Beetel brand and has leading share in
retail and telecom service provider segments in the Landline category.
Beetel is a fast growing and dynamic brand with a focus on new and growing categories. Having
been a pioneer in Landline phones, Beetel has entered into the fast expanding mobile phone
category in 2010-2011. The other strategic growth area for Beetel is that of IT products where
Beetel is present in both Memory and Storage products and IT peripherals. Beetel is also a
distributor of Memory and Storage devices (HDD) for Transcend.
Beetel has recently stepped into the area of convergence devices, specifically Mobile broadband
devices being Airtels exclusive pan-India distributor for Mobile Broadband Devices starting
with 3G Data Cards.
Beetel's manufacturing unit for its Landline business is in Ludhiana with high-speed SMT lines,
Automatic Robotic Plastic Molding Injection line (ISO90012000 Certified).
Beetel is also into distribution & marketing of a wide range of brands that include Blackberry,
Apple, Avaya, Polycom, Samsung, Sanyo, Panasonic, Transcend, Iomega, Aastra Telecom, RAD
Data Comm, Actelis. Beetel is amongst the leading telecommunication equipment provider
across the globe with products and solutions deployed in over 35 countries across 5 continents.
2.2.2 Vision & Mission
Vision
Enabling technology to reach masses
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Mission
To become Indias finest Sales & Distribution Company by 2015: building a boundary-less
distribution scale across India delivering profitable growth and success to our partners making
Beetel a loved, trusted & aspirational brand of Indian consumer ensuring a performance drivenand satisfied ecosystem of our people, partners and consumers.
2.2.3 Milestones
o Push Button Phone in 1985o Answering Phone/Machines in 1989o Cordless Phones & Fax Machines in 1990o Manufacture of Radio Pagers in 1993o CLI Phones in 2000o Phones with SMS facility in 2003o Integrated player to launch Free to AirSet Top Boxes in 2004o Phones with FM Radio in 2007o Beetel branded Mobile Phones in 2010 - 2011 with Dual SIM, Big Sound and Camera as
base features.
o IT Peripherals range of products in 2010 - 2011 with 10 product categories.
2.2.4 Global Portfolio
Beetel, one of the largest manufacturers of landline phones in India, is amongst the leading
telecommunication equipment providers across the globe. Our products and solutions have been
deployed in over 35 countries and across 5 continents. We share the pride of being associated
with the leading telecom operators and biggest brands in the OEM space. We have our strength
as customization of products with a quick turnaround time which is well established by the
telecom operator approval as well as regional approvals like CE-Europe, NOM-Mexico, ICASA-
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South Africa, CNC-Argentina, MIC-Korea, SONCAP - Nigeria and SIRIM-Malaysia etc. With a
strong R&D set-up and stringent Quality Controls, we have been able to lead the technology
curve in the Telecom industry and have provided great value to our customers / channel partners.
2.2.5 Chairman's Profile
Mr. Rakesh Bharti Mittal
Rakesh Bharti Mittal is the Chairman of Beetel Teletech Ltd and the Vice-Chairman &
Managing Director of Bharti Enterprises.
Rakesh is the Chairman of Comviva Technologies, Field Fresh Foods, Bharti AXA Life
Insurance, Bharti AXA General Insurance, and Centum Learning and on the Board of Bharti
Airtel, Bharti Ventures. Rakesh is also a Life Trustee and the Co- Chairman of Bharti
Foundation, the Philanthropic arm of Bharti Group.
He has been a member of the National Council of the Confederation of Indian Industry (CII)
since 1999 and has served as a Chairman of its Northern Region Council. He is also on the Board
of Industrial Finance Corporation of India (IFCI).
A passionate advocate of the right to good education, Rakesh serves on Boards of several
educational institutions. He is a member of the Executive Board of Indian School of Business
(ISB) and the Campus Advisory Board [CAB] of ISB, Mohali. He is a member of the Advisory
Board of the Indian Institute of Technology (IIT) - Delhi, Executive Council of the YMCA
University of Science and Technology and the Round Table on School Education of the
Ministry of Human Resources Development, Government of India. He is the Co-Chairman of the
Advisory board of Bharti School of Telecommunication Technology & Management and
Chairman of Governing Council of Sat Paul Mittal School. He was a member of the International
Advisory Council of Southern Methodist University (SMU), Dallas, USA.
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2.2.5 Ombuds Office
2.2.5.1 Corporate GovernanceBharti Enterprises Limited (including its group and Joint Venture companies) firmly believes in
the principles of Corporate Governance and is committed to ensure sustainable, capital-efficient
and long-term growth thereby maximizing shareholder value. The companys commitment
towards compliance to the highest governance standard is backed by an independent and fully
informed board, comprehensive processes, policies and communication. The Company ensures
that various disclosure requirements are compiled in letter and spirit for effective Corporate
Governance.
We adhere to the highest levels of ethical business practices as articulated by our Code of
Conduct so as to achieve our performance with integrity.
OFFICE OF THE OMBUDSPERSON
The Office of the Ombudsperson is an independent forum for employees and external
stakeholders of the company to raise concerns and complaints about improper practices which
are in breach of the Bharti Code of Conduct.
Any stakeholder (employee, associate, strategic partner, vendor) who observes unprofessional
behavior can approach the Ombudsperson to voice his or her concerns. The complainant may be
either an observer who is not directly impacted, or a victim who is directly or indirectly affected
by such practices.
The Office aims to provide a fair and equitable redressed mechanism. The process is designed to
offer protection to the complainant provided the disclosure is made in good faith and the alleged
action constitutes a genuine and serious breach of Bharti Code of Conduct. The Ombudsperson
will treat all disclosures in a confidential and sensitive manner.
A person can raise a concern, either verbally or in writing by giving background of theunprofessional conduct, reasons for raising the concern, the identity of the individuals who may
be involved and documentary evidence, wherever available.
Complaints may be sent in either of these forms:
1) In writing (through hard copy mail) to:
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The Ombuds person Bharti Enterprises Ltd. Bharti Crescent 1,Nelson Mandela Road, Vasant
Kunj, Phase II, New Delhi110 070 India
2) In writing (through email) to a secure email id, [email protected]
2.2.6 Awards & Recognition
1) CMAI AwardsCMAI Association of India is a professional registered association for promotion of Indian IT
and Telecom Sector. CMAI is the only Integrated Association in India for IT and Telecom Sector
having all stakeholders as its members. It is an apex premier body with MOU partners and
representatives all over the world.
Beetel has been announced as the "Emerging Mobile Handset Company" in the 5th National
Telecom Awards 2011.
2) FIEO AwardsThe Federation of India Export Organizations represents the Indian entrepreneurs' spirit in the
global market. Known popularly as "FIEO", this apex body of Indian export promotion
organizations was set up jointly by the Ministry of Commerce, Government of India and trade
and industry in the year 1965.
Beetel is the recipient of Largest Landline Telecom Handset Manufacturer and Exporter for the
year 2010 - 2011.
3) VAR India AwardsVAR India has a long and proud tradition of honoring leading companies in business, technology
leadership and innovations in the Annual Award Nite.The Star Nite Awards honors companies
that are create new business value by innovating with technology.
Beetel was the recipient of the Best Value Added Distributor for the year 2009 and 2010.
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4) Voice & Data AwardsThe Voice & Data Annual awards are seen as the hallmark of the Indian Telecom & IT Industry.
The awards are decided after an extensive in-house research and analysis by Voice & Data and
the research findings are published in the annual V&D 100 survey conducted by the publication.
Beetel was the recipient of the Voice & Data Award for "Top Telephone Manufacturer" in 2002-
03, 2003-04, 2005-06 and 2006-07 and "Top Fixed Line Phones Company-2006 by Voice and
Data.
5) Golden Peacock AwardsGolden Peacock Awards have been instituted since 1991 and have given tremendous boost to the
Industry. The Awards are bestowed annually and are designed to encourage total improvement in
each sector of our business. The Golden Peacock Awards are now recognised worldwide as the
hallmark of corporate excellence.
Beetel has been awarded with Golden Peacock for Innovative Products/Services Award in the
Telecommunication Sector in the year 2004, 2005, 2006 and 2007.
6) ESC AwardESC is an autonomous organization under the Ministry of Information Technology, Government
of India. The ESC awards recognize a companys excellence in the exports of electronics andcomputer software.
Beetel Teletech was the recipient of the ESC Award for Excellence in Exports in
Telecommunication Equipment in 2001-02, 2002-03, 2003-04, 2004-05 and 2005-06 in the Non
SSI category.
7) Niryat Shiromani PuraskarBeetel was the recipient of the Niryat Shiromani Purashkar organized by the Indian Council of
Small and Medium Exporters (ICSME) for the year 2007-08.
8) Polycom Asia Pacific PVT. Ltd. AwardsBeetel has been awarded as Best Services Partner India 2008 and Largest Growth
DistributorAsia Pacific 2008 by Polycom Asia Pacific Pvt Ltd.
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2.3 MEDIA VIDEO LIMITED (MVL) MOBILES
2.3.1 MVL Industries Limited
Media Video Limited is listed on Bombay Stock Exchange and National Stock Exchange and
engaged in the manufacturing and marketing of consumer electronics. It has two state-of-the-art
manufacturing facilities and a nationally spread distribution network with over 25 years of
experience in delivering value to its customers. Product portfolio comprises of audio video
products and display devices, home entertainment electronics, DVDs, VCDs, home theatre
systems, mini compo systems, color televisions and TV video games etc. The companys
achievements include pioneering the TV games revolution in India in 1985 with the gaming
consoles under the brand Media owing to its high standard of quality, design & innovation as
well as prudent pricing.
2.3.2 MVL Telecom Limited
MVL Telecom Ltd. was established in 1994 with an objective to deliver OEM solutions to
consumer electronics brands and now the company has launched mobile handsets under the
brand name MVL Mobiles.
2.3.3 MVL Limited
MVL Limited was established in 2006 and today its one of the fastest growing real estate
companies in India with a market capitalization of approximately Rs. 1600 crores. MVL is
operating in Residential, Township, Commercial, Retail and Hospitality verticals with
approximately 9.62 million sq. of sales area. Today, the company has projects worth Rs. 3450
crores.
2.3.4 Vision
To provide value for money innovations and to be among the top 5 mobile handset brands in
India.
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2.3.5 Innovations find a face
MVL G 81 - It is the first Indian handset brand to introduce Dual Sim Push Mail Phone with
Push Mail technology free. It allows automatic notifications for emails. Besides, it is stated as
one of the most innovative products of 2010 in its category by NDTV Cell Guru. MVL G 25 -This model is a Mobile Music Station. It's a first of its kind innovation. It's a mobile handset with
dual external powered speakers.
2.3.6 Innovations meet excellence
A pool of best international tie-ups to bring world class technology.
MVL Connect is the first push mail service to be enabled on a java based operating system. It isdesigned to provide an advanced and secure emailing experience. MVL has tied up with one of
the worlds leading companies to provide their customized award winning push mail solution.
It has the best development and production facilities like Foxconn, Lobofone, CK Telecom and
Konka.
It has strategic tie ups with worlds best semiconductor chipset manufacturers like Mediatek,
Mstar, Spreadtrum, Infineon.
2.3.6 after sales service
MVL Telecom Ltd. has set up an extensive pan-India service network of over 200 service centers
centrally linked through a specially developed ERP solution to provide fast and reliable after
sales service to its customers every time.
Further, a major internal L4 service center has been set up which eventually be a profit center for
the company when the full range of its services are rolled. The service includes chip level repairsas well.
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2.3.7 Marketing
MVL Telecom Ltd. has set out to create a brand which offers value for money innovations. The
endeavor is to create a positive brand impact while consistently delivering products which reflect
the brand persona.
2.3.8 Distribution
To deliver maximum value and efficiency to business associates, MVL follows a single layer
distribution model, thereby eliminating the middlemen and reducing the lead time to the retailer.
The accruing efficiencies in product delivery help it strengthen business relationships and boost
retail efforts which are well supported by its pan-India network.
2.3.9 Innovations for tomorrow
The group is in the process of evaluation to set an advanced manufacturing facility in India,
thereby giving it the first mover advantage amongst Indian brands. The facility is proposed to
come up in Gujarat, the state well known for its proactive approach towards potential investors.
The facility envisages setting up a 20 million handsets manufacturing capability and a competent
design and R&D ecosystem, which will cater to both domestic and international market. The
facility will cater to 10% of the market demand for mobile handsets.
In order to deliver world class experience, investment has been made in developing a web based
channel management portal for business partners. The endeavor is to enable real time operational
efficiencies.
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2.4 LAVA MOBILES
2.4.1 Profile
With this motto as its guiding principle, LAVA has embarked on an ambitious journey of
empowering every human with quality innovative products at an affordable price.
With a distinguished management having an excellent industry track record and a highly
motivated team, Lava plans to enter the mobile handset ecosystem. The company aspires to be a
leading player in the mobile handsets ecosystem by offering customers with a unique value
proposition and in turn create immense value for its stakeholders
The company aims to carve a unique niche for itself by focusing on Innovation in every field
namely Product, After-Sales Service and Distribution. The company aspires to become one of
the strongest brands in the Telecom sector by offering the customer with a unique proposition
unmatched by any other player in the industry.
Lava debuts Indian mobile handset industry in June 2009. A telecom venture of 3 renowned
entrepreneurs, Mr S N Rai, Mr Hari Om Rai and Mr Sunil Bhalla, Lava mobiles started with just
3 handsets. Within one year of operations Lava, today is among the top 5 players with 6%
market share.
2.4.2 Challenges
Being a Public Relation Agency of Lava International Limited, the mandate was to create a
strong recall value for Lava brand and its handsets by using editorial media support.
We observed the mobile handset industry was largely dominated by 3 multinational brands and
media (journalist) was not even ready to touch homegrown brands.
The perception was an another Chinese brand
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2.4.3 Management
The management at Lava comprises of highly qualified professionals with years of experience in
the telecom sector. The driving force of the group is TQM and innovation in every aspect of this
trade, products, after sales service and sales.The management is ably supported by a highly motivated and passionate team that shares Lava's
Vision of empowering people to do more and be more.
1) HARI OM RAICo-founder and Director
Hari Om Rai is the driving force behind the operations and business development activities of
Lava. His vast knowledge emanating from decades of experience in the industry is unparalleled.
He enjoys an enviable position because of his strong industry relationships.
He has also co-promoted Pacetel Communications, a company which is recognized as an
epitome of success in Service of GSM/CDMA Handsets, Terminals & Other Electronics
Products. He has also co-founded Amexpress Worldwide Logistics, a premier logistics based
firm.
2) SUNIL BHALLACo-founder and Director
Sunil Bhalla has over two decades of industry experience in varied fields such as Marketing &
Sales, Strategic Planning, HR, After-Sales Service, MIS, ERP and Vendor Development. He has
earlier been associated with companies like Metal Box, Maruti Udyog (a SUZUKI venture in
India). He has a B.E. Degree in Mechanical Engineering and is an MBA.
He is a director on the board of Luminous Power Technologies, the No. 1 Inverter brand name in
the country and has been an instrumental force behind the success of the company.
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3) SHAILENDRA NATH RAICo-founder and Director
A business professional with over 24 years of varied business experience, Shailendra Nath Rai,
or 'SNR' as he is popularly known, is a Mechanical Engineer, Six Sigma Green Belt, and is
considered one of the leading professionals in Supply Chain Management in India today. SNR
has been a part of a sponsored research project of "Perpetual Supply-Demand Balancing" with
the Indian School of Business (ISB) which is a partner of the Kellogg Institute of Management.
SNR is recipient of various awards which include "Best Supply Chain Manager" by IIM
Bangalore and Price Waterhouse Cooper UK, in 2003. And "Top 6 Supply Chain Process
Company in India" by SP Jain institute of management and IIM.
SNR has also co-promoted Pacetel, a leading OEM supplier to Bharti, Reliance, Tata, Hutch,
ZTE and other telecom majors.
4) VISHAL SEHGALCo-founder and Director
Vishal Sehgal has more than 18yrs of business management experience in the Telecom & FMCG
space. A Mechanical Engineer from PEC Chandigarh & an MBA - Marketing/ Finance from
FMS Delhi, he has earlier been associated with leading Indian and multinational business houses
like Marico, Coca-Cola, Pepsi and Bharti Airtel. In his last role, he was a CEO in Bharti Airtel,
heading their Rajasthan circle which is among of Airtel's largest business in terms of share,
revenue and profits.
Vishal has also been part of Strategic Leadership Programs at Pepsico Franchise University at
Purchase (New York, USA), INSEAD (Singapore) & Singtel's International Game for GlobalGrowth (Singapore).
2.4.4 Vision
To empower people to do more, to be more
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2.4.5 Core Values
Integrity:
Steadfast adherence to high moral and professional standards
Passion for Excellence:
Intense keenness to stretch the limits of great in everything we do
Adaptability:
The ability to quickly evolve in response to changing
circumstances
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2.5 SPICE MOBILES
2.5.1 Overview
We commenced operations in 1997 as a cellular services provider in the states of Punjab and
Karnataka in India. As of December 31, 2006, we were the second largest cellular services
provider in Punjab and sixth largest cellular services provider in Karnataka, measured by the
total number of subscribers (based on data compiled by the COAI). On a combined basis, we
have a market share of 14.26% in these states, measured by the total number of subscribers. Our
customer base consisted of approximately 2.45 million subscribers as of December 31, 2006,
comprising approximately 1.92 million pre-paid subscribers and approximately 0.53 million
post-paid subscribers. Our total billable subscribers as on December 31, 2006 were 1.86 million
comprising approximately 1.41 million pre-paid subscribers and approximately 0.45 millionpost-paid subscribers. According to data compiled by COAI, the Punjab and Karnataka circles in
which we operate accounted for 12.09% of Indias telecommunications market share as of
December 31, 2006, measured by total number of subscribers. Both of these states are
recognized as major economic hubs of India, with Punjab enjoying the highest per capita income
in the country, and Karnataka (whose major city is Bangalore) known as the Silicon Valley of
India. To complement our existing markets, we have recently embarked on a pan-India
expansion strategy by applying for licenses for an additional 20 circles throughout India to
provide GSM cellular services, in addition to licenses for providing NLD and ILD services. In
the three years ended June 30, 2004, 2005 and 2006, our total income was Rs. 5,544 million, Rs.
6,430.59 million and Rs. 6,804.53 million, respectively, and our earnings before income, tax,
depreciation and amortization (EBITDA) was Rs. 1,681 million, Rs. 2,026.41 million and Rs.
1,647 million, respectively. For the quarter ended September 30, 2006 our total income was Rs.
1,844.33 million and our EBITDA was Rs. 422.41 million.
We are an incumbent cellular operator in the states of Punjab and Karnataka with an allocation in
the 900 MHz spectrum in both these states. As of December 31, 2006, we had installed 1,189
sites throughout Punjab and 838 sites throughout Karnataka. We own/lease optical fibre
backbone and micro transmission links with back-up and redundancy support in the markets in
which we operate. As of December 31, 2006, we distributed our services through 223 exclusive
distributors, which tapped into a network of 90 corporate dealers and various retailers and over
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23,973 independent retailers. We believe that our network coverage and large number of
distribution outlets have enabled us to compete effectively in the cellular services market in these
states.
We have a strong and vibrant brand, which we currently promote in a targeted manner in each ofour markets, usinglocal languages and cultural norms. As we expand our business outside of
Punjab and Karnataka, we expect to supplement this local brand strategy with a national brand
strategy which focuses on Indias relatively youthful population by providing marketing,
customer retention and loyalty programs and lifestyle features, including valueadded services
that appeal to younger subscribers. Currently, we also offer various value-added services and
international roaming services.
One of the challenges faced by the Indian cellular industry is high churn rate. We have
implemented a comprehensive churn prediction module which helps us to estimate potential loss
of subscribers on the basis of certain parameters such as usage, calls to competitor help lines, the
payment pattern and history of subscribers network. This module helps us in reaching out to
customers proactively instead of reacting when the customer has decided to churn.
Our Promoters are Mr. Dilip Modi and Modi Wellvest Private Limited.
TM, through TMI India, a wholly-owned subsidiary of TM International, is an investor in our
Company. We expect to benefit from TMs operational and management experience both inMalaysia and key Asian regional markets, through the creation of new products and services, the
sharing of technological experience and implementing and leveraging group synergies.
2.5.2 Our Competitive Strengths
Strong Player in our footprint. As of December 31, 2006, we were the second largest operator in
Punjab, with approximately 1.75 million subscribers and the sixth largest operator in Karnataka,
with approximately 0.70 million subscribers. We believe our size, presence and relatively long
history in these markets help provide us with strong brand recognition in these markets, as well
as substantial experience in providing services that appeal to diverse markets.
Strong Investor in TM, TMs investment in our Company in March 2006 provided us with an
opportunity to leverage the operational and strategic expertise of a major regional
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telecommunications player. TM is a leading telecommunications company based in Malaysia,
with a strong presence in the Asia-Pacific region, including strategic investments in Sri Lanka,
Bangladesh, Indonesia, Cambodia, Singapore and Pakistan. We believe that TMs experience
and track record in expanding its business throughout the region will be helpful in the
implementation of our pan-India expansion strategy and that our relationship with TM may also
give us access to additional technical and marketing expertise and economies of scale.
Vibrant and well-recognized brand name, we believe we were the first cellular services company
to commence commercial operations in the Punjab markets and we believe our history in these
markets, and ongoing targeted marketing strategy, has contributed to the development of our
brand. The Spice brand which we have obtained from MCorp Global Private Limited through
a deed of assignment is well recognized in our target markets. We position our brand as
innovative, youthful and high-performing to appeal to the savvy and technologically advanced
youth in these affluent states. Furthermore, we believe our brand positioning can be applied in
the national market as we seek to expand our presence in all the telecom circles in India. We
believe the recognition of the Spice brand is enhanced through sale of mobile handsets by one
of our Promoter Group Companies, Spice Limited, under the same brand name.
Experienced Management Team, our management team includes senior executives who have
experience working in the Indian wireless communications market since the first
commercialization of wireless services in 1995. As a result, our management has extensive
experience with planning and implementing strategies in the fast-changing Indian cellular
market. We believe our management strength will be crucial in the implementation of our future
growth plans.
2.5.3 Our Strategy
Consolidate and strengthen our position in our existing markets. We intend to consolidate andgrow our presence in Punjab and Karnataka markets. We intend to achieve this by expanding our
geographic network coverage in these states to enhance our market share. We believe that one of
the most significant factors that subscribers consider when making decisions on cellular services
is network quality. To that end, a key component of our overall strategy is to continually improve
and expand our network. We intend to accelerate the build-out of the network to improve
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coverage in small towns and rural areas and strengthen the penetration in urban areas. We will
also work with our roaming partners to improve and expand coverage outside of our footprint
and assist them in providing consistent products and services to our subscribers who roam onto
their networks.
Expand our operations nationally to eventually cover all 22 circles in India. We have applied to
the appropriate regulatory authorities to obtain licenses to provide cellular services in an
additional 20 circles throughout India. We have also applied to obtain NLD and ILD licenses,
because providing these services could provide additional revenue streams at a relatively low
marginal cost. We believe that a national presence will not only provide us with marketing and
branding benefits, but will also permit us to offer simplified national pricing plans that appeal to
corporate subscribers and allow us to increase our penetration of national accounts. Our pan-
India expansion strategy involves a gradual build-out of a nationwide cellular network and
related brand positioning. We believe our experience in developing our business in local markets
in Punjab and Karnataka will be valuable in expanding our business throughout the diverse
markets of India.
Focus on operational efficiencies to improve profit margin and cash flow. We intend to use a
variety of financial, management and operational tools to help improve our profit margins and
cash flows. For example, to assist in a cost-efficient build-out of our network, we plan to
continue to share towers with other cellular services providers and outsource infrastructure build-
up in order to reduce cost of infrastructure development and quicken the roll-out of our
infrastructure. We are also in the process of structuring certain financing solutions to our
acquisition of network equipment to manage our cash flow. For more details, please see
Management Discussion and AnalysisLiquidity and Capital ResourcesCash Flow Data on
page 268 of this Draft Red Herring Prospectus. Finally, we anticipate significant cost savings in
outgoing calls if we are awarded NLD and ILD licenses. Additionally, we would expect to earn
revenue from incoming traffic once we start operating our own NLD and ILD services.
Enhance recognition of the Spice brand through both a local and national brand strategy. In
line with our strategy to become a national player, we will focus on horizontal and vertical
branding to make Spice more prominent in our existing markets as well as creating a greater
national presence. We will continue our strategy of undertaking region-focused, local language
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advertising and marketing programs to consolidate our position in Punjab and Karnataka. At the
same time, we plan to begin promotion and advertising nationally through newspapers, radio and
television networks in order to increase recognition of Spice throughout the country. We will
continue to position our brand as youthful, innovative, high performing, savvy and
technologically advanced, targeting the growing below- 35 years old demographic in India.
Continue to expand our comprehensive distribution network to grow our customer base. We
intend to leverage our relationship with our existing exclusive independent distributors to
increase the network of retailers who sell our pre-paid and post-paid services, thereby attracting
new subscribers. As of December 31, 2006, we distributed our services through 223 exclusive
distributors, which tapped into a network of 90 corporate dealers and various retailers and over
23,973 independent retailers. Our exclusive distributors provide us with ongoing support in
customer acquisition and retention. We intend to expand our network of dealers and distributors
in order to increase our brand awareness, provide better logistical support to our customer base
and create a strong channel of communication between us and our subscribers. As part of our
pan-India strategy, we intend to develop relationships with distributors in the new markets we
enter, leveraging their local expertise and relationships with retailers to provide our services in
those markets.
Focused emphasis on value-added services, We believe that it is increasingly important to create
value-added services that are attractive to subscribers across a broad spectrum of market
segments. We will seek to improve and expand the information, ring tones, games and other
content and value-added services that our subscribers can access via their handsets. We also
intend to leverage our relationship with Cellebrum.com Private Limited, an affiliate company,
which creates value-added services for wireless operators, to introduce value-added services that
put us ahead of our competitors. Additionally, we will work with TM, to develop innovative
value-added services designed to appeal specifically to different market segments.
Leverage our relationship with TM. We believe we will benefit from TMs operational and
management experience both in Malaysia and key Asian regional markets, through creating new
products and services, sharing technological experience and implementing and leveraging group
synergies such as in global procurement. TM is a consortium member of all submarine cable
systems that land in Malaysia and has access to capacity in other submarine cable systems
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globally. Also, TM has co-location facilities at major data centers and tele-houses. Due to our
relationship with TM, we can access these cable systems and facilities. Also, up on receiving the
ILD license, we expect to be able to benefit through high volume Commitments TM has in the
Asia-Pacific region.
2.5.4 Marketing, Sales and Distribution
2.5.4.1 Marketing
We adopted a single brand, Spice, for both ourpre-paid and post-paid services. Our marketing
policy is centered on four key parameters acquisition, retention, enhancement and brand. We
spent Rs. 290 million, Rs. 412 million and Rs. 327 million and Rs. 77 million in fiscal 2004,
fiscal 2005, fiscal 2006 and the quarter ended September 30, 2006, respectively, on advertising
and promotional activities in Punjab. Some of the key initiatives taken by us recently include:
Targeted Marketing, Loyalty and Retention Programs to Reduce Average Monthly Churn, Inorder to promote loyalty among post-paid subscribers, we launched a retention program in
which high-value subscribers are identified and rewarded. The program is designed to reward
the loyalty of these subscribers by offering personalized services, offers and discounts,
invitations to exclusive events and reward points from their monthly bills.
Aggressive Brand Management, We have adopted an aggressive approach to themanagement of our Spice brand in order to maintain a strong overall company brand image
and provide a better marketing platform. We intend to develop and implement targeted
advertising and promotional activities to support this objective. Our brand was recently re-
positioned to be more vibrant and innovative in order to appeal to the younger generation.
Also, we signed up a leading Indian actress and former Miss World, Priyanka Chopra, as our
brand ambassa