telecom in india

8/4/2019 Telecom in India

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Telecom Industry in India1. INDUSTRYOVERVIEW1.1 Background

The Indian Telecommunications network is the third largest in the world and the secondlargest among the emerging economies of Asia. Today, it is the fastest growing market in the

world. The telecommunication sector continued to register significant success during theyear and has emerged as one of the key sectors responsible for Indias resurgent Indias economic growth.1.1.1 Growth

This rapid growth has been possible due to various proactive and positive decisions of theGovernment and contribution of both by the public and the private sector. The rapid stridesin the telecom sector have been facilitated by liberal policies of the Government that provideeasy market access for telecom equipment and a fair regulatory framework for offering telecom services to the Indian consumers at affordable prices.1.1.2 Wireline Vs WirelessIt 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 beenpredominant 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 theGlobal Satellite Mobile Communication (GSM) and Code Division Multiple Access (CDMA)technologies used and the graph below shows the divide between the two.1.2 Segment wise Status1.2.1 Wireline Services

With increasing penetration of the wireless services, the wireline services in the country isbecoming stagnant.On the other hand, Broadband demand has picked up and promises to stabilise fixed linegrowth.1.2.2 GSM Sector In terms of the Global System for MobileCommunication (GSM) subscriber base thisnow places India third after China andRussia.China had 401.7 million GSMsubscribers1.2.3 CDMA ServicesCDMA technology was introduced in India as a limited mobility solution. The introductionof CDMA services has created competition, lowered tariffs and offered many citizens accessto communication services for the first time1.2.4 Internet Services

Internet services were launched in Indiaon August 15, 1995. In November 1998the government opened up the sector toprivate operators. A liberal licensing regime was put in place to increaseInternet penetration across the country.

The growth of IP telephony or grey market is also a serious concern.


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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 toincrease in coming years. The scope of services under existing ISP license conditions areunclear.

1.3 Manufacture of Telecom EquipmentRising demand for a wide range of telecom equipment, particularly in the area of mobiletelecommunication, has provided excellent opportunities to domestic and foreign investorsin the manufacturing sector. The last two years saw many renowned telecom companiessetting up their manufacturing base in India. Ericsson has set up GSM Radio Base StationManufacturing facility in Jaipur. Elcoteq has set up handset manufacturing facilities inBangalore. 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 PromotionForum 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 inIndia. With above initiatives India is expected to be a manufacturing hub for the telecomequipment.2 POLICY AND INITIATIVES2.1 Regulatory Framework

The Telecom Regulatory Authority of India (TRAI) was set up in March 1997 as a regulatorfor 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, decis ion or order of TRAI Tariffs for telecommunication services have evolved from a regime where tariffs weredetermined 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, themarkets of which are not competitive.Universal Service Obligation Fund (USOF) exclusively for meeting the Universal ServiceObligation was established in April, 2002. The Universal Service Levy is presently 5 per centof the Adjusted Gross Revenue (AGR) of all telecom service providers except the pure valueadded 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 telecomaccess services to consumers in a technology neutral manner, subject to fulfilling certainconditions. Introduction of this regime has also broken the legal/regulatory impasse betweenthe cellular and basic service providers. Issuance of Intra-Circle Merger and AcquisitionGuidelines provide investors an opportunity to take stakes in existing telecom operations.2.2 Government Initiatives

The Government has taken the following main initiatives for the growth of the TelecomSector:


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All telecom services have been opened up for free competition for unprecedentedgrowth 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 zeroCustoms 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 2003,27 licenses out of 31 Basic Service Licenses were converted to Unified Access ServiceLicenses In April 2004, license fee for Unified Access Service Providers (UAS) was reduced by 2per cent License fee for infrastructure Provider-II reduced from 15 per cent to 6 per cent of the

Adjusted 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 for ILD reduced to Rs. 2.5 Crore from Rs. 25 Crore Lease line charges have been reduced to make the bandwidth available at competitiveprices to facilitate growth in IT enabled services One India plan i.e. single tariff of Re. 1/-per minute to anywhere in India wasintroduced from 1st March 2006 by the Public Sector Undertakings. This tariff wasemulated 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 NationalIntegration further The robust telecom network has also facilitated the expansion of BPO industry that ishaving 500,000 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 providers subject to availability of scarce resources such as spectrum etc. Licence Fees 6-10 per cent of Adjusted Gross Revenue (AGR)2.3 Foreign Direct Investment PolicyForeign Direct Investment (FDI) was permitted in the telecom sector beginning with thetelecom manufacturing segment in 1991 - when India embarked on economic liberalisation.FDI is defined as investment made by non-residents in the equity capital of a company. Forthe 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: In Basic, Cellular Mobile, National Long Distance, International Long Distance, Value

Added Services and Global Mobile Personal Communications by Satellite, FDI islimited to 49 per cent (under automatic route) subject to grant of licence from theDepartment of Telecommunications and adherence by the companies (who areinvesting and the companies in which investment is being made) to the licence


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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 andsecurity requirements for the following:- Internet Service (with gateways)

- Infrastructure Providers (Category II)- 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)- Infrastructure Providers providing dark fibre (IP Category I)- Electronic Mail- Voice Mail

The above is subject to the following conditions:- FDI up to 100 per cent is allowed subject to the condition that suchcompanies would divest 26 per cent of their equity in favour 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 ForeignInvestment Promotion Board (FIPB) on a case-to-case basis. In the manufacturing sector 100 per cent FDI is permitted under the automaticroute. In Basic, Cellular Mobile, paging and Value Added service, and Global MobilePersonal Communications by Satellite, FDI is permitted up to 49 per cent (underautomatic route) subject to grant of license from Department of Telecommunications Foreign direct investment up to 74 per cent permitted, subject to licensing andsecurity requirements for the Internet Service (with gateways), InfrastructureProviders (category-II), Radio Paging Service FDI up to 100 per cent permitted in respect of - ISPs not providing gateways (both for satellite and submarine cables),- Infrastructure Providers providing dark fibre (IP Category I);- Electronic Mail; and- 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 telecomservices. Investment by these investment companies in a telecomservice 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 favour of Indian public in 5 years, if thesecompanies 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 casebasis


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3. COMPETITION OVERVIEW3.1 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, Bharti Tele-Ventures, Escotel, IdeaCellular, BPL Mobile, Spice Communications) Bharat Sanchar Nigam Limited (BSNL)Name Bharat Sanchar Nigam Limited (BSNL)Year of Establishment 2000Company Profile Bharat Sanchar Nigam Ltd. is World's 7thlargest Telecommunications Company providing comprehensive range of telecomservices in India: Wireline, CDMA mobile,GSM Mobile, Internet, Broadband, Carrierservice, MPLS-VPN, VSAT, VoIP services, IN

Services etc. Within a span of five years it hasbecome one of the largest public sector unit inIndia.Global Presence/ Marketing It has a network of over 45 million linescovering 5000Network towns with over 35 million telephoneconnections.Acquisitions / StrategicAlliancesFuture Prospect BSNL plans to expand its customer base frompresent 47 millions lines to 125 million lines and

infrastructureinvestment plan to the tune of Rs. 733 crores(US$ 16.67 million) in the next three years.

Mahanagar Telephone Nigam Limited (MTNL)Name Mahanagar Telephone Nigam Limited (MTNL)Year of Establishment 1986Company Profile MTNL was set up by the Government of Indiato upgrade the quality of telecom services,expand the telecom network, introduce new services and to raise revenue fortelecom development needs of India.s key metros. MTNL with a market share of about13% of the National telecomNetwork has a customer base of 5.92 million.

The Govt. of India currently holds 56.25% stake in thecompany.Acquisitions / StrategicAlliancesMTNL has formed a Joint Venture company in


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operations are broadly handled by twocompanies: the Mobility group and the Infotelgroup.Global Presence/ MarketingNetwork

The mobile business provides mobile & fixed wireless services using GSM technology across23 telecom circles while the Airtel TelemediaServices business offersbroadband & telephone services in 94 cities.Acquisitions / StrategicAlliancesBharti Telecom and British Telecom formed a51%:49% joint venture, Bharti BT Internet forproviding Internet services, in 1998Bharti Tele-Ventures acquired an effective32.36% equity interest in Bharti Mobile(formerly JT Mobiles), the cellular servicesprovider in Karnataka and Andhra Pradeshcircles in 1999Bharti Telesonic entered into a joint venture,Bharti Aquanet, With SingTel for establishing asubmarine cable landing station at Chennai in2001

A 50:50 joint venture between Bharti andSingTel, to undertake the largest infrastructureproject between Singapore and Indiancompanies in 2001

Future Prospect Bharti Airtel company is planning to set up3000 more towers as part of enhancing theirrural coverage and will now focus on rural andsemi-urban areas.

Reliance CommunicationName Reliance CommunicationsYear of Establishment 1999Company Profile Reliance Telecom's cellular services are availablein 340 towns within its eight-circle footprint.Reliance Infocomm also offered for the firsttime in India, mobile data services though its RWorld

mobile portal. This portal leverages thedata capability of the CDMA 1X network.Reliance Infocomm offers a complete range of telecom services covering mobile and fixed linetelephony including broadband, national andinternational long distance services, dataservices and a wide range of value addedservices and applications aimed at enhancing


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productivity of enterprises and individuals.Global Presence/ MarketingNetworkReliance Communications has IP-enabledconnectivity infrastructure comprising over

150,000 kilometers of fiber-optic cable systemsin India, the US, Europe, Middle East, and the Asia Pacific region.Acquisitions / StrategicAlliancesInternational wholesale telecommunicationsserviceprovider, FLAG Telecom amalgamates withReliance Gateway, a wholly owned subsidiary of Reliance Infocomm in 2004Tata TeleservicesName Tata TeleservicesYear of Establishment 1996Company Profile Tata Teleservices is a part of the $12 billion

Tata Group, which has 93 companies, over200,000 employees and more than 2.3 millionshareholders. Tata Teleservices bouquet of telephony services includes Mobile services,

Wireless Desktop Phones, Public Booth Telephony and Wireline services. Other servicesinclude 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 servicesand enterprise services.Global Presence/ MarketingNetwork

Tata Teleservices has presence in across 19circles that includes Andhra Pradesh, Chennai,Gujarat, Karnataka, Delhi, Maharashtra,Mumbai, Tamil Nadu, Orissa, Bihar, Rajasthan,Punjab, Haryana, Himachal Pradesh, UttarPradesh (E), Uttar Pradesh (W), Kerala,Kolkata, Madhya Pradesh and West Bengal.

Acquisitions / StrategicAlliances

Tata Teleservices has acquired Hughes Tele.com (India) Limited [now renamed Tata Teleservices (Maharashtra) Limited] in 2002Future Prospect The company is also expanding its footprint,and has paid Rs. 4.17 billion ($90 million) toDoT for 11 new licenses under the IUC


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(interconnect usage charges) regime.VodafoneName VodafoneYear of Establishment Acquired majority stake in Hutch Essar in India,by buying

out complete stake of Hutch in 2007, Essar isstill minority stakeholder in company Company Profile Vodafone Essar in India is a subsidiary of

Vodafone Group Plc and commencedoperations in 1994 when its predecessorHutchison Telecom acquired the cellular licencefor Mumbai. Vodafone Essar now hasoperations in 16 circles covering 86% of India'smobile customer base, with over 45.78 millioncustomers. Vodafone Essar, under the Hutchbrand, has been named the 'Most Respected

Telecom Company', the 'Best Mobile Service inthe country'and the 'Most Creative and Most Effective

Advertiser of the Year'.Global Presence/ Marketing It has operations in 25 countries across 5continents and 40Network partner networks with over 200 millioncustomers

worldwide.Acquisitions / StrategicAlliancesFuture Prospect Vodafone Essar is expecting to touch over 35million customers across 400,000 shops andthousand of hutchs own employees along with employees of its business associates.

IdeaName IdeaYear of Establishment 1995Company Profile Idea Cellular is part of the Aditya Birla Group,

which is India's first truly multinationalcorporation. Aditya Birla Nuvo Ltd. holds 35.7per cent, Birla TMT Holdings Ltd. 44.9 percent, Grasim 7.5 per cent, and Hindalco 10.1per cent in Idea.Global Presence/ MarketingNetworkHas a customer base of over 17 million, IDEACellular has operations in Delhi, Maharashtra,Goa, Gujarat, Andhra Pradesh, Madhya


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Pradesh, Chattisgarh, Uttaranchal, Haryana, UPWest,Himachal Pradesh and Kerala.Acquisitions / StrategicAlliancesMerged with Tata Cellular Limited in 2001,

thereby acquiring original license for the AndhraPradesh Circle Acquired RPG Cellular Limitedand consequently the license for the MadhyaPradesh (including Chattisgarh) Circlein 2001 In2004 acquired Escotel, incumbent cellularservice provider in Haryana, UP(W) & Keralaand new licensee in HP Acquired Escorts

Telecommunications Limited (subsequently renamed as Idea Telecommunications Limited)in 2006 Merger of seven subsidiaries with IdeaCellular Limited in 2007Future Prospect Idea also plans to enter rural and neglectedcircles as a strategy to gain subscribers. Otheradvancements in the telecom industry will helpit cut costs - use of e-mail to send bills tocustomers; sharing cell sites; smaller basetransmission stations that will mean lesserinfrastructure requirements and expenses andindependent tower operators. Along with itsplan to go for a national long distance licence, it

will also look at international long distance inthe near future.4. CHALLENGES AND OPPORTUNITIES4.1 Opportunities

The telecom sector has been one of the fastest growing sectors in the Indian economy in thepast 4 years. This has been witnessed due to strong competition that has brought downtariffs as well as simplification of policy environment that has promoted healthy competitionamong 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), thissector 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 hasled 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 segmentIn 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 nextbig opportunity for telecom companies after the mobile communications segmentNon-voice services and VAS are the gold mines. The big takeoff is expected with the rolloutof 3G services in early 2007, once the spectrum issues are sorted out.


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Internet users base fast reaching near the English speaking population base. Local languageand content required for further growthInfrastructure 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 furtherIts not without reason that India is tipped to be the worlds third -larges economy by 2050!No wonder if it happens much earlierInvestors can look to capture the gains of the Indian telecom boom and diversify theiroperations outside developed economies that are marked by saturated telecom markets andlower GDP growth rates.

At a time when global telecom majors are struggling to cope with their losses and the rolloutof 3G networks, which has been a non-starter for close to a year now; India, with its telecom

success story, represents an attractList of top 30 Telecom companies in India :

Company Name Market Cap in CroresBharti Airtel 108066.23

Reliance Communications 32683.44Idea Cellular 14368.92

Tata Communications 13181.25Tata Teleservices 4393.06

Spice Communications 4136.13MTNL 4044.6GTL 2475.12

GTL Infrastructure 2210.49OnMobile Global 1403.52

HFCL Infotel 457.73ITI 413.28

Him.Fut.Comm 386.99Astra Microwave 241.88

Gemini Communications 125.71Avaya Global 118.54

Shyam Telecom 64.58Nelco 63.55

XL Telecom & Energy Limited 55.96Goldstone Infratech Ltd 52.6

Nu Tek 48.16Kavveri Telecom 26.51

Krone Communications 24.52Mobile Telecommunications Ltd 17.37

Valiant Communications 16.58Pun.Communi. 16.19

Nettlinx 12.68
http://www.airtel.in/http://www.airtel.in/http://www.rcom.co.in/http://www.rcom.co.in/http://www.ideacellular.com/http://www.ideacellular.com/http://www.tatacommunications.com/http://www.tatacommunications.com/http://www.tatateleservices.com/http://www.tatateleservices.com/http://www.spiceindia.com/spice/aboutus.asphttp://www.spiceindia.com/spice/aboutus.asphttp://www.mtnl.net.in/http://www.mtnl.net.in/http://www.gtllimited.com/http://www.gtllimited.com/http://www.gtlinfra.com/http://www.gtlinfra.com/http://www.onmobile.com/http://www.hfclconnect.com/http://www.hfclconnect.com/http://www.astramwp.com/http://www.astramwp.com/http://www.gcl.in/default.htmhttp://www.gcl.in/default.htmhttp://www.avayaglobalconnect.com/http://www.avayaglobalconnect.com/http://www.shyamtelecom.com:4040/http://www.shyamtelecom.com:4040/http://www.xltelenergy.com/news.htmhttp://www.xltelenergy.com/news.htmhttp://www.goldstonebpo.com/http://www.goldstonebpo.com/http://www.nutek.in/Home/Default.aspxhttp://www.nutek.in/Home/Default.aspxhttp://www.mobileteleindia.com/http://www.mobileteleindia.com/http://www.valiantcom.com/http://www.valiantcom.com/http://puncom.com/http://puncom.com/http://www.nettlinx.com/http://www.nettlinx.com/http://www.nettlinx.com/http://puncom.com/http://www.valiantcom.com/http://www.mobileteleindia.com/http://www.nutek.in/Home/Default.aspxhttp://www.goldstonebpo.com/http://www.xltelenergy.com/news.htmhttp://www.shyamtelecom.com:4040/http://www.avayaglobalconnect.com/http://www.gcl.in/default.htmhttp://www.astramwp.com/http://www.hfclconnect.com/http://www.onmobile.com/http://www.gtlinfra.com/http://www.gtllimited.com/http://www.mtnl.net.in/http://www.spiceindia.com/spice/aboutus.asphttp://www.tatateleservices.com/http://www.tatacommunications.com/http://www.ideacellular.com/http://www.rcom.co.in/http://www.airtel.in/


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ive and lucrativedestination for

Rank Brand Parent Company Brand Value($bn)

1 Vodafone Vodafone Group 26.59

2 AT&T AT&T 24.6

3 Verizon Verizon Comm 24.38

4 Orange France Telecom 18.35

5 China Mobile China Mobile 13.87

6 Telecom Italia Telecom Italia 9.43

7 T-Mobile Deutsche Telekom 8.96

8 Movistar Telefonica 7.959 NTT DoCoMo NTTC 7.54

10 BT BT Group 7.29

11 Sprint Sprint Nextel Corp. 7.07

12 Telefonica Telefonica 6.33

13 Alcatel-Lucent Alcatel-Lucent 5.16

14 America Movil America Movil 5.08

15 Telstra Telstra Corp. 4.64

16 O2 Telefonica 4.6217 China Unicom China Unicom 3.45

18 Qwest Qwest Comm Intl 3.06

19 SoftBank Softbank Corp. 3.02

20 KDDI KDDI Corp. 3.01

21 Telenor Telenor 2.97

22 Swisscom Swisscom 2.96

23 MTS Mobil TeleSystems 2.79

24 CNC China NetcomGroup 2.55

25 Airtel Bharti Airtel Ltd 2.48

Aishwarya Telecom Ltd 9.86Interg.Digit 3.15

Vital Communications 2.81
http://www.aishwaryatelecom.com/http://www.aishwaryatelecom.com/http://www.aishwaryatelecom.com/


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History of telecom industry in India

The history of telephone services in India found its beginning when a 50-line manual telephoneexchange was commissioned in Kolkata in the year 1882 in less than five years after AlexanderGraham Bell invented the telephone. While India became independent in the year 1947, the

country had about 82,000 telephone connections, which slowly rose up to 3.05 million by theyear 1984. The telecom sector in India was a government monopoly until the year 1994 whenliberalization was gradually unrolled. For the first time, cellular services were launched in Indiain Kolkata in the year 1995.

An Overview of the Telecommunication Industry in India

Talking of telecommunications sector in India today, we can primarily identify two segmentsnamely Fixed Service Provider (FSPs) and Cellular Services. Some of the essential and basic

telecom services forming part of Indian telecom industry include telephone, radio, television andInternet. Telecom industry in the country lays a special emphasis on some of the advanced andthe latest technical innovations like GSM( Global System for Mobile Communications),CDMA(Code Division Multiple Access), PMRTS(Public Mobile Radio Trunking Services),Fixed Line and WLL(Wireless Local Loop ). Especially, India has a flourishing market in GSMmobile service, while the number of subscribers is on rapid and dramatic increase. The Indiantelecommunications industry boasts as being one among the most rapidly growing chunks on theglobe. Experts around the world estimate that India holds the promise of emerging as the secondlargest telecom market of the world.

Figures published by the Telecom Regulatory Authority of India (TRAI), reveal that the number

of telecom connection subscribers in India reached 562.21 million in December 2009, marking a3.5 percent increase over the number 543.20 million reported in November 2009. This figureindicates that the average teledensity (number of telephones per 100 persons) has gone up to47.89.

On account of a dramatic increase in the earnings from mobile and landline connections, thetelecom industry in India made revenue of US$ 8.56 billion during the quarter ending onDecember 31, 2009 thereby witnessing a recovery from the economic downturn.

Business Monitor International has stated that at present, India is adding up about 8-10 millionmobile subscribers every succeeding month. Estimates have revealed that by June2012, almosthalf Indias population will be in possession of a mobile phone. This will result in about 612million mobile subscribers, making up a teledensity of about 51 per cent by the year 2012.

Over and above, a study undertaken by Nokia has brought out that the communications sectorwill grow as the single largest chunk of the Indias GDP making up about 15.4 per cent bythe year 2014.


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Estimates made in February 2009 show that the Indian equipment market valued at US$ 24billion, while Nokia was glowing as the market leader reporting more than US$ 3.4 billionrevenues in 2008-09. Ericsson followed Nokia with revenue of about US$ 2.11 billion.

The latest reports published by Evalueserve state that the availability of the 3G spectrum has

given hopes of finding about 275 million Indian subscribers using 3G-enabled services. This willtake up the number of 3G-enabled handsets to reach near to 395 million by the end of 2013.

A Frost & Sullivan industry analyst has predicted that by the year 2012, revenues from fixed linesubscriptions in India will reach up to US$ 12.2 billion, while the revenue from mobileconnections will reach up to US$ 39.8 billion.

In a significant step taken to boost up the auction of 3G spectrum, the Indian Government haspermitted prospective bidders to call for short-term funds from the domestic market in thecountry, while allowing refinancing out of external commercial borrowings (ECBs) within aperiod of 12 months. Estimates show that the government can mop up US$ 7.53 billion from the

auction of 3G spectrum to be completed shortly. The reserve price has been fixed at US$ 753.74million.

BSNL, the state-managed telecom operator has introduced 3G services in more than 318 citiesbenefitting 856,000 subscribers. BSNL has been venturing to cross more than 400 cities in thenear future eventually rolling this service across 760 cities by September 2010. While the debateon 3G is seen continuing, TRAI has already started consulting on the next higher level of telecom services. 4G or the fourth generation enables downloads faster than all the earlierversions.

Today, India is the largest market in the world adding up a dramatic number of about 20 million

mobile subsc Higher standards............making a difference for youD-19 (GF) & D- 31, South Extension -1, New Delhi-110049, Indiaemail: [email protected], website: www.indialawoffices.comINDIAN TELECOMMUNICATION SECTORI IntroductionIndian telecom industry is growing at a great pace & India is expected to become amanufacturing hub for telecom equipment. Indian telecom equipment manufacturingsector is set to become one of the largest sectors globally by 2010. Due to risingdemand for a wide range of telecom equipment, particularly in the area of mobiletelecommunications, has provided excellent opportunities to domestic and foreigninvestors in the manufacturing sector.II Opportunities

The Indian telecom market is expected to grow three fold by 2012 & market size over US$ 8 billion. Moreover the government has set a target of 20 million broadbandconnections by 2010.The National Telecom Policy 1999 targets tele-density at 15 per cent by 2010. This willentail an investment of US $ 40- 50 billion over the next 6-8 years.There is an immense opportunity for DTH in the Indian market which is almost 10 timescompared to the developed countries like the US and Europe. For every channel there isa scope for broadcasting it in at least ten different languages. So every channel


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multiplied by ten that is the kind of scope for DTH in the country. Indias media players have all the ingredients to develop a successful DTH industry. So currently there is a lotof pent-up demand in the Indian market for DTH.It is expected that by the year 2010 there will be over 500 million subscribers in theIndian telecom market. Cellular subscriber base is projected to grow at a CAGR(Compounded Annual Growth Rate) of 48 per cent & expected to reach 88 million in2012.Over 150% growth in telecom services is projected in 5 years. India will require largeinvestments in network infrastructure & India expected to be fasted growing telecommarket in the world. Since the project expected to reach 30-40% per year 250subscribers by 2009- 2010.Total estimate of investment opportunity of USS 22 billionexpected over the next five years.Investment opportunity of $22 billion across many areas:

Telecom Devices and Software for InternetBroadband and Direct To Home Services

Higher standards............making a difference for youD-19 (GF) & D- 31, South Extension -1, New Delhi-110049, Indiaemail: [email protected], website: www.indialawoffices.com

Gateway exchangeSet top boxModemMobile handsets and consumer premise equipmentsGaming devicesEPABXTelecom SoftwareTelecom Services for voice and data via a range of technologies.

With the rapid growth of the telecom network, there are further opportunities to expandthe telecom infrastructure and research and development.III Regulatory policy

The Department of Telecommunications (DOT) under the Ministry of Communicationsand Information Technology is the concerned authority for all matters relating to telecom.The department is responsible for formulating the developmental policies; grantinglicenses for various telecom services; promoting standardization, research anddevelopment as well as private investment in the sector.An independent regulatory body called as the Telecom Regulatory Authority of India(TRAI) was established in 1997, under the Telecom Regulatory Authority of India Act,1997.The Telecom Regulatory Authority of India Act, 1997 was amended by theTelecom Regulatory Authority of India (Amendment) Act, 2000. By the Amendment Act,an Appellate Tribunal known as the Telecom Disputes Settlement and Appellate Tribunal(TDSAT) has been set up to protect the interests of service providers and consumers ofthe telecom sector.74% to 100% FDI permitted for various telecom services.FIPB approval required for foreign investment exceeding 49% in all telecom services.100% FDI permitted in telecom equipment manufacturing on automatic approval basis.Higher standards............making a difference for youD-19 (GF) & D- 31, South Extension -1, New Delhi-110049, Indiaemail: [email protected], website: www.indialawoffices.comIndian has a telecom policy viz. Telecom Policy of 1994 aims to encourage private andforeign investment. Which has opened the doors of the sector for private players and the


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process was given a further boost by the telecom policy announced in 1999 viz. NewTelecom Policy 1999.Other enactments which govern the telecom sector are as follows:Indian Telegraph Act, 1885Indian Telegraph (Amendment) Rules, 2000Indian Wireless Act, 1933Cable Television Networks (Regulations) Act,1995.Information Technology Act, 2000Broadband Policy 2004IV Incentives to investTax incentives under the current BudgetCustoms duty on convergence products to be reduced from 10% to 5%.Exemption from excise duty for specified inputs and raw materials for manufacture ofspecified electronics/ IT hardware to lower the network cost for telecom serviceproviders.Specified parts of set top boxes and specified raw materials for use in the IT/electronichardware industry to be exempted from customs duty.

Internet telecommunication service brought under the service tax net. And countervailingduty on wireless data modem cards with exempted by way of excise duty exemption.V Projections in the current BudgetBudget has proposed a Bharat Nirman project wherein 52 villagesare targeted toprovide telephones.And center has proposed to 170 crore ruppes for OFC based Network for DefenceServices and 158 for C-DoT (including Telecom testing and security certificationCentre).VI ConclusionHigher standards............making a difference for youD-19 (GF) & D- 31, South Extension -1, New Delhi-110049, Indiaemail: [email protected], website: www.indialawoffices.com

Indian telecom is worlds fastest growing telecom expected grow three fold by2012.Tremendous strides in this industry have been facilitated by the supportive andliberal policies of the Government. Especially the Telecom Policy of 1994 which openedthe doors of the sector for private players. Rising demand for a wide range of telecomequipment has provided excellent opportunities for investors in the manufacturing sector.Provision of telecom services to the rural areas in India has been recognized as anotherthrust area by govt.which also helps for the enormous opportunities in this sector.Therefore telecom sector in India is one of the fastest growing sectors in the country andhas been zooming up the growth curve at a feverish pace in the past few years. And

even the Indian Wireless Market is booming which has plenty of room for growth. ManishaMaheshwari (roll no 26, A1)

Indian Telecommunication Industry

Last Updated: July-September 2008


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Buoyed by the rapid surge in the subscriber base, huge investments are being made into thisindustry by companies like Maxis Communications-owned mobile service provider Aircel Srei Group's Quippo Telecom Infrastructure Ltd (QTIL) The Central public sector enterprises(CPSEs) have lined up investments for

infrastructure sectors like telecom energy and power for 2008-09. Vodafone Essar will invest US$ 6 billion over the next three years in a bid to increase itsmobile subscriber base from 40 million at present to over 100 million.

Manufacturing

India is emerging as a handset super-power as more manufacturers set up base in the country,it is not only the world's fastest-growing telecom market but it is also making remarkableprogress in the telecom manufacturing space. The Indian telecom equipment manufacturingsector is set to become one of the largest globally by 2010.Simultaneously, India's surging domestic market is also providing excellent investmentopportunities in other segments of telecom equipment industry.

Nokia Siemens Networks (NSN) is shifting its global services business unit headquartersfrom Munich to India.

Nokia set up its manufacturing plant in Chennai. Samsung has set up its GSM mobile manufacturing base in Manesar. Motorola has established a manufacturing plant in Sriperumbedur. Sony Ericsson has set up GSM Radio Base Station Manufacturing facility in Jaipur and

R&D centre in Chennai. LG Electronics set up plant of manufacturing GSM mobile phones near pune. Elcoteq has set up handset manufacturing facilities in Bangalore Elextronics has set up an SEZ in Chennai.

Value Added Services Market

India's runaway success in mobile telephony has also given a boost to the mobile value addedservices (MVAS) market. According to a study by Stanford University and consulting firm BDA,the Indian MVAS is likely to grow at a CAGR of 44 per cent 2010.

Government Initiatives

The Government has taken many proactive initiatives which has provided a framework for therapid growth of the telecom industry. Opening the industry for private sector participation. 100 per cent FDI is permitted in telecom equipment manufacturing through theautomatic route. FDI ceiling in telecom services has been raised to 74 per cent.


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Establishment of an independent regulator - the Telecom Regulatory Authority of India(TRAI)-for the telecom sector. Introduction of a Unified access licensing regime for telecom services on a pan-Indiabasis. Implementation of New Telecom Policy (NTP'99).

Introduction of Calling Party Pay (CPP) regime and lowering of access deficit coupledwith introduction of revenue share regime in ADC. Introduction of Mobile Number Portability in a phased manner, starting with the fourthquarter of 2008. Allowing service providers to share active infrastructure.

Road Ahead

According to a report by Boston Consulting Group, while only one in 20 of the world'sfirst two billion mobile subscribers live in India, as many as one in every four of the nextbillion subscribers will be an Indian.

The department of telecommunication estimates the total subscriber base to total 500million by 2010, out of which 80 million are expected to be from rural areas.

The Indian telecom industry's revenue, likewise, is estimated to increase, whichaccording to Ernst & Young is expected to total US$ 35 billion, accounting for 3.6 percent of the total GDP of the country.

With such growth projection, this industry is likely to see increased investments. In fact, totalinvestment is projected at US$ 76.6 billion during the eleventh plan period (2007-12). Privatesector is estimated to continue its dominant share, accounting for 67 per cent of the totalprojected investment while public sector accounts for the rest.

Top players

The top players based on cellular subscriber (in millions) base were


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Cellular services can be divided into two categories : Global System for Mobile Communications(GSM) and Code Division Multiple Access (CDMA). The GSM sector is dominated by Airtel,Vodafone-Hutch, and Idea Cellular, while the CDMA sector is dominated by Reliance and TataIndicom.

Surprisingly, CDMA market has increased its market share up to 30% thanks to RelianceCommunication. However, across the globe, CDMA has been losing out numbers to popularGSM technology, contrary to the scenario in India

Reasons for growth

The two major reasons that have fuelled this growth are

1. low tariffs2. falling handset prices.

Problems facedThe bottlenecks for ' Indian Telecom Industry ' are:

Slow reform process. Low penetration. Service providers bears huge initial cost to make inroads and achieving break-even is

difficult.

Bharti, 62

Reliance, 46Vodafone, 44

BSNL, 41

Idea cellular , 24


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Lack of infrastructure in semi-rural and rural areas, which makes it difficult to makeinroads into this market segment as service providers have to incur a huge initial fixedcost.

Huge initial investments. Limited spectrum availability and interconnection charges between the private and

state operators.

Rural Telecom Market an emerging market

According to numbers compiled by the Telecom Regulatory Authority of India, nearly 21 percent of the mobile user base now reside in the villages of India, where a few years ago none of the operators wanted to venture. As on September 2007, out of the 209 million mobile users inthe entire country, 43 million were in rural areas.

Rural India will wrest 40 percent of new telecom market

Indias rural telecom connectivity is poised for explosive growth in the next five to 10 years,grabbing a 40 percent share of the new market, a study released Wednesday said. Of theestimated new 250 million Indian wireless users, in next 5-10 years approximately 100 millionwill be from rural areas, said the study by the Federation of Indian Chambers of Commerceand Industry (Ficci) and Ernst and Young.Operators have demonstrated they can achieve profitability by reducing fixed costs, controllingvariable costs and carefully tailoring services to the requirements of their customers. A similarmodel with minor customization could be emulated in the rural areas.The government will roll out new incentives for mobile networks in rural India.Its also planned that the ultra-low cost handset of approximately Rs.840 ($20) to the marketwith built-in subsidies, lifetime validity and minimal maintenance costs have promoted mobileusage in remote areas.

Moreover, operators could learn from business models that have been experimented acrossthe developing world for expanding rural connectivity.

Reasons for rural inclinationFar from being considered as a social obligation, offering telecom services in rural areas hasnow become the hot spot for private telecom operators.


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Nearly 75 per cent of the mobile users in the villages are now owned by private operators ascellular phones catch the imagination of rural consumers. Until now, state-owned BharatSanchar Nigam Ltd was known to be the only significant rural telecom operator in the country.Analysts said that the share of rural telecom consumers will continue to increase as operatorshave initiated an aggressive roll-out plan to cover remote areas of the country. This is primarily

driven by a slump in the growth rate of mobile user base in the metro and urban areas.According to the data released by the Cellular Operators Association of India Circle C and CircleB States such as Bihar, Kerala, Madhya Pradesh and Punjab are showing better growth ratescompared to the metros. Therefore, most of the mobile operators are investing heavily insetting up infrastructure in these circles.The telecom regulator has suggested a number of initiatives to make mobile connectionattractive, including lower entry cost to make it more affordable.

In a hi-tech market like telecom, Schumpeter's view that competition through innovation is more

important than price holds significance. Technology advancements, lower costs and competition

translate this into benefits for the consumer. Moreover, competition drives innovation."

- Poonam Madan Sarmah, Head of Research, Genesis PR.

"We are looking at making the phone a more useful product than just an instrument to

exchange voices. We want to be identified as a great value-added service provider."

- Harit Nagpal, Vice President (Corporate Marketing), Vodafone

Talented persons are like frogs in a wheelbarrow, which can jump at any point of time when they sense opportunities

HUMAN RESOURCE MANAGEMENT


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The goal of human resource management is to help an organization to meet strategic goals byattracting, and maintaining employees and also to manage them effectively.

The process involves carrying out a skills analysis of the existing workforce, carrying outmanpower forecasting, and taking action to ensure that supply meets demand. This may

include the development of training and retraining strategies. Through HRP an organizationstrives to have the right number & the right kind of people at the right place at the right time.

RECRUITMENT

According to Edwin B. Flippo, Recruitment is the process of searching the candidates foremployment and stimulating them to apply for jobs in the organization. Recruitment is theactivity that links the employers and the job seekers.

Usually, the recruitment process starts when a manger initiates an employee requisition for aspecific vacancy or an anticipated vacancy. However, Recruitment is a continuous process

whereby the firm attempts to develop a pool of qualified applicants for the future humanresources needs even though specific vacancies do not exist.

RECRUITMENT Process


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SOURCES OF RECRUITMENT

Some Top Consultants

Identifyvacancy

Prepare jobdescriptionand person

specification

Advertising thevacancy

Managing theresponseShort-listing

Arrangeinterviews

Conductinginterview and

decisionmaking

INTERNAL

1. Transfers.2. Promotions.3. Upgrading.4. Retired Employees.5. Retrenched Employees.6. Dependants and Relatives

of Deceased Employees.

7. Acquisitions and Mergers

EXTERNAL

1. Press Advertisements.2. Educational Institutes.3. Placement Agencies /

Outsourcing.4. Employment

Exchanges.5. Labor Contractors.

6. Unsolicited Applicants.7. Employee Referrals.8. Job Portals9. Factory Recruits10. Walk-ins, Write-ins and

Talk-ins


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Latest Trends in Recruitment

1. OUTSOURCING The outsourcing firms help the organization by the initial screening of the candidates

according to the needs of the organization and creating a suitable pool of talent for the finalselection by the organization. Outsourcing firms develop their human resource pool byemploying people for them and make available personnel to various companies as per theirneeds. In turn, the outsourcing firms or the intermediaries charge the organizations for theirservices.

2. POACHING/RAIDING

Buying talent (rather than developing it) is the latest mantra being followed by theorganizations today. Poaching means employing a competent and experienced personalready working with another reputed company in the same or different industry; the

organization might be a competitor in the industry. A company can attract talent fromanother firm by offering attractive pay packages and other terms and conditions, betterthan the current employer of the candidate. But it is seen as an unethical practice and notopenly talked about. It has become a challenge for human resource managers to face andtackle poaching, as it weakens the competitive strength of the firm.

3. E- Recruitment Many big organizations use Internet as a source of recruitment. E- recruitment is the use of


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technology to assist the recruitment process. They advertise job vacancies throughworldwide web. The job seekers send their applications or curriculum vitae i.e. CV through email using the Internet. Alternatively job seekers place their CVs in worldwide web, whichcan be drawn by prospective employees depending upon their requirements.

9 Recruitment Trends for '08

1) Bigger paychecks , say 80 percent of the survey respondents. Of those expecting to increase

wages, 64 percent say it will be at least 3 percent, and 17 percent say 5 percent or more.2) Flexible work arrangements are on the rise. Sixty percent of employers offer flexible work

plans now usually alternative schedules (shifted start and quit times), condensed workweeks or telecommuting, while 39 percent expect to offer some form of flex- time in 08.

3) Online candidate screening will grow, and not only the use of qualifying pre-applicationquestions, but full-blown searching of social networking sites and search engine checks.

4) Video & audio Resume will be preferred as is a way for job seekers to showcase theirabilities beyond the capabilities of a traditional paper resume. The video resume allowsprospective employers to see, hear and get a feel for how the applicant presentsthemselves.

5) Retiree rehiring will increase as companies remain pressured from the loss of moreexperienced workers. Twenty-one percent say they are likely to rehire retirees from othercompanies in 2008; another 14 percent plan to provide incentives for workers at orapproaching reti rement age to stay on with the company longer. The numbers here arentlarge, but this trend wont go away.

6) Recruiting diversity workers , especially workers bilingual, will continue to be an importantfocus of recruiters. Survey respondents particularly no ted mature workers.

7) Freelance or contract hiring will continue to be a key part of the workforce mix, with 31percent of employers anticipating a working relationship with freelancers or contractors thisyear.

8) Perks and benefits will receive more attention from companies wanting to remain

competitive in attracting and keeping workers. In light of rising healthcare costs, nearly one-in-five employers (19 percent) report their companies plan to offer more comprehensive orbetter health benefits to employees in 2008. Ten percent plan to enhance or add perks suchas bonuses, discounts, company cars, stock options, free childcare, educationalreimbursement, transit passes and wellness programs.

9) One in four (26 percent) of the surveyed companies are likely to provide more promotionsand career advancement opportunities in 2008. More than half of workers stated that a


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companys ability to offer career advancement is more important than salary, so employersare taking action to carve out career paths for employees.

Twenty-seven percent of workers say they are dissatisfied with pay, but 67 percent of workersreported they received a raise in 2007.

A quarter of the surveyed workers plan to change jobs within the next two years: 41 percentare leaving their jobs to find a position with better pay and/or career advancementopportunities; 8 percent are changing careers; 7 percent say they want to find a companywhere they would feel appreciated; 7 percent are retiring; and 5 percent plan to start their ownbusiness.This survey was released by CareerBuilder.com conducted by Harris Interactive, trackingprojected hiring trends for 2008. The 2008 Job Forecast survey is based on the responses of 3,016 hiring managers and human resource professionals in private-sector companies.

Telecom tops in employment growth

According to estimates of the World Bank, employment in the telecommunications sector hasgrown by 33 per cent since 1994, the highest growth among all the sectors in the servicesindustry.

While the Word Bank numbers, released in its recent report on `India's Services Revolution,'head-hunters and recruiters say that telecom is still the favorite among higher levelprofessionals.

Thanks to the aggressive rollout of a countrywide network, operators like Reliance Infocom,Tata Teleservices and Bharti have gone on a hiring overdrive.

From a career point of view, telecom sector continues to offer growth and new learning as thesector matures and the business opportunities expand.

And, with new networks and businesses being rolled out, this number is expected to growexponentially in the coming months.

The growth can also be attributed to the large number of telecom equipment manufacturersand applications developers from Korea, China and Europe foraying into the Indian market intheir bid to take a share of the pie in the booming telecom industry.

These Telecom companies require large number of telecom engineers, telecom softwareengineers and Telecom test engineers in the functional areas of Embedded softwaredevelopment, Analog Digital engineering technology, Telecom networking, Protocol, Chip
http://img.icbdr.com/images/aboutus/pressroom/2008Q1forecastUSA.pdfhttp://img.icbdr.com/images/aboutus/pressroom/2008Q1forecastUSA.pdfhttp://img.icbdr.com/images/aboutus/pressroom/2008Q1forecastUSA.pdfhttp://img.icbdr.com/images/aboutus/pressroom/2008Q1forecastUSA.pdf


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Design Engineering, VLSI Software Testing. In the Mumbai Telecom companies there areSoftware Engineer jobs, Telecom software Engineers jobs, Quality / Test Engineer jobs, ProductManager job openings, Network Security Systems Specialist vacancies, NMS Engineer jobs,Network Management specialists, Managers, UNIX Network Systems Operations Engineers,

NMS Administrator jobs, Cisco Specialist Software Engineer etc.Taking a cue from the demand for telecom professionals, top educational institutions havebegun specialized courses in telecommunication management. Symbiosis in Pune and Amity inDelhi are examples of such institutions. Even state-owned Mahanagar Telephone Nigam Ltd(MTNL) has set up a training facility for telecom engineers in Mumbai.

HR (employment) in telecom industry:

With more and more players entering the industry, the competition in the industry in terms of attracting and retaining the best talent is also increasing. The employment scenario in thetelecom sector is very promising. The sector is creating employment opportunities and addingaround 1 lakh people in its workforce. The telecom sector has a huge demand for the trainedand qualified engineers and other professionals specializing in telecommunications.

Compensation:

According to various studies in recent times, the telecom sector offers the best salary packagesat the entry level i.e. an average of 20k. The average hike in salaries across the various levels inthe telecom sector ranges from 15 to 20 percent. Incentives also form a part of thecompensation till the middle levels.

Attrition and retention:

Although the sector faces the moderate attrition rates of 20 to 25 percent, the HRs primestrategic function in the sector is retaining the talent and employee engagement. The onlyfunctional area which faces the high attrition rate is the sales people in the telecom industry.

TOP 10 Recruiters in Telecom Sector

Recruiters Total No. Of Vacancies

1 Vodafone Essar 45

2 Reliance communications 44


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3 Bharti Airtel 43

4 Tata teleservices 23

5 Cable & Wireless 19

6 IMI mobile 14

7 VSNL Internet Services Ltd 12

8 Motorola Worldwide 10

9 GTL Limited 4

10 Nokia 3

The ranking is based on the number of vacancies notified by the company on different job portals (Till 29th January

2008)

Here rankings of the ten companies in the Indian Telecom sector are given on the basis of theirworkforce relationship factors. Ten companies were selected on random basis from the sector.The companies were given a consolidated rank on a scale of 1-10 on the basis of sum of theirindividual ranks on various HR practices, procedures, policies and parameters like recruitmentpractices, compensation policies, work culture, recognition for good work, retention, trainingand development, performance appraisals et al. The scores are consolidated on the basis of data collected through recent surveys and studies by renowned names like Business Today,Hewitt, IDC Data Quest, NASSCOM and naukrihub.com

hR CHALLENGES IN RECRUITMENT

In the last few years, the job market has undergone some fundamental changes in terms of technologies, sources of recruitment, competition in the market etc. In an already saturated jobmarket, where the practices like poaching and raiding are gaining momentum, HR professionals

are constantly facing new challenges in one of their most important function- recruitment. Theyhave to face and conquer various challenges to find the best candidates for their organizations.

The major challenges faced by the HR in recruitment are:

1. Adaptability to globalization The HR professionals are expected and required to keep intune with the changing times, i.e. the changes taking place across the globe. HR shouldmaintain the timeliness of the process


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2. Lack of motivation Recruitment is considered to be a thankless job. Even if theorganization is achieving results, HR department or professionals are not thanked forrecruiting the right employees and performers.

3. Process analysis The immediacy and speed of the recruitment process are the mainconcerns of the HR in recruitment. The process should be flexible, adaptive and responsive

to the immediate requirements. The recruitment process should also be cost effective.4. Strategic prioritization The emerging new systems are both an opportunity as well as a

challenge for the HR professionals. Therefore, reviewing staffing needs and prioritizing thetasks to meet the changes in the market has become a challenge for the recruitmentprofessionals.

5. Attracting highly talented ones - The number of highly talented professionals is less. All thebig MNC's are trying to attract these people with high salaries, perks, incentives etc. Thereis a tough competition among these companies to get these candidates on their roles.

These days, its not just salaries which will pull the candidate in but various factorslike brand, culture, location ,job security, reputation of the company etc play amajor role in recruiting a talented professional.


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1. Organizing market survey of salaries, job opportunities etc.


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December 2006 The Chartered Accountant 927Banking and f inance

MERGERS & ACQUISITIONS (M&A) IN INDIANTELECOM INDUSTRY- A STUDY

India has become a hotbed of telecom mergersand acquisitions in the last decade. Foreigninvestors and telecom majors look at Indiaas one of the fastest growing telecom marketsin the world. Sweeping reforms introduced bysuccessive Governments over the last decadehave dramatically changed the face of thetelecommunication industry. The mobile sectorhas achieved a teledensity of 14% by July 2006which has been aided by a bouquet of factorslike aggressive foreign investment, regulatorysupport, lower tariffs and falling network costand handset prices.M&A have also been driven by thedevelopment of new telecommunicationtechnologies. The deregulation of the industrytempts telecom firms (telcos) to provide bundledproducts and services, especially with theongoing convergence of the telecom and cableindustries. The acquisition of additional productsand services has thus become a profitable move

for telecom providers.REGULATORY FRAMEWORKM&A in telecom Industry are subject tovarious statutory guidelines and Industryspecific provisions e.g. Companies Act, 1956;Income Tax Act, 1961; Competition Act, 2002;MRTP Act; Indian Telegraph Act; FEMA Act; FEMAregulations; SEBI Takeover regulation; etc. We


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Monopoly market situation is definedas market share of 67% or above of totalsubscriber base within a given service area,as on the last day of previous month. Forthis purpose, the market will be classified asfixed and mobile separately. The categoryof fixed subscribers shall include wire-linesubscribers and fixed wireless subscribers.l Consequent upon the merger of licences,the merged entity shall be entitled to thetotal amount of spectrum held by themerging entities, subject to the conditionthat after merger, the amount of spectrumshall not exceed 15 MHz per operator perservice area for Metros and category A service areas, and 12.4 MHz per operatorper service area in category B and category

C service areas. l In case the merged entity becomes aSignificant Market Power (SMP) post merger, then the extant rules & regulationsapplicable to SMPs would also apply to themerged entity. TRAI has already classifiedSMP as an operator having market sharegreater or equal to 30% of the relevantmarket.In addition to M&A guidelines, DoT has alsoissued guidelines on foreign equity participationsand management control of telecom companies.The National Telecom Policy, 1994 (NTP94) provided guidelines on foreign equityparticipation and as revised by NTP 99 permittedmaximum 49% cap on foreign investment.Recently by its order no. - 842-585/2005-VAS/9dated 1 st February, 2006 DoT has enhancedthe FDI limit in telecom sector to 74%. The keyprovisions of these guidelines are as follows:l The total composite foreign holdingincluding but not limited to investments byForeign Institutional Investors (FIIs), Nonresident

Indians (NRIs), Foreign CurrencyConvertible Bonds (FCCBs), AmericanDepository Receipts (ADRs), GlobalDepository Receipts (GDRs), convertiblepreference shares, proportionate foreigninvestment in Indian promoters/investmentcompanies including their holdingcompanies, etc., referred as FDI, shouldnot exceed 74%. The 74% investment


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can be made directly or indirectly in theoperating company or through a holdingcompany and the remaining 26 per centwill be owned by resident Indian citizensor an Indian Company (i.e. foreign directinvestment does not exceed 49 percent andthe management is with the Indian owners).It is also clarified that proportionate foreigncomponent of such an Indian Company willalso be counted towards the ceiling of 74%.However, foreign component in the totalholding of Indian public sector banks andIndian public sector financial institutionswill be treated as Indian holding. l The licencee will be required to disclose thestatus of such foreign holding and certifythat the foreign investment is within the

ceiling of 74% on a half yearly basis.l The majority Directors on the Boardincluding Chairman, Managing Directorand Chief Executive Officer (CEO) shall beresident Indian citizens. The appointment tothese positions from among resident Indiancitizens shall be made in consultation withserious Indian investors.l The merger of Indian companies may bepermitted as long as competition is notcompromised as defined below:No single company/legal person, either directly or through its associates, shall havesubstantial equity holding in more than onelicencee Company in the same service area forthe Access Services namely; Basic, Cellular andUnified Access Service. Substantial equity herein will mean equity of 10% or more. A promoter company/Legal person cannot have stakesin more than one LICENCEE Company for thesame service area Some exceptions have been provided to this guideline.l The Licencee shall also ensure that any

change in shareholding shall be subject toDecember 2006 The Chartered Accountant 929Banking and f inanceall necessary statutory requirements.As per recent news reports, the Governmentwants to arm itself with power to block FDIin case the investment from companies orcountries deemed undesirable, even if it is withinthe approved limit. This is a positive step due to


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increasing security concern India is facing buthas led to apprehension that the new law will beused to block investment from certain parts ofthe world.FEMA GuidelinesThe foreign exchange laws relating to issuanceand allotment of shares to foreign entities arecontained in The Foreign Exchange Management(Transfer or Issue of Security by a person residingout of India) Regulation, 2000 issued by RBIvide GSR no. 406(E) dated 3 rd May, 2000. Theseregulations provide general guidelines onissuance of shares or securities by an Indian entityto a person residing outside India or recording inits books any transfer of security from or to suchperson.RBI has issued detailed guidelines on

foreign investment in India vide Foreign Direct Investment Scheme co ntained in Schedule1 of said regulation. As per the FDI scheme,investment in telecom sector by foreign investorsis permitted under the automatic route within theoverall sectoral cap of 74% without RBI approval.The salient features of FDI scheme as applicableto telecom sector is as follows:l Industries which do not fall within theambit of Annexure A can issue shares underautomatic route to foreign companies (Para2). Since telecom sector is not listed inAnnexure A hence foreign investment canbe made in telecom sector upto 74% capwithout prior approval of RBI.l In case, investment by foreign investor(s) inan Indian telco is likely to exceed sectoralcap of 74%, then they should seek approvalof (FIPB) Foreign Investment Proposal Board.(Para 3)l FDI scheme permits automatic approvalof transfer of shares from one foreignshareholder to another, so long as the

transfer is in compliance of FDI scheme andthe regulation. (Regulation 9)l However, if the shares are being transferredby a person residing outside India to aperson resident in India, it shall be subjectto adherence to pricing guidelines,documentation and reporting requirementsof RBI. Application seeking RBI approval is


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to be made in Form TS 1. (Regulation 10 B)l The issue price of share should be workedout as per SEBI guidelines in case of listedcompanies. In case of unlisted companies,fair valuation method as prescribed byerstwhile Controller of Capital Issues shouldbe adopted and should be certified by aChartered Accountant. (Para 5)l FDI scheme also stipulates the norms ondividend balancing, whereby the cumulativeamount of outflow on account of dividendfor a period of 7 years from commencementof production or services should not exceedcumulative amount of export earningduring those years. The dividend balancingguidelines are applicable to companiesincluded in Annexure E of FDI scheme and

telecom industry is not included in saidannexure. (Para 6)l In case preference shares are issued to aforeign investor, the rate of dividend shallnot exceed 300 basis points over the Primelending rate of SBI, prevailing on the dateof Board meeting where such issuance isrecommended. (Para 7)l The reporting requirement are containedin regulation 9 viz. a) The Indian companyshould report the details of receipt ofconsideration to RBI within 30 days ofreceipt and b) The Indian company shouldsubmit report of issuance and allotment ofshares in Form FCGPR along with necessarycertificates from the Company Secretaryand the Statutory Auditor of the Company.l An Indian Company may also issue shareson Rights basis or issue bonus shares930 The Chartered Accountant December 2006Banking and f inancethe regulations. Further, if a target companywas unlisted, but has obtained listing of10% of issue size, then the limit of 75% willbe increased to 90%. - Regulation 11(2A)l The minimum size of public offer to bemade under Regulation 11(2A) shall belesser of a) 20% of the voting capital of thecompany; or b) such other lesser percentageof voting capital as would enable theacquirer to increase his holding to themaximum possible level, while ensuring


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the requirement of minimum publicshareholding as per listing agreement.Competition LawsCompetition Commission of India (CCI),established in 2003, holds statutory responsibilityfor ensuring free and fair competition in all sectorsof the economy. The Competition Act, 2002 hasprovided for a liberal regime for mergers, wherebycombinations exceeding the threshold limits fallwithin the jurisdiction of CCI. The threshold limitsare quite high.Most competition laws in the world requiremandatory prior notification of every merger tothe competition authority but under Indian law itis voluntary. However CCI can also take suo motucognisance of a merger perceived as potentiallyanti competitive and it can also enquire until one

year after the merger has taken place. Once CCIhas been notified, it must decide within 90 daysof publication of details of the merger or else it isdeemed approved. The CCI can allow or disallowa merger or can allow it with certain modification.Most of the operative provisions of CompetitionAct have still not been notified.THE CONTOURS OF M&A IN TELECOMM&A are also referred as Corporate Marriagesand Alliances. Mergers can be across same orsimilar product lines. In many cases mergersare initiated to acquire a competing orcomplementary product. A reverse merger isanother scenario in taxation parlance wherea profit making company merges with a lossincurring company to take advantage of tax(Regulation 6A); subject to compliance ofconditions of FDI scheme and sectoral cap.l FDI scheme prohibits investmentsby citizen or entities of Pakistan andBangladesh (regulation 5) primarily onsecurity concerns. In the recent past, DoThas also delayed its approval to an Egyptian

companys investment in Hutch India on similar grounds.SEBI Takeover GuidelinesSEBI takeover guidelines called Securitiesand Exchange Board of India (Substantialacquisition of shares and takeover) Regulations,1997 are applicable to listed Public companiesand hence would be applicable in case of M&A


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in listed telecom companies like Bharti, RelianceCommunication, Shyam Telecom, VSNL, TataTeleservices (Maharashtra) Limited, etc. Theseguidelines have been recently amended bySEBI and notified vide SO No. 807(E) dated26.05.2006.The highlights of the amendment are as follows:l No acquirer who together with personsacting in concert with him, who holds 55%or more but less than 75% of the shares orvoting rights of the target company shallacquire by himself or through personsacting in concert unless he makes a publicannouncement as per the regulations.Further, if a target company was unlisted,but has obtained listing of 10% of issue size,then the limit of 75% will be increased to

90%. Regulation 11(2)l If an acquirer who together with personsacting in concert with him, who holds 55%or more but less than 75% of the sharesor voting rights of the target company isdesirous of consolidating his holding whileensuring that Public Holding in the targetcompany does not fall below the permittedlevel of listing agreement he may do so onlyby making a public announcement as perDecember 2006 The Chartered Accountant 931Banking and f inance

shelter.A horizontal merger (mergers across sameproduct profile) adds to size but the chancesfor attainment of profit efficiency are not veryhigh. On the other hand a vertical merger(entities with different product profiles) mayhelp in optimal achievement of profit efficiency.Say a mobile operator acquires a national longdistance company and thus saves IUC charges. Intelecom Industry, most of the acquisitions werehorizontal which helped the acquirers to expandthe area of their operation and customer basequickly. These provided economies of scale withphenomenal benefit to the acquirers in terms ofhigher profitability, and better valuations.Takeovers generally have three typicalpatterns:a) In the first model, the investor acquires acontrolling stake in the acquired companyand retains it as a separate entity. This is


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the simplest model with the intent to avoidthe legal hurdle for merging the companyinto the parent company. This route alsogives the acquirer a flexibility to sell off theoperation on a stand alone basis later on, incase the merger is not successful. This modehas been followed by Hutchison, which hasretained most of the acquired companies(Usha Martin- Kolkata, Fascel- Gujarat, AircelDigilink Haryana, Rajasthan and UP East,Sterling Cellular- Delhi, Escotel - Punjab) asseparate legal entities.b) In the second model, the acquirer mergesthe acquired company with the parent afteracquiring controlling stake. This modelrequires completion of merger formalitieswith due approval of High courts and also

from DoT. It has the advantage of avoidingstatutory compliance for several entitiesand integrate all operations seamlessly intoa single legal entity. This model has beenfollowed by Bharti, which has merged mostof the acquired entities with the parent indue course of time.c) The third model entails purchase of assetsof the target company on stand alonebasis without purchasing the company asa whole. In some cases, where the licenceswere cancelled by DoT due to default,such companies sold the telecom assetsand customer database to the acquirer,who could easily integrate the same intohis existing licence and strengthened hisnetwork and customer base at a nominalcost. The seller company which was strippedof licence as well as telecom network wasultimately wound off.THE ALLURE OF M&A IN TELECOMIndias telecom liberalisation was noticed by Global investors in 1995 when the Government

permitted entry of foreign telecom operatorsthrough Joint venture route. Some of theseglobal giants included Vodaphone, AT&T,Hutchison Whampoa, Telekom Malaysia, andTelestra Australia. We now need to understandsome of the predominant objective of takeoversin telecom sector, which can be summarised asfollows:


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l Acquisition of licences or geographicalterritory;l Acquisition of spectrum;l Acquisition of telecom infrastructure andnetwork;l Acquisition of customer base to achieve aneconomic base;l Acquisition of brand value;l Higher operating profit (EBITDA) margin;l A combination of above.Market access : There has been almostsaturation of demand in the home market ofmajority of foreign investors where teledensityranges from 40% to 100%. On the other hand,the teledensity in Indian market is currentlyhovering at 14% like a low hanging fruit. Therural teledensity is almost negligible at about

3%. Indias young and middle class market offers tremendous scope for market expansion andnew business. For example, even after 15 years932 The Chartered Accountant December 2006Banking and f inanceof economic reforms, sale of most consumerdurable goods has not exceeded Rs. 60 million,whereas telephone penetration has alreadycrossed the Rs. 120 million mark and is all set tocross 150 million mark by December 2006 andRs. 250 million mark by 2010. This huge expansionis possible only with higher focus on rural

telephony, bridging the digital divide and higherallocation of network and funds to rural areaswhich are not so rewarding in terms of ARPU.Spectrum : Spectrum is turning out to be thebiggest bottleneck for Indian mobile operators asthey face network problems, poor voice qualityand call dropping. GSM operators initially get 4.4MHz of spectrum while CDMA operators get 2.5MHz spectrum. In case of GSM operators with 10lakh or more subscribers, they are eligible for 10MHz spectrum, while CDMA operators get 5 MHzfor 10 lakh subscribers. Since CDMA technologycarries the voice in small packets, it can carryabout five times more traffic and hence has alower spectrum allocation.However, as the number of mobile usersis growing at an amazing rate of 4 million permonth), spectrum is falling short of requirements.Thus, the foreign investors prefer to acquire anexisting operation to ensure ready availability of


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spectrum, instead of applying for a new licencewhere spectrum allocation from DoT is really achallenging task. The Government is also takingeffective steps to get approx 40 MHz spectrumvacated from Indian defense services which willgive a fresh lease of life to spectrum starvedmarket. This will be a key driver for all future M&Ain India.Network roll out : Network roll out is a nightmarefor telecom operators. It is more complexfor a foreign operator who may not be conversantwith local conditions. Network roll out involvesRight of way (ROW) approvals, coordination withlocal government departments, acquiring BTSand BSC sites on rentals, acquiring municipal andlocal approvals to set up tower and antenna, obtainingelectrical connection for the sites, import

of equipment, installation of tower, equipmentand shelter, SACFA and TEC approvals, integrationof various sites and final launch of servicesin a geographical area etc. Generally the time toroll out a network in a circle takes minimum 6months to 1-year time. The industry is also resortingto site and infrastructure sharing with otheroperators to reduce its capital expenses and operatingexpenses cost and optimise profitability.Human Resource : The dovetailing of humanresources of the acquired company into theculture of parent company has significantimportance in any M&A deal and can even spoila deal if not properly managed. It is now anestablished principle that local leaders decidethe success or failure of a cross boarder deal. Thesavvy acquirer retains competent local leadersand dangles incentives and awards to aligntheir personal interest with that of the mergedentity. Premium is placed for target companieswhich have strong management team in place,lower manpower base and higher employeeproductivity. Some benchmarks used in this

regard are Number of customers per employee,Revenue per employee per month etc. Majorityof the telecom companies resort to outsourcingof routine and non core activities and reducenumber of on roll employee to attract better valuations. Hence, it is essential to make anassessment of the off roll and outsourced staffinvolved in a telecom operation to ascertain thetrue operational efficiency and real manpower


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cost.Brand value : In most cases, where theacquisition is for majority control, the foreigninvestor is likely to introduce its own brand inIndia instead of local brand. Hence, generallyno value is placed on brand related expenditureamortised or any goodwill. However, where theinvestor takes minority stake and the brandstabilised by the controlling local partners hasbecome popular, brand value plays an importantrole in valuation.Better margin possibility : Across Asia-Pacific,be it China, Indonesia, Philippines, Thailand orAustralia, operating margins (EBITDA) average40% - 60%, which are considerably higher thanthe mid-30% for Indian telecom operators. TheEBITDA margin of Bharti Airtel at 37% is the

highest among all telecom operators whereasfor other operators it ranges from 11% to 25%.Thus, the scope for enhancing margins is fairlyDecember 2006 The Chartered Accountant 933Banking and f inancesignificant in Indian market since Governmentlevies, licence fees, etc. are likely to come down togive further fillip to teledensity. The Governmentis also providing Universal Service Obligation(USO) support to operators to expand theirnetwork in rural areas.The foreign investors continue to look at

India to spread their market. In the initial years,the number of operators in each circle werelimited to four which was a major entry barrier.Further the entry fee for acquiring a licence wasalso high. But over the years, the DoT has beenconsistently liberalising entry norms and makingmarket access easier for foreign investors withthe ultimate objective of benefiting consumers.THE VALUATION OF A TELECOM LICENCEGeorge Bernard Shaw had once said,Economists know the price of everything, but the value of nothing. This saying is aptly reflected in case of telecom valuation also. The acquirerpays hefty valuation to acquire an entity andthe Business value placed is much higher than Accounting value . The local promoters strive hard to enhancethe enterprise value of their project by adoptinga multi pronged strategy. This involves a carefulincubation of network across the entire circle,


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hiring a strong management team, installingrobust billing system, well oiled channel partnernetwork and above all, an aggressive sellingstrategy to build a critical mass of customerbase. In their aggression to inflate enterprisevalue, some operators end up creating phantom subscribers to attract better valuation. Phantom subscribers refer to low value prepaid cards,which are sold by channel partners to unwillingend users. These cards are not likely to yieldmuch revenue to the operator, but just retainedas customers to show an inflated subscriber baseand fetch higher valuations.The Investment banker has to decide whatis being valued a) Whether its a valuation ofcompanys equity or its assets; b) Whether the company is being valued as a going concern with

all its assets and liabilities or is under liquidation;or c) Is it a valuation of minority interest or aControlling stake; d) Whether the valuation ofentity on per sub base is appropriate; e) Whetherthe EV/EBITDA ratio is in line with Industry trend.The list of these factors is endless.Enterprise value (EV) refers to the marketcapitalisation of a company plus debts. When aninvestor acquires a company, it takes over notonly the assets of the company, but also assumesthe liability to pay the existing debts and liabilitiesof the company. Thus, Enterprise value is the sumtotal of all fair value of assets and the liabilities ofthe acquired entity. The key performance metricsto evaluate the EV are:a) EV / EBITDA ratio : This ratio reflects numberof years the unit has to yield operating profit(EBITDA) to return the basic investmentmade by the Investor. This ratio is in thenature of PE ratio from the viewpoint of aretail investor and varies from Industry toindustry. In telecom Industry, most of thedeals struck in the past couple of years have

been at EV/EDITDA ratio of 6-10 times.b) EV/Revenue Ratio: This ratio indicatesnumber of years required to generaterevenue to return the investment price paidby the acquirer. In one way it can be likenedto pay-back period. EV/Revenue ratio is onan average five or less.c) Per subscriber EV (EV/number of acquiredsubscribers) : This ratio represents value


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placed by the acquirer on subscribersacquired along with complete networkand infrastructure. Smart acquirers on thelookout prefer to pay a premium for takingover an existing operation say US$ 450 persubscriber as against network rollout whichcosts even less than 1/3rd cost @ US$ 100.As we would see later, the per subscriberrate varies from US$ 400 to US$ 1000. Acompany earning higher Average RevenuePer User (ARPU) is likely to command betterper subscriber rate. A better rate is alsodependent on other factors like Churn ratio,VAS revenue, type of circle, average lifecycle of customer, subscriber acquisitioncost, quality of customers etc. An indicative934 The Chartered Accountant December 2006Banking and f inanceEnterprise value can also be computedby multiplying the subscriber base of thecompany with the per subscriber rate.For example, if the subscriber base of atelecom operator is 1,00,000 customersand the applicable per subscriber rate forthis category of operator is US$ 400, thenthe indicative enterprise value will be US$40,000,000 (US$ Forty million).M&A CASE STUDIESThe first M&A deal in India was the sale of

Mumbai licence by Max group to HutchisonWhampoa group of Hong Kong. The deal fetchedover half a billion dollars for Max group and wastouted as a major success for Indian entrepreneurin telecom venture. This followed a series of M&Ain subsequent years as stated hereunder. Someof the other high profile deals were Vodaphones acquisition of 10% equity in Bharti in 2006 forUS$ 1 billion, Maxis acquisition of Aircel atenterprise value of US$ 1 Billion, Birla Groups acquisition of Tatas stake in Idea Cellular. Interestingly some of the high profile investorswho had sold their stake around year 2000 arenow reentering India like Telekom Malaysia(exited India in 2000 from Kolkata licence andrecently acquired 49% stake in Spice Telecom)and Vodafone (exited India in 2003 from RPGCellular Chennai and recently acquired stake inBharti).The author also closely followed the sell-off, acquisition,


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resale and reacquisition by Indian Promotersas a case study. In April 1998, Max grouphad sold its stake in Mumbai licence to HutchisonTelecom for US$ 560 million. Somewhere alongthe way Max group again picked up a small stakeof 3.16% in Hutch and resold it to Essar Group inOctober 2005 for US$ 147 million. Max India hasstaged another comeback in Hutch by acquiringan 8.33% from Kotak Mahindra Bank for Rs. 1,019crore in 2006. This second return to the telecombusiness reflects the buoyant conditions in telecomsector.The table on the next page gives a birds eye view of major M&A deals in India and the keyindicators like per sub value, enterprise valueetc.The valuation of state owned Bharat Sanchar

Nigam Limited (BSNL) is estimated to be US$ 30Billion one of the highest in India. On a globalscale, China Mobile has emerged as the worlds most highly valued telco with enterprise valueof US$ 131.46 billion, followed by Vodaphone atUS$ 123.11 billion as on July 2006.From the table, readers can find that averagevaluation per subscriber ranges from US$ 400to US$ 550 which in turn is based on a variety offactors including Average ARPU, type of circle,competition in the circle, Category of operator whether only a Mobile service provider oran integrated telecom player (like Bharti andReliance) etc. Valuation is generally lower in cas

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