The Growth of Telecommunication in Indian Business

ACKNOWLEDGEMENT

This report is the product of painstaking & accurate inductive work. A lot

of guidance and support was needed to complete this project. It was

essentially a team work in which many persons had a role to play, from

behind the curtain.

I am thankful to my faculty Dr. Tanmoy Dasgupta for his co-operation &

guidance.

Last but not the least, I express my profound sense of gratitude to all my

family members and friends whose moral supports made my project report

a success.

(ARKADEEP MONDAL) Date ________

Place________

TABLE OF CONTENTS

1. INTRODUCTION

2. OBJECTIVES OF THE STUDY

3. METHODOLOGY

4. ANALYSIS

5. CONCLUSION

6. REFERENCES

INTRODUCTION

The India telecom market ranks among the fastest growing industries in

the country. The improvement in the standard of living and the

development of infrastructure and connectivity are some of the mains

reasons for the significant growth of the telecom industry. The growth is

expected to be more over the years.

Presently, there are around 200 million telephone lines in India which

make it the third largest phone network in the world after China and the

US. Today, the telecom market in India enjoys a growth rate of around

45% which is the highest in the whole world.

India telecom market is mainly divided into two major segments namely,

the Fixed Service Provider (FSPs) and the cellular services. Fixed Service

Provider network comprises land lines, basic services, domestic and long

distance call service. The two major basic operators BSNL and MTNL

comprise almost 90 % of the FSPs in the country. Around 5 % are

operated by private firms and are mostly scattered in the urban areas. In

most cases, the private basic service telephone operators cater to offices,

business firms, schools and the corporate sector. 

In case of the cellular services, there are mainly two sub divisions: Code

Division Multiple Access (CDMA) and Global System for Mobile

Communications (GSM). In the GSM sector, the major players are

Vodafone, Airtel, Idea Cellular, and Aircel and so on. The national

company BSNL also has its GSM service named "Cellone" which has a

major share in the semi urban and rural areas. The major companies

which dominate the CDMA scenario are Reliance Communications and

Tata Indicom. In both the sectors of cellular services, perfect competition

exists according to the demand supply chains.

It was in the year 1851 that the British first introduced telecommunication

services in India through operational land lines near Calcutta. Gradually,

the telephone service was made operational in the year 1881. After

independence, the foreign telecommunication companies were

nationalized and the Posts, Telephone and Telegraph (PTT) Company

was set up by the Ministry of Communications. 

In the year 1985, the Department of Telecommunications (DOT) was set

up to provide domestic and long distance telephone services. In the year

1986, the government established two companies namely Mahanagar

Telephone Nigam Limited (MTNL) for metropolitan telephone services

and Videsh Sanchar Nigam Limited (VSNL) for international telephone

services. 

With the economic liberalization in the 1990s, the telecom market in

India was also benefited to a great extent. The service was improved and

the tariffs were also significantly lowered. In the year 1997, the

government set up the Telecom Regulatory Authority of India (TRAI) to

provide a comprehensive telecom service in the country. In 1999,

modification was brought to the policy and the cellular services were

introduced. 

The Indian economy is greatly benefited by the growth of the telecom

industry in the country. With the growth in the demand and customer

base, more and more multinational companies are entering the telecom

market. The India telecom market is expected to grow by Rs 344,921

crore by the year 2012. The rate of growth will be around 26 % and the

sector will also generate employment to around 10 million people. 

The number of telephone subscribers is expected to grow by around 650

million by 2012 from the current number of 250 million.

Telecom Penetration in Rural India

The mobile subscriber base in India is 680 million out of which 68% of

the subscribers are from urban areas and the balance 32% is from rural

areas. The urban teledensity has reached 134% whereas rural teledensity

is only 28%. As a result, the telecom subscriber growth in urban areas is

now saturated and further growth can come only from rural India. 

According to TRAI, 91% of the villages in India are covered by at least

one operator. Overall, 51% of the villages in India are covered by three

operators and 31% of the villages are covered by four operators. The

population density across India is very low in villages making it less

viable for the telecom companies. This is due to lower number of

subscribers per BTS and lower ARPU of a rural customer when

compared to the urban customers.

Difficult topography and climatic conditions are the other reasons for this

low tele-density in rural areas. 

Population density:-

Number of villages

Between 1000 – 2000---129,000

Between 500-1000---144,000

Less than 500---219,000

If we look at the spread of population, 70% of the population lives in

rural India spanning 492,000 villages. Majority of this population

depends on agriculture for survival. Contribution of the rural India is very

significant as 45% of the GDP comes from this segment.  As telecom and

network connectivity is seen as enablers of nation's socio-economic

growth, the Government is aggressively looking at plans to improve the

tele-density in rural areas. The industry has made several suggestions for

improving the tele-density in rural areas.

1.   Fast approval mechanism for site acquisition

Telecom companies spend considerable time for the acquisition of land

and for obtaining permission from the quasi-government authorities like

Panchayats for the erection of BTS. There is always a threat of site

demolition and considerable delay is experienced in getting approvals till

now. There is also difficulty in laying down optical fibre cable due to

right of way issues.

Telecom is a public utility and a critical infrastructure for rural

development. Government should instruct the Village Panchayats / Forest

departments / Highway authorities to issue the permission for the erection

of BTS site on a fast track. Similarly the land for the site acquisition

should be made available quickly and there should not be any restriction

or charges or penalty on conversion of agricultural land to commercial

activity.

2.  Immediate SEB (grid) power connection at industrial rate

Another major deterrent for erecting sites at rural areas is the non-

availability of SEB power. The telecom companies depend on diesel

power which is very expensive and does not justify the site at many rural

areas.

The Government should treat the telecom as essential services and

mandated to the state electricity board that the power connections should

be made available within one month of application and at industrial tariff.

The BTS sites should be exempted from power cuts and uninterrupted

power supply should be made available.

USO subsidy should be considered for non-conventional energy sources

like Wind power, solar energy and bio fuels.

3.  VSAT connectivity for rural areas

The telecom companies face considerable delay in providing optical fiber,

leased lines and MW backbones at rural areas. Besides it takes time and

huge effort to build up this network. The Government should provide

VSAT connectivity at these rural areas, faster approval and lesser

charges.

4.  Ensuring availability of low cost Handset

Even though the mobile handsets are available now at Rs 1000 and

below, the rural households may still consider this as expensive and it

will be a major entry barrier in rural India.

The telecom companies should consider bundling of handsets along with

connection and subsidies the handset cost. In turn, the Government needs

to provide financial support / subsidy to the telecom companies to

compensate this cost.

5.  Develop applications to make the mobile handset more useful

The literacy rate in rural areas is very low. It is therefore, important to

develop content in vernacular language and design the application

software such that it is user-friendly and menu driven, with innovative

graphics to overcome the limitations of illiteracy.  Operators should take

initiatives to offer regional and national news, weather forecasts and

market prices for crops in regional languages to help improve mobile

uptake in rural areas.

6.  USO subsidy for OFC connectivity

As the OFC connectivity at rural areas requires huge investments, USO

Fund should be made available to the telecom operators who invest

capital expenditure for rural connectivity. In order to reduce the capital

expenditure Government should mandate that the OFC infrastructure

available in rural India should be shared among all operators at a pre-

fixed nominal cost.

 7.  Mobile Banking

TRAI is of the view that mobile banking is a catalyst to promote mobile

services in untapped rural India. Even today the banking services have

not reached the rural India fully. It will be very expensive to provide the

banking services through branch expansion or through ATM. Mobile

phone is the ideal and unique vehicle to extend the banking services to

rural India. Many African countries have successfully employed mobile

phones for fund transfer among the rural population. RBI and the banking

sector should make the necessary policy changes and join hands with the

telecom sector to reach the banking services to the uncovered areas.

The advent of wireless technologies, Government support and policy

changes have made it possible to overcome many of these difficulties.

While launching wireless technologies in rural India, operators are

required to focus on service availability, affordability, acceptability and

awareness. Operators need to create and implement business models

capable of driving profitable growth through a rural expansion strategy.

BSNL is an integrated telecom service provider which provides all

types of telecom services.

Wire Line Services

CDMA WLL Limited Mobility Services

National Long Distance Services

International Long Distance Services

Broadband & Internet Services

IN Services viz. Prepaid calling card etc.

BSNL’s Milestones

• Set up on 1st October,2000

• Introduced cellular services on 19th October,2002 and has 32.7

million customers as on date

• Became market leader within 6 months, in its areas of operation

• Introduced limited mobility WLL services w.e.f. December 2000,

and has 4 million customers as on date

• Introduced dial up internet facility w.e.f. December 2000

• Introduced CLI based internet facility w.e.f. December 2003

• 3.35 million Internet Customers with BSNL

• Introduced Broadband in the country w.e.f. 14.11.2005 and has

1.45 million customers.

Role Of TRAI & TDSAT in Indian Telecom Growth

TRAI (Telecom Regulatory Authority of India):-

• Setup in 1997

• Protection of Consumer Interest

• Nurture Conditions for Growth of Telecom in India

• Major Activities

– Reduced levies on Operators.

– Reduced upper limit in tariff (Local, STD & ISD) and other

Inter-operators tariffs.

– Directives on number of network access service providers.

– Policy guidelines on new services like 3G, WiMAX, Internet

Telephony, Radio Paging, VSAT, etc.

– Regular monitoring of Quality of Service parameters.

TDSAT (Telecom Disputes Settlement Appellate Tribunal):-

• An integrated & comprehensive dispute settlement mechanism.

• Set up on 29th May 2000 & started hearing w.e.f. Jan 2001

• 83% cases disposed off from 2001 till 2007

TRAI & TDSAT provided healthy atmosphere for healthy

growth of Telecom sector (Teledensity from 1.57 in 1997 to

24 in December 2007)

OBJECTIVES OF THE STUDY

The objectives of this paper are-

1. To find out the prospect of Telecommunication service in Indian

Market.

2. To make an idea about the teledensity in Indian market.

3. To understand the position of mobile services in Indian market.

METHODOLOGY

The study is mainly based on the Secondary Data. I have carried out a

study on “The growth of telecommunication in Indian Business”. I have

collected the data from secondary data source such as the website of

different companies, books, and journals. I have also interacted with the

company people to understand about “The growth of telecommunication

in Indian Business”.

There are various methods, which has been used in the project. Various methods for collecting data are:-

a) Data obtained from the Subscribers

b) Secondary data obtained from—

1) Magazine

2) Local television and other channels

3) Annual report

4) Internet data

ANALYSIS

Fig: - Mobile Tariffs in India one of the Lowest

From the above graph we can see that only India is having the lowest mobile tariff in respect to the other developed countries.

Growth of telecommunication in India

• 1994-National Telecom Policy – 1994 announced

• Aug 1995-Kolkata became the first metro to have a

cellular network

• 1997-Telecom Regulatory Authority of India was setup

• 1999-Tariff rebalancing exercises gets initiated

• March 1999 -National Telecom Policy – 99 announced

• Oct-2002-BSNL entered in to GSM cellular operation

w.e.f 19th October, 2002. Made incoming call free &

initiated tariff equalization process. Tariff for GSM

cellular mobiles reduced

• Nov 2003-Unified Access (Basic & Cellular) Service

License (USAL) introduced as a first step towards Unified

License Regime Technology neutral and allows

provisioning any kind of service

• Apr 2004-License fee reduced by 2% across the board for

all the access licenses.

Mobile Services: Fuelling the growth

Total telephone connections as on November 2008: 183.46 millionNovember 2009: 264.77 million

Nov-08

40.3522%

143.1178%

Fixed Line

Wireless

Nov-09

39.3115%

225.4685%

Fixed Line

Wireless

From the above graphs we can see that the numbers of Wireless connections are increasing from the Year 2008 to 2009 in respect to the Fixed lines.

Teledensity - Rural & Urban

Teledensity

0.52 0.68 0.93 1.21 1.49 1.57 1.73 1.865.88 7.96.94 8.36 10.37 12.2 14.32

20.7426.88

39.45

48.52

60.04

2.32 2.86 3.58 4.29 5.11 7.02 8.9512.74

18.3123.21

0

10

20

30

40

50

60

70

1999

2000

2001

2002

2003

2004

2005

2006

2007

2007

(Nov

)

Year

Rural Urban Total

From the above chart we can find that the teledensity in Urban areas is much more than the Rural areas.

Subscribers (in millions)

Year Fixed line including WLL(F)

Mobile (GSM+WLL(M)

Total Tele density

March-01

14.54 0.34 14.8 1.57

March-02

26.65 1.9 28.55 2.81

March-03

32.71 3.58 36.29 3.52

March-04

38.33 6.54 44.87 4.28

March-05

41.48 13 54.48 5.1

March-06

42.84 33.69 76.53 7.04

March-07

46.19 52.22 98.41 9.11

March- 50.18 90.14 140.32 12.8

08March-09

48.87 157.96 206.83 18.46

Dec. 2010

43.3 226 269.3 24.04

From the above chart, we can see that the teledensity is increasing from the year 2001 to the year 2010.

Feb’2011 (COAI)Sl. No. Name of Company Total no. of subscribers1 Bharti Airtel 158,998,8692 Vodafone Essar 130,920,7323 IDEA 86,800,8094 BSNL 85,098,2005 Aircel 53,500,4696 Uninor 21,577,4977 Videocon 6,564,0838 MTNL 5,178,6179 Loop Mobile 3,079,28110 Stel 2,692,46211 Etisalat 652,370

Nov’2010 (AUSPI)Sl. No. Name of Company Total no. of subscribers1 Connect 1,618,7872 Reliance Communications 1,23,579,5263 TATA Indicom 83,855,3044 MTS 7,815,389

(COAI- Cellular Operators Association of India.AUSPI- Association of Unified Telecom Service Providers of India.)

CONCLUSION

Telecommunication has been recognized as a crucial infrastructure for

socio-economic development of a nation. It is also one of the prime

support services, needed for rapid growth and modernization of the

various sectors of an economy. India's telecommunication network is the

third largest in the world and the second largest among the emerging

economies of Asia. It still continues to grow at an unprecedented pace

and is one of the key sectors responsible for India's resurgent economic

growth. The number of telephones has increased from 44.97 million (as

on 31st March 2002) to 142.09 million (as on 31 March 2006) and 190

million (till December 2006) and 203 million (by February 2007). Also,

the tele density in the country has steadily increased from 4.29% (as on

31st March 2002) to 16.83% (as on 31st December 2006).

REFERENCES

1. www.auspi.in

2. www.coai.com

3. www. indiatelecom .org

4. Annual Report, 2009-2010

5. Indian Telecommunication Statistics 2002 (Policy Framework,

Status and Trends), both published by the Department of

Telecommunications, Ministry of Communications & IT,

Government of India.