Telecommunication Marketing in India
Content
Telecommunication Marketing In India
(Review and Forecast)
India is the world’s 12th largest economy, with a GDP of $500 billion. GDP
growth was expected to reach 6 percent by the end of 2003, making India one of the
fastest growing economies in the world. With a population of over one billion and only
four telephone lines per one hundred inhabitants, it is clear that India presents immense
opportunities
for
U.S.
telecommunications
equipment
manufacturers.
Telecommunications Overview
India's telephone network including mobile is the fifth largest in the world and
the second largest among emerging economies, after China. Although one of the world's
largest telecom markets, with a fixed-line phone network of about 48 million lines, India's
telephone density of four phone lines per one hundred persons is a quarter that of
China. More than 970 million Indians do not have access to a telephone.
The Indian telecommunications market represents one of the largest potential
opportunities after China. The demand for main lines is projected to reach 42 million by
the year 2005, compared to the existing 9 million lines in service today. With a
population of 900 million, this still represents a telephone density of only 4 per hundred
population. The Indian government is committed to allowing private and foreign
companies in all aspects of the telecom sector and has already issued guidelines for
foreign investment.
Compared to China, India has a long history of open business practices, an
established legal framework, a democratic society and uses English as a primary
language in business. It has only been recently that major telecommunications
manufacturers and service providers have entered the Indian market. Don't be left
behind!
Keep
up
to
date
with
the
latest
developments!
India's mobile phone industry has been built by the private sector, which has
invested $6 billion in capital equipment in recent years. As a result, India today has a
world-class cell phone system, although other aspects of the telecom infrastructure are
1
still sub-standard. By mid 2003, India had 16 million cell phone subscribers, with
numbers expected to surpass 50 million before 2006. India is adding one million mobile
connections every month, and industry experts foresee a 40 percent compound annual
growth
rate
till
2007.
The Telecommunications Regulatory Authority of India (TRAI) is the industry
regulator. Although the regulatory environment has improved, private telecom firms
continue to raise concerns about TRAI's weak enforcement powers and over the
apparent conflicts of interest arising out of the government's ownership interest in some
telecom companies. A telecommunications Convergence Bill is pending in Parliament,
aiming to bring telecommunications, information technology and broadcasting under the
purview of one regulatory body – to be named the Communications Commission of India
(CCI). The CCI will be responsible for spectrum management, granting licenses and
enforcing license conditions, determining tariff rates and ensuring a competitive
marketplace.
India's cable TV industry has experienced rapid growth in recent years. India has some
79 million TV sets, of which 38 million are connected to cable TV. There are more than
30,000 cable operators, many of them family-run establishments. Cable TV represents a
large potential for broadband Internet connections to the home. A few cable operators
have
already
begun
to
offer
such
service.
Telecommunications Equipment: Top Prospect for India
The U.S. Commercial Service’s 2004 Fiscal Year India Country Commercial
Guide ranks the telecommunications equipment sector as the number one prospect for
U.S. exports and investment in India. Total spending on telecommunications equipment
in the Asia/Pacific region is expected to increase from $112.5 billion in 2004 to $146.0
billion in 2007 growing at a compound annual growth rate of 8.6 percent according to
TIA's 2004 Telecommunications Market Review and Forecast released by TIA in late
January 2004. TIA's report indicates that the overall telecommunications market in the
Asia/Pacific region will expand at a projected 10.9 percent rate, reaching $604.3 billion
by
2007.
2
India has one of the fastest growing telecommunications systems in the world,
growing at an average of more than 20 percent per annum over the last four years.
According to the government of India (GOI) telecom plan (1997-2007), the demand for
new telephone lines during the period up to 2007 is estimated at 81.8 million. This
projected demand will generate a requirement of approximately more than 61 million
telephones during the next eight years. State-owned Bharat Sanchar Nigam Limited
(BSNL) and Mahanagar Telephone Nigam Limited (MTNL) are expected to provide
about 43 million telephones, while private operators are expected to provide
approximately 21 million. The growth in demand for telecom services in India will be
highest in the basic, followed by national long distance, international long-distance and
the cellular services sector.
The market has changed dramatically over the last few years and continues to do so.
Understanding the transition is essential for the continued success of companies. Those
that do not adjust their business model will miss tremendous opportunities, or even
worse, lose their position in the market.
Trends, Analyses and Projections through 2008
Worldwide telecommunications revenue totaled $2.1 trillion in 2004, up 9.4 percent from
2003. (The U.S. market accounted for $785 billion, while other regions spent a combined
$1.4 trillion.) Over the 2004-2008 periods, the U.S. telecommunications industry will
grow at a projected 9.5 percent compound annual rate, rising to $1.1 trillion. Which
segments will fuel this growth?
This report helps you understand growth opportunities, while providing data on every
major industry segments including:
Applications Software
Broadband Technologies (DSL, Cable, Satellite, Fixed Wireless)
Broadband over Power Lines
Collaborative Technologies
(Audio
conferencing,
Videoconferencing)
Converged Data Networks
Economic, Regulatory and Technology Drivers
3
Web conferencing
and
EDGE Technologies/Soft switches
Formal/Non-Formal Call Centers
International Markets
Interexchange Market
IP-equipment and Applications
LAN/WAN Internetworking
Landline vs. Wireless Communications Market
Mobile Communications/M-Commerce
Network Infrastructure Equipment and Services
Optical Networking
Professional Services
Prepaid Telephony, including wireless and Internet
Virtual Private Networks (VPNs)
Voice over Internet Protocol (VoIP)
Voice Recognition Technologies
Voice/Data Communications for the Enterprise
Wireless Data Services
Wireless Internet Access including Wi-Fi and WiMAX
Introduction of TelecommunicationThe telecommunication network in India is one of the largest in the world providing wideranging services such as basic, cellular, internet, radio paging, VSAT etc. Telecom is one
of the fastest growing sectors of the economy, growing at an average of more than 20
percent over the last four years.
The Indian telecommunications sector has undergone a major process of transformation
because of significant policy reforms during the recent years. The New Telecom Policy,
1999 focussed on creating an ideal environment for investment, establishing
communication infrastructure by leveraging on technological development and providing
affordable telecom services to all. Major initiatives have been taken to achieve the
objectives of the policy and its results have started becoming visible with a rapid growth
of subscribers and lower tariffs.
4
In order to speed up the development of the telecom sector, all telecom services have
been opened up to private sector participation. Unrestricted entry is allowed in the basic
services, national and international long distance service, in global mobile
personal communication by satellite (GMPCS) service, VSAT and Public Mobile
Radio Trunked Service (PMRTS).
India is among the top ten countries in the world in terms of its
telecommunications network. The country has an investment potential estimated
at US$ 37 billion by 2005 and US$ 69 billion by 2010.
The new range of telecom services at affordable prices introduced by Reliance
Infocom, a sister company of India's largest Reliance Industries group, towards
the end of 2002 have further galvanised the growth potential of telecom market.
India has 38.44 million fixed telephone connections, growing at 22 per cent per
annum and almost 10.0 million cellular phone connections, growing at 100 per
cent per annum. The telecom network in the country comprises over 35,000
exchanges with switching capacity of over 47 million, 427 digital trunk automatic
exchanges, and over 326,271 route km of optic fibre network.
In addition to the two state-owned companies BSNL and MTNL, several private
players have established a significant presence in both the basic and cellular
markets. Global majors with a presence in the country include Hutchison,
Singapore Telecom, AT&T, France Telecom, etc.
The total inflow of FDI into the sector between August 1991 and October 2002 is
estimated to be around US$ 1.95 billion.
Types of Services
Basic Services
The basic services were privatized and opened up for competition.33 basic
service licenses were issued up to December, 2001. MTNL and BSNL had one
5
license each, 31 licenses were with the private sector, out of which 25 were
signed in 2001-02(April-December). The number of subscribers served by the
private basic service operators increased from 272761 in April 2001 to 447618 in
end December, 2001.Wireless In Local Loop (WLL) technology has been
introduced for providing telephone connections promptly in urban, semi-urban
and rural areas.
Cellular Mobile Telephone Service
MTNL and BSNL have issued licenses for operation of Cellular Mobile Telephone
Service as third operator in various parts of the country. In terms of the NTP-99,
17 fresh licenses have been issued to private companies as fourth cellular
operator in September/October, 2001, one each in 4 metro cities and 13 circles.
There were about 5.5 million cellular subscribers in the country in December
2001. The service is available in about 1367 cities/towns of the country as
against 648 in September 2000. The share of cellular subscribers in the total
telephone subscribers has gone up from 5.8% in 1999 to 10.5% by 2001.
Radio Paging Service
It is a one-way wireless communication .The subscriber pager, which is
programmed to respond to a unique number/frequency, can receive messages
only within the limits set by service provider as per the capability of his
transmission equipment.95 licenses were issued and implemented in 200102(April-December) for the RPG. The customs duty on pagers has been reduced
to 5%.
Internet Expansion
506 licenses were issued to Internet Service Providers (ISPs), of which 150 have
stated providing the service.15 ISPs have also been given clearance for
commissioning of International Gateways for internet using satellite as a medium.
There were 3.2 million Internet Subscribers in March 2002.
6
Rural Telephony
In the NTP-99, telecom coverage for all the villages had to be achieved by the
end of 2002.Accordingly, out of 6.07 lakh villages, 468862 villages had been
covered by Village Public Telephones by March, 2002, out of which BSNL has
provided 468016 VPT's while six private Basic service operator have provided
846 VPTs.The total number of DELs provided in rural areas also increased from
6.69 million in March 2001 to 9.02 million by March 2002, increasing the share of
the rural areas in total DELs from 20.4% in March 2001 to about 23.4% in
January 2002.
Expansion of Telecom Services
Over the last few years, the telecom network has spread considerably.Up to
December 31,2001, the network measured in terms of fixed and mobile lines
provided by both the public and the private sector has grown by about 12%, over
that achieved up to March 31,2001. There were 9.74 lakh PCOs, 7.61 million
rural DELs and about 3.7 million internet subscribers in December 2001. During
this period (April December2001-02), the growth realized in fixed DELs was 7.6%
and that in cellular mobile phones was 53%. The equipped capacity of the public
sector units (BSNL and MTNL) increased from 39.91 million in March 2001 to
47.40 million in March 2002. The direct exchange lines (DELs) increased from
32.71 million (including 0.27 million by private sector) to 38.45 million (including
0.50 million by private sector) during this period. The fixed DELs increased to
47.4 million and cellular mobile phones to 6.4 million in March 2002 experiencing
a
growth
rate
of
18%
and
74%
respectively
over the connections in March 2001.
Tele-density (number of telephone per 100 population) is an indicator
of the expansion of telecommunication services in the country. The telecom
network expansion had been slow till the 1990s as the tele-density grew from
0.03 in 1951, to 0.60 in 1991.The Department of Telecommunications has been
7
making efforts for the expansion of the network through its two major
undertakings, the Bharat Sanchar Nigam Limited (BSNL) and the Mahanagar
Telephone Nigam Limited (MTNL). Private sector participation is also encouraged
to provide telecom facilities both in urban and the rural areas. The telecom
network has spread considerably as seen in the increase of the tele-density from
2.86 as on March 31, 2000 to 3.58 as on March 31, 2001. The Rural tele-density
and the Urban tele-density as on March 31,2001 were 0.93 and 10.16
respectively. The total tele-density as on March 31, 2002 was 4.4 and the rural
tele-density crossed one. It is intended to achieve a teledensity of 11.5 at the
national level and 3 in the rural areas by March 2007.
Policy Initiatives
India is one of the most deregulated telecom markets in the world. Private
participation is permitted in all segments of the services - international
long distance, domestic long distance, basic, cellular, internet, radiopaging, and a number of value-added services. Private participation in
international voice services has been a significant step undertaken by the
government. Private players have been allowed to provide international
long distance services since April 2002; two years ahead of schedule.
The government has announced the New Telecom Policy (NTP) 1999 to
further de-regulate the sector with respect to services like basic,
international long distance (ILD), national long distance (NLD) and
Wireless in Local Loop (WLL) among others.
The government has liberalised the sector with the following objectives:
Ensure availability of telephones on demand
Provide universal access to basic telecom services at affordable
prices
Benchmark telecom services with global standards
Position India as a major manufacturing base and exporter of
telecom equipment
8
Introduce all value added services available internationally
Achieve higher telecom penetration
The government has relaxed significantly the foreign investment norms in
the sector. Presently 49 per cent equity participation is permitted in
telecom services and 74 per cent in Internet services under the automatic
route. Maximum foreign equity participation for Internet Service Providers
(ISPs) is 100 per cent. Private investors, both domestic and foreign, have
already invested over US$ 2,449 million in different segments of the
industry. 100 per cent FDI is allowed for manufacturing telecom
equipment.
To effectively regulate the sector, facilitate growth and development,
promote transparency and ensure fair competition, the government has
set up the Telecom Regulatory Authority of India (TRAI) as an independent
regulatory body and the Telecom Dispute Settlement Appellate Tribunal as
a dispute settlement body.
Fourth cellular operator, one each in four metros and thirteen circles has
been permitted in all, 80 licenses (56 private and 22 to BSNL & 2 MTNL)
have been issued.
Wireless in Local Loop (WLL) has been introduced for providing telephone
connections in urban, semi-urban and rural areas promptly.
As per the NTP-99, adequate access to telecommunications facilities in
the rural areas is to be ensured. In this regard, Telecom Regulatory
Authority of India (TRAI) has made recommendations in respect of the
policy on Universal Service Obligation. Steps are being taken for
fulfillment of USO, its funding and implementation.
Termination of Monopoly of VSNL for International Long Distance services
(ILDS) has been preponed to March 31,2002 from March 31,2004. Letter
of Intent (LOIs) have been issued to Five companies for ILDS of which
one has been converted in to license.
TRAI has given its recommendations for opening up of Internet Telephony
in 2002, which are under consideration of the government.
9
Disinvestment of PSUs in the telecom sector has also been undertaken
during the year. In February 2002, the disinvestment of VSNL has been
completed by bringing down the government equity to 26% and the
management of the company has been transferred to Tata Group, a
strategic partner.
FDI upto 49% is allowed subject to licensing and security requirement and
adherence by the companies to the license conditions for foreign equity
cap and lock-in period for transfer and addition of equity and other license
provisions in basic, cellular, value added services and global mobile
personal communications by satellite.
FDI upto 74%, with FDI beyond 49% requiring Government approval, is
permitted in ISPs with gateways, radio-paging and end-to-end bandwidth,
subject to licensing and security requirement.
FDI upto 100% is allowed in ISPs not providing gateways (both for satellite
and submarine cables), Infrastructure Providers providing dark fibre (IP
category), Electronic Mail and Voice Mail, subject to prevalent conditions.
No equity cap is applicable to manufacturing activities.
Full repatriability of dividend income and capital invested in the telecom
sector.
Competition introduced in all service segments.
Termination of monopoly of VSNL for International Long Distance (ILD)
services was preponed to March 31, 2002 from March 31, 2004.
International long distance services opened on 01.04.2002.
National long distance services opened for free competition.
Licenses for basic and cellular services given.
Revenue sharing regime in place of existing fixed license fee, introduced
for both basic and cellular service operators.
Fourth cellular operator, one each in four metros and thirteen circles has
been permitted with seventeen fresh licenses issued to private companies
in September/October 2001.
10
National and International automatic roaming facility has been permitted
for cellular subscribers.
25 new Basic Service License Agreements signed by private operators.
Wireless in Local Loop (WLL) has been introduced for providing telephone
connections in urban, semi-urban and rural areas promptly.
Internet Services opened for free competition and permitted to establish
own international gateways (satellite or submarine cable) for carrying
internet traffic. National Internet Backbone (NIB) has been commissioned.
Global Mobile Personal Communication by Satellite (GMPCS) opened for
free competition.
Two categories of infrastructure providers, viz; infrastructure providers
category II to provide end-to-end bandwidth and infrastructure providers
category I to provide dark fibre, right of way, towers, duct, space etc. have
been allowed
Corporatisation
of
Department
of
Telecom
Services
(DTS)
and
Department of Telecom Operations (DTO) by creating Bharat Sanchar
Nigam Limited (BSNL) w.e.f. 1 October 2000
The Telecom Regulatory Authority of India and Telecom Dispute
Settlement and Appellate Tribunal (TDSAT) have been set up for price
regulation, ensuring technical compatibility, recommending terms and
conditions of licence, facilitate competition, protecting consumer interest,
resolution of disputes, etc.
Disinvestments of VSNL undertaken.
The Communication Convergence Bill 2001 has been introduced in the
Lok Sabha.
As a result of positive response to the investment policy being pursued for the
sector, about 45% of the total inflow of FDI so far has come during the current
year itself. During the period August, 1991-November, 2001, the actual flow of
FDI was Rs.81224 million. In terms of approval of FDI, telecom sector is the
second largest after energy sector. More than 32% of the total inflow of FDI in the
11
telecom sector has come for cellular and basic services and about 54% for the
holding companies.
Actual Inflow of FDI in Telecom Sector from August'91 to November'01
(Sector-Wise)
Rs. In
S.No Service/Item/FDI
1
2
Million
Basic Telephone Service
3937
Cellular Mobile Telephone
Service
22154
Share(%)
4.85
27.27
3
Radio Paging Service
910
1.12
4
E-Mail Service
688
0.85
5
VSAT Service
281
0.35
6
Cable TV Network+ Internet
746
0.92
7
Satellite Telephone Service
481
0.59
8
Radio Trunking Service
71
0.09
9
10
11
Manufacturing
7677
&Consultancy
Holding Companies
44016
Other Value Added
2
Services
12
9.45
54.19
0.00
12
Automatic Route
262
Total
0.32
81224
Source: Annual Report of Ministry of Communication & Information Technology
Opportunities
Despite a strong base of a billion people, the country has a low telephone
density of approximately 5 per cent, estimated to grow to 7 per cent by
2005 and 15 per cent by 2010. A large contribution towards this growth will
emanate from semi-urban and rural markets where the telephone density
is far below the average.
Opportunities exist in acquiring licenses issued to existing operators, as
some of them are divesting equity stakes to foreign investors.
The government is planning to divest its holdings in state-owned
enterprises.
The rapid and sustained growth in the telecom market in the country also
provides major investment opportunities for manufacturing and marketing
telecom equipment.
Reference:
Asian
telecommunication
market
research
trends
and
forecast
http://www.gii.co.ip/
Telecom market studies http://www.igigroup.com
TRAI http://www.trai.gov.in
TIA
pulse
online
February
2004
Market
http://www.pulse.tiaonline.org
Bharat Sanchar Nigam Limited http://www.bsnl.co.in/
13
development
India
Market report India telecom 2000 vol. 1 http://www.igigroup.com
14
(Review and Forecast)
India is the world’s 12th largest economy, with a GDP of $500 billion. GDP
growth was expected to reach 6 percent by the end of 2003, making India one of the
fastest growing economies in the world. With a population of over one billion and only
four telephone lines per one hundred inhabitants, it is clear that India presents immense
opportunities
for
U.S.
telecommunications
equipment
manufacturers.
Telecommunications Overview
India's telephone network including mobile is the fifth largest in the world and
the second largest among emerging economies, after China. Although one of the world's
largest telecom markets, with a fixed-line phone network of about 48 million lines, India's
telephone density of four phone lines per one hundred persons is a quarter that of
China. More than 970 million Indians do not have access to a telephone.
The Indian telecommunications market represents one of the largest potential
opportunities after China. The demand for main lines is projected to reach 42 million by
the year 2005, compared to the existing 9 million lines in service today. With a
population of 900 million, this still represents a telephone density of only 4 per hundred
population. The Indian government is committed to allowing private and foreign
companies in all aspects of the telecom sector and has already issued guidelines for
foreign investment.
Compared to China, India has a long history of open business practices, an
established legal framework, a democratic society and uses English as a primary
language in business. It has only been recently that major telecommunications
manufacturers and service providers have entered the Indian market. Don't be left
behind!
Keep
up
to
date
with
the
latest
developments!
India's mobile phone industry has been built by the private sector, which has
invested $6 billion in capital equipment in recent years. As a result, India today has a
world-class cell phone system, although other aspects of the telecom infrastructure are
1
still sub-standard. By mid 2003, India had 16 million cell phone subscribers, with
numbers expected to surpass 50 million before 2006. India is adding one million mobile
connections every month, and industry experts foresee a 40 percent compound annual
growth
rate
till
2007.
The Telecommunications Regulatory Authority of India (TRAI) is the industry
regulator. Although the regulatory environment has improved, private telecom firms
continue to raise concerns about TRAI's weak enforcement powers and over the
apparent conflicts of interest arising out of the government's ownership interest in some
telecom companies. A telecommunications Convergence Bill is pending in Parliament,
aiming to bring telecommunications, information technology and broadcasting under the
purview of one regulatory body – to be named the Communications Commission of India
(CCI). The CCI will be responsible for spectrum management, granting licenses and
enforcing license conditions, determining tariff rates and ensuring a competitive
marketplace.
India's cable TV industry has experienced rapid growth in recent years. India has some
79 million TV sets, of which 38 million are connected to cable TV. There are more than
30,000 cable operators, many of them family-run establishments. Cable TV represents a
large potential for broadband Internet connections to the home. A few cable operators
have
already
begun
to
offer
such
service.
Telecommunications Equipment: Top Prospect for India
The U.S. Commercial Service’s 2004 Fiscal Year India Country Commercial
Guide ranks the telecommunications equipment sector as the number one prospect for
U.S. exports and investment in India. Total spending on telecommunications equipment
in the Asia/Pacific region is expected to increase from $112.5 billion in 2004 to $146.0
billion in 2007 growing at a compound annual growth rate of 8.6 percent according to
TIA's 2004 Telecommunications Market Review and Forecast released by TIA in late
January 2004. TIA's report indicates that the overall telecommunications market in the
Asia/Pacific region will expand at a projected 10.9 percent rate, reaching $604.3 billion
by
2007.
2
India has one of the fastest growing telecommunications systems in the world,
growing at an average of more than 20 percent per annum over the last four years.
According to the government of India (GOI) telecom plan (1997-2007), the demand for
new telephone lines during the period up to 2007 is estimated at 81.8 million. This
projected demand will generate a requirement of approximately more than 61 million
telephones during the next eight years. State-owned Bharat Sanchar Nigam Limited
(BSNL) and Mahanagar Telephone Nigam Limited (MTNL) are expected to provide
about 43 million telephones, while private operators are expected to provide
approximately 21 million. The growth in demand for telecom services in India will be
highest in the basic, followed by national long distance, international long-distance and
the cellular services sector.
The market has changed dramatically over the last few years and continues to do so.
Understanding the transition is essential for the continued success of companies. Those
that do not adjust their business model will miss tremendous opportunities, or even
worse, lose their position in the market.
Trends, Analyses and Projections through 2008
Worldwide telecommunications revenue totaled $2.1 trillion in 2004, up 9.4 percent from
2003. (The U.S. market accounted for $785 billion, while other regions spent a combined
$1.4 trillion.) Over the 2004-2008 periods, the U.S. telecommunications industry will
grow at a projected 9.5 percent compound annual rate, rising to $1.1 trillion. Which
segments will fuel this growth?
This report helps you understand growth opportunities, while providing data on every
major industry segments including:
Applications Software
Broadband Technologies (DSL, Cable, Satellite, Fixed Wireless)
Broadband over Power Lines
Collaborative Technologies
(Audio
conferencing,
Videoconferencing)
Converged Data Networks
Economic, Regulatory and Technology Drivers
3
Web conferencing
and
EDGE Technologies/Soft switches
Formal/Non-Formal Call Centers
International Markets
Interexchange Market
IP-equipment and Applications
LAN/WAN Internetworking
Landline vs. Wireless Communications Market
Mobile Communications/M-Commerce
Network Infrastructure Equipment and Services
Optical Networking
Professional Services
Prepaid Telephony, including wireless and Internet
Virtual Private Networks (VPNs)
Voice over Internet Protocol (VoIP)
Voice Recognition Technologies
Voice/Data Communications for the Enterprise
Wireless Data Services
Wireless Internet Access including Wi-Fi and WiMAX
Introduction of TelecommunicationThe telecommunication network in India is one of the largest in the world providing wideranging services such as basic, cellular, internet, radio paging, VSAT etc. Telecom is one
of the fastest growing sectors of the economy, growing at an average of more than 20
percent over the last four years.
The Indian telecommunications sector has undergone a major process of transformation
because of significant policy reforms during the recent years. The New Telecom Policy,
1999 focussed on creating an ideal environment for investment, establishing
communication infrastructure by leveraging on technological development and providing
affordable telecom services to all. Major initiatives have been taken to achieve the
objectives of the policy and its results have started becoming visible with a rapid growth
of subscribers and lower tariffs.
4
In order to speed up the development of the telecom sector, all telecom services have
been opened up to private sector participation. Unrestricted entry is allowed in the basic
services, national and international long distance service, in global mobile
personal communication by satellite (GMPCS) service, VSAT and Public Mobile
Radio Trunked Service (PMRTS).
India is among the top ten countries in the world in terms of its
telecommunications network. The country has an investment potential estimated
at US$ 37 billion by 2005 and US$ 69 billion by 2010.
The new range of telecom services at affordable prices introduced by Reliance
Infocom, a sister company of India's largest Reliance Industries group, towards
the end of 2002 have further galvanised the growth potential of telecom market.
India has 38.44 million fixed telephone connections, growing at 22 per cent per
annum and almost 10.0 million cellular phone connections, growing at 100 per
cent per annum. The telecom network in the country comprises over 35,000
exchanges with switching capacity of over 47 million, 427 digital trunk automatic
exchanges, and over 326,271 route km of optic fibre network.
In addition to the two state-owned companies BSNL and MTNL, several private
players have established a significant presence in both the basic and cellular
markets. Global majors with a presence in the country include Hutchison,
Singapore Telecom, AT&T, France Telecom, etc.
The total inflow of FDI into the sector between August 1991 and October 2002 is
estimated to be around US$ 1.95 billion.
Types of Services
Basic Services
The basic services were privatized and opened up for competition.33 basic
service licenses were issued up to December, 2001. MTNL and BSNL had one
5
license each, 31 licenses were with the private sector, out of which 25 were
signed in 2001-02(April-December). The number of subscribers served by the
private basic service operators increased from 272761 in April 2001 to 447618 in
end December, 2001.Wireless In Local Loop (WLL) technology has been
introduced for providing telephone connections promptly in urban, semi-urban
and rural areas.
Cellular Mobile Telephone Service
MTNL and BSNL have issued licenses for operation of Cellular Mobile Telephone
Service as third operator in various parts of the country. In terms of the NTP-99,
17 fresh licenses have been issued to private companies as fourth cellular
operator in September/October, 2001, one each in 4 metro cities and 13 circles.
There were about 5.5 million cellular subscribers in the country in December
2001. The service is available in about 1367 cities/towns of the country as
against 648 in September 2000. The share of cellular subscribers in the total
telephone subscribers has gone up from 5.8% in 1999 to 10.5% by 2001.
Radio Paging Service
It is a one-way wireless communication .The subscriber pager, which is
programmed to respond to a unique number/frequency, can receive messages
only within the limits set by service provider as per the capability of his
transmission equipment.95 licenses were issued and implemented in 200102(April-December) for the RPG. The customs duty on pagers has been reduced
to 5%.
Internet Expansion
506 licenses were issued to Internet Service Providers (ISPs), of which 150 have
stated providing the service.15 ISPs have also been given clearance for
commissioning of International Gateways for internet using satellite as a medium.
There were 3.2 million Internet Subscribers in March 2002.
6
Rural Telephony
In the NTP-99, telecom coverage for all the villages had to be achieved by the
end of 2002.Accordingly, out of 6.07 lakh villages, 468862 villages had been
covered by Village Public Telephones by March, 2002, out of which BSNL has
provided 468016 VPT's while six private Basic service operator have provided
846 VPTs.The total number of DELs provided in rural areas also increased from
6.69 million in March 2001 to 9.02 million by March 2002, increasing the share of
the rural areas in total DELs from 20.4% in March 2001 to about 23.4% in
January 2002.
Expansion of Telecom Services
Over the last few years, the telecom network has spread considerably.Up to
December 31,2001, the network measured in terms of fixed and mobile lines
provided by both the public and the private sector has grown by about 12%, over
that achieved up to March 31,2001. There were 9.74 lakh PCOs, 7.61 million
rural DELs and about 3.7 million internet subscribers in December 2001. During
this period (April December2001-02), the growth realized in fixed DELs was 7.6%
and that in cellular mobile phones was 53%. The equipped capacity of the public
sector units (BSNL and MTNL) increased from 39.91 million in March 2001 to
47.40 million in March 2002. The direct exchange lines (DELs) increased from
32.71 million (including 0.27 million by private sector) to 38.45 million (including
0.50 million by private sector) during this period. The fixed DELs increased to
47.4 million and cellular mobile phones to 6.4 million in March 2002 experiencing
a
growth
rate
of
18%
and
74%
respectively
over the connections in March 2001.
Tele-density (number of telephone per 100 population) is an indicator
of the expansion of telecommunication services in the country. The telecom
network expansion had been slow till the 1990s as the tele-density grew from
0.03 in 1951, to 0.60 in 1991.The Department of Telecommunications has been
7
making efforts for the expansion of the network through its two major
undertakings, the Bharat Sanchar Nigam Limited (BSNL) and the Mahanagar
Telephone Nigam Limited (MTNL). Private sector participation is also encouraged
to provide telecom facilities both in urban and the rural areas. The telecom
network has spread considerably as seen in the increase of the tele-density from
2.86 as on March 31, 2000 to 3.58 as on March 31, 2001. The Rural tele-density
and the Urban tele-density as on March 31,2001 were 0.93 and 10.16
respectively. The total tele-density as on March 31, 2002 was 4.4 and the rural
tele-density crossed one. It is intended to achieve a teledensity of 11.5 at the
national level and 3 in the rural areas by March 2007.
Policy Initiatives
India is one of the most deregulated telecom markets in the world. Private
participation is permitted in all segments of the services - international
long distance, domestic long distance, basic, cellular, internet, radiopaging, and a number of value-added services. Private participation in
international voice services has been a significant step undertaken by the
government. Private players have been allowed to provide international
long distance services since April 2002; two years ahead of schedule.
The government has announced the New Telecom Policy (NTP) 1999 to
further de-regulate the sector with respect to services like basic,
international long distance (ILD), national long distance (NLD) and
Wireless in Local Loop (WLL) among others.
The government has liberalised the sector with the following objectives:
Ensure availability of telephones on demand
Provide universal access to basic telecom services at affordable
prices
Benchmark telecom services with global standards
Position India as a major manufacturing base and exporter of
telecom equipment
8
Introduce all value added services available internationally
Achieve higher telecom penetration
The government has relaxed significantly the foreign investment norms in
the sector. Presently 49 per cent equity participation is permitted in
telecom services and 74 per cent in Internet services under the automatic
route. Maximum foreign equity participation for Internet Service Providers
(ISPs) is 100 per cent. Private investors, both domestic and foreign, have
already invested over US$ 2,449 million in different segments of the
industry. 100 per cent FDI is allowed for manufacturing telecom
equipment.
To effectively regulate the sector, facilitate growth and development,
promote transparency and ensure fair competition, the government has
set up the Telecom Regulatory Authority of India (TRAI) as an independent
regulatory body and the Telecom Dispute Settlement Appellate Tribunal as
a dispute settlement body.
Fourth cellular operator, one each in four metros and thirteen circles has
been permitted in all, 80 licenses (56 private and 22 to BSNL & 2 MTNL)
have been issued.
Wireless in Local Loop (WLL) has been introduced for providing telephone
connections in urban, semi-urban and rural areas promptly.
As per the NTP-99, adequate access to telecommunications facilities in
the rural areas is to be ensured. In this regard, Telecom Regulatory
Authority of India (TRAI) has made recommendations in respect of the
policy on Universal Service Obligation. Steps are being taken for
fulfillment of USO, its funding and implementation.
Termination of Monopoly of VSNL for International Long Distance services
(ILDS) has been preponed to March 31,2002 from March 31,2004. Letter
of Intent (LOIs) have been issued to Five companies for ILDS of which
one has been converted in to license.
TRAI has given its recommendations for opening up of Internet Telephony
in 2002, which are under consideration of the government.
9
Disinvestment of PSUs in the telecom sector has also been undertaken
during the year. In February 2002, the disinvestment of VSNL has been
completed by bringing down the government equity to 26% and the
management of the company has been transferred to Tata Group, a
strategic partner.
FDI upto 49% is allowed subject to licensing and security requirement and
adherence by the companies to the license conditions for foreign equity
cap and lock-in period for transfer and addition of equity and other license
provisions in basic, cellular, value added services and global mobile
personal communications by satellite.
FDI upto 74%, with FDI beyond 49% requiring Government approval, is
permitted in ISPs with gateways, radio-paging and end-to-end bandwidth,
subject to licensing and security requirement.
FDI upto 100% is allowed in ISPs not providing gateways (both for satellite
and submarine cables), Infrastructure Providers providing dark fibre (IP
category), Electronic Mail and Voice Mail, subject to prevalent conditions.
No equity cap is applicable to manufacturing activities.
Full repatriability of dividend income and capital invested in the telecom
sector.
Competition introduced in all service segments.
Termination of monopoly of VSNL for International Long Distance (ILD)
services was preponed to March 31, 2002 from March 31, 2004.
International long distance services opened on 01.04.2002.
National long distance services opened for free competition.
Licenses for basic and cellular services given.
Revenue sharing regime in place of existing fixed license fee, introduced
for both basic and cellular service operators.
Fourth cellular operator, one each in four metros and thirteen circles has
been permitted with seventeen fresh licenses issued to private companies
in September/October 2001.
10
National and International automatic roaming facility has been permitted
for cellular subscribers.
25 new Basic Service License Agreements signed by private operators.
Wireless in Local Loop (WLL) has been introduced for providing telephone
connections in urban, semi-urban and rural areas promptly.
Internet Services opened for free competition and permitted to establish
own international gateways (satellite or submarine cable) for carrying
internet traffic. National Internet Backbone (NIB) has been commissioned.
Global Mobile Personal Communication by Satellite (GMPCS) opened for
free competition.
Two categories of infrastructure providers, viz; infrastructure providers
category II to provide end-to-end bandwidth and infrastructure providers
category I to provide dark fibre, right of way, towers, duct, space etc. have
been allowed
Corporatisation
of
Department
of
Telecom
Services
(DTS)
and
Department of Telecom Operations (DTO) by creating Bharat Sanchar
Nigam Limited (BSNL) w.e.f. 1 October 2000
The Telecom Regulatory Authority of India and Telecom Dispute
Settlement and Appellate Tribunal (TDSAT) have been set up for price
regulation, ensuring technical compatibility, recommending terms and
conditions of licence, facilitate competition, protecting consumer interest,
resolution of disputes, etc.
Disinvestments of VSNL undertaken.
The Communication Convergence Bill 2001 has been introduced in the
Lok Sabha.
As a result of positive response to the investment policy being pursued for the
sector, about 45% of the total inflow of FDI so far has come during the current
year itself. During the period August, 1991-November, 2001, the actual flow of
FDI was Rs.81224 million. In terms of approval of FDI, telecom sector is the
second largest after energy sector. More than 32% of the total inflow of FDI in the
11
telecom sector has come for cellular and basic services and about 54% for the
holding companies.
Actual Inflow of FDI in Telecom Sector from August'91 to November'01
(Sector-Wise)
Rs. In
S.No Service/Item/FDI
1
2
Million
Basic Telephone Service
3937
Cellular Mobile Telephone
Service
22154
Share(%)
4.85
27.27
3
Radio Paging Service
910
1.12
4
E-Mail Service
688
0.85
5
VSAT Service
281
0.35
6
Cable TV Network+ Internet
746
0.92
7
Satellite Telephone Service
481
0.59
8
Radio Trunking Service
71
0.09
9
10
11
Manufacturing
7677
&Consultancy
Holding Companies
44016
Other Value Added
2
Services
12
9.45
54.19
0.00
12
Automatic Route
262
Total
0.32
81224
Source: Annual Report of Ministry of Communication & Information Technology
Opportunities
Despite a strong base of a billion people, the country has a low telephone
density of approximately 5 per cent, estimated to grow to 7 per cent by
2005 and 15 per cent by 2010. A large contribution towards this growth will
emanate from semi-urban and rural markets where the telephone density
is far below the average.
Opportunities exist in acquiring licenses issued to existing operators, as
some of them are divesting equity stakes to foreign investors.
The government is planning to divest its holdings in state-owned
enterprises.
The rapid and sustained growth in the telecom market in the country also
provides major investment opportunities for manufacturing and marketing
telecom equipment.
Reference:
Asian
telecommunication
market
research
trends
and
forecast
http://www.gii.co.ip/
Telecom market studies http://www.igigroup.com
TRAI http://www.trai.gov.in
TIA
pulse
online
February
2004
Market
http://www.pulse.tiaonline.org
Bharat Sanchar Nigam Limited http://www.bsnl.co.in/
13
development
India
Market report India telecom 2000 vol. 1 http://www.igigroup.com
14
