Sunitha.SAssistant Professor,

School of Management StudiesNational Institute of Technology Calicut

Indian telecom market is the fastest growing, globally

2005 65 million subscribers2006 146 million2009 500 million

Since Aug,2009, 15 million subscribers are added every month. The US adds only 2-3 million per month and even China adds only 7-8 million per month(but China’s total subscription base is 730 million!)

Pre 2007 periodIndian telecom market lacked competition

earlier. Pre 2007, there were four to five major players in each circle.

Bharti Airtel & Vodafone Essar were national GSM players

Rcom used CDMA technology across most of India and GSM services in the North East.

TTSL had CDMA operations nationwideIdea Cellular, by the Aditya Birla Group

provided in most states using GSM.

Pre 2007 periodStrong regional players-Aircel, JT Mobile and Spice

Govt owned telecom companies- MTNL , in Delhi and Mumbai and BSNL which covered the rest of India.

Price Wars not a new phenomenon. It happened when Reliance made its debut in 2005.It offered pre paid customers a lifetime valid connection for a one time payment. Everyone was forced to follow with similar schemes.

Pre 2007 periodBetween 2005 & 2007,things have started

settling down.Hutch Essar (now Vodafone Essar) picked up

Modi Telstra,Bharti Airtel snapped up Hexacom and JT mobileIdea acquired Spice.

Hierarchy was well formed by the end of 2007 State owned players’ profits shrunk owing to

politically biased forces.

2008Govt decides to issue fresh set of licenses to a

no: of new applicants, included known and unknown faces-Swan Telecom ;S-Tel ,a joint venture between Sterling & InfoTech & Bahrain Telecommunications; Loop Mobile, a new subsidiary of BPL mobile & Datacom ,a partnership between HFCL and Videocon.

License issue was meant for rural coverage

Norway based Telenor picked up a 74% stake in the telecom company promoted by property developer Unitech and firm renamed as Unitech wireless.

Tatas who were only in CDMA space entered the GSM space through a joint venture with Japanese telecom major NTT DoCoMo.

Aircel which was earlier there only in Chennai expanded to North Eats and other 22 circles.

Rural coverage is very poor in IndiaEarlier players did not cover those areas bcos

Arpu (Average Revenue per user)in rural area(Rs50) is much low compared to that of in urban areas(Rs 175)

The Battle Begins!New entrants had some advantagesCost of entry had come down dramaticallyCost of equipment had dropped sharply

because of markets growth and operating model had changed. The early players had built their own networks, infrastructure, towers etc, thus causing high capital expenditure.

Outsourcing is in vogue!Outsourcing model lead to various waysNokia would handle the networksIBM/other technology company looks after would

handle things such as maintenance and customer service

Thus leaving telecom provider to focus on building brands and subscriber base.

The outsourcing model has brought down cost of entry as ewell as break even period

For eg: Unitech Wireless has outsourced its network to Nokia Siemens Network and entire capability is built & maintained by Wipro.

PRICE WARAn unexpected war has broken put for control

of an attractive marketThe Govt issues fresh licenses in 2008Spectrum policy divides players into haves &

have -notsOutsourcing lowers cost of entry.Hence break even point have come down .It

was 5-7 years for old players and is only 4-5 years for new players.

Market gets crowdedAirtel 23.2%Reliance 18%Vodafone 17.6%BSNL 12.2%Idea 10.9%Tata Tele 10.4%Others 7.7%

The Battle FieldTwo fronts to the war: lower tariff and more

spectrumPrice War: initated when Tata DoCoMo

introduced per second billing instead of minute based billing. Almost all operators followed.Company Launch On net(Own

Network)Off Net(other network)

Tata DoCoMo 29 Sep 1p/sec on local,STD,ISD

1p/sec

SISTEMA 8 Oct 0.5/sec on local ,STD 0.5/sec

AIRTEL 30 Oct 1p/sec on local,STD 1.2/sec

VODAFONE 30 Oct 1p/sec on local,STD 1p/sec

AIRCEL 31 Oct 1p/sec on local,STD 1p/sec

IDEA 31 Oct 1p/sec on local,STD 1p/sec

RELIANCE COMM.

3 Nov 1p/sec on local,STD 1p/sec

The CasualtyFalling revenues : while the number of

subscribers has grown, the Arpu (average revenue per user)has been falling steadily over the years

Stock decline: As profit margins become thinner and thinner, market capitalization of the companies has fallen.

Telecom industry is becoming an industry of diminishing returns.

Thank You