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STUDY OF TELECOM INDUSTRY IN INDIA

OBJECTIVE AND RESEARCH METHODOLOGY

Objectives:

- Provide an objective, knowledgeable perspective on the communications sector.

- Focus on fundamentals as they relate to this industry.

- Identify innovations in the communications industry, plus other technical areas when appropriate, as a source of investment ideas.

This research project investigates communication issues and how these issues are addressed

through the application of telecommunication technologies and services.

Telecommunication products and services related to these issues include,

Wireless

Satellite

Internet technologies and services

Broadband communication

Switching and routing

The research methodology followed in this study addresses .The second is government's use of

telecommunication technology and services to accomplish their programmatic objectives.

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EXECUTIVE SUMMARY The Indian Telecommunications network with 70 million connections is the fifth largest in

the world and the second largest among the emerging economies of Asia. Today, it is the

fastest growing market in the world and represents unique opportunities for international

companies in the stagnant global scenario. The total subscriber base is expected to reach 203

million in 2007. The wireless subscriber base has jumped from 1.6 million in 1999 to 28.2

million in 2003. In the last 3 years, two out of every three new telephone subscribers were

wireless subscribers. Consequently, wireless now accounts for 40% of the total telephone

subscriber base, as compared to only 9.5% in 2000. Wireless subscriber growth is expected

to accelerate further from 2 million new subscribers per month now to 2.5 million by 2005.

Given the persistent low telephone penetration rate of about 7 per one hundred and high

levels of overall economic growth, the telecom sector offers vast potential. The mobile

market recently topped 31 million customers. It is therefore not surprising that India is one

of the fastest growing telecom markets with an average annual growth of about 22% for basic

telephony and over 100% for cellular and Internet services.

Recognizing that the telecom sector is one of the prime movers of economy, the

Government's regulatory and policy initiatives have been directed towards establishing a

world-class telecommunications infrastructure. Capital requirements are considerable. India

requires investments of at least $37 billion by 2005 and $69 billion by 2010.

The technologies currently in use are Global System for Mobile Communications (GSM) and

Code Division Multiple Access (CDMA). There are primarily 10 companies providing

mobile services in 19 telecom circles and 4 metro cities, covering 2000 towns across the

country. Presently there are 4 GSM operators and 2 CDMA operators in each circle. There

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are 100 state-of-the-art Networks (GSM + CDMA) on air with a total investment of $8

billion.

The Wireless Planning and Co-ordination wing of the Department of Telecommunications

allocates spectrum in accordance with the National Frequency Allocation Plan (NFAP).

Extensive reforms introduced by successive Indian governments over the last decade have

dramatically changed the nature of telecommunications in the country. The country’s telecom

regulator, the TRAI, says that the rate of market expansion would increase with further

regulatory and structural reform. The adoption of Unified Licensing, a change in the Access

Deficit Charge regime, increased sharing of infrastructure and coverage of new areas by

operators will contribute to ongoing growth.

Fixed-line services, although not as spectacular as mobiles, have been growing solidly. By

early 2006, the country has passed the 50 million fixed-line milestone. In 2001, the Indian

government threw open the whole fixed-line business to an unlimited number of operators in

each of the 21 telecom circles. Prior to this, fixed-line telephony had been the preserve of the

state-owned MTNL and BSNL, with only one private company being allowed to compete

with an existing state-run player in each circle. VSNL, the former monopoly provider of

international telephony, also lost its exclusive status when the market was opened to

competition in April 2002.

The nature of the country’s telecommunications industry has certainly been changed by the

extensive reforms introduced by successive Indian governments over the last decade or so. In

the early stages of change, the structure of the market was frequently criticized, but there has

been a healthy evolution through a series of mergers and takeovers among the mobile

operators that has produced a welcome consolidation. The ‘licensing by circles’ policy is

generally credited with having established a highly competitive telecom market. This is

certainly benefits the country. With what is now seen as a well regulated commercial

environment and with plenty of growth potential, India has become an attractive market for

foreign investment. Of course, regulatory reform is very much regarded as a ‘work in

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progress’. The government has been pushing to further restructure the telecommunications

regulatory regime.

TABLE OF CONTENT

SR. NO TOPIC PAGE

NO.

1. ANALYSIS 10

2. OVERVIEW OF INDUSTRY 12

3. HISTORY 20

4. MARKET LEADERS AND THEIR SHARES 26

5. GROWTH IN INDUSTRY 29

6. DRIVERS IN TELECOM INDUSTRY 32

7. CONSTRAINTS 35

8. INTERNET SERVICE PROVIDERS IN

INDIA

36

9. POLICY 38

10. SALES PROSPECTS 41

11. COMPETITION 44

12. MARKET OVERVIEW 50

13. MARKET ACCESS 51

14. MARKET TREND 52

15. MERGERS AND ACQUISITIONS 55

16. TELECOM COMMISSION 56

17. BUDGET 2007-2008 TELECOM 57

18. DEPARTMENT OF TELECOM 61

19. RECENT NEWS 62

20. SWOT ANALYSIS 72

21. FUTURE OUTLOOK OF INDUSTRY 74

22. CONCLUSION 76

23. BIBLIOGRAPHY 77

24. ANNEXURE 78

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ANALYSIS

INDIAN TELECOM SECTOR ANALYSIS

"Indian Telecom Sector Analysis", provides extensive research and objective analysis of

the Telecommunications Sector in India. This report has been written to help clients in

analyzing the opportunities critical to the growth of Telecom market in India. Detailed data

and analysis will help investors to understand the rapidly changing dynamics of the Telecom

industry.

KEY FINDINGS

Much of the growth in Asia Pacific Wireless Telecommunication Market is encouraged by

the growth in demand in countries like India and China.

India’s mobile phone subscriber base is growing at a rate of 82.2%.

China is the biggest market in Asia Pacific with a subscriber base of 48% of the total

subscribers in Asia Pacific.

Compared to that of India’s share in Asia Pacific Mobile Phone market is 6.4%.

Considering the fact that India and China have almost comparable populations,

India’s low mobile access offers huge scope for growth.

The Internet Access Market in India is all set to grow twice the existing value what

with the increase in de-regularization, literacy level, increasing consumer awareness,

PC penetration etc.

Key findings on how telecoms select and hire an outsourcing vendor include:

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The most important aspect in considering a vendor is assured returns, 10-20% savings

is a "necessary condition," but some service providers are looking for up to 50%

savings;

Most companies prefer short-term (less than 3 years) deals as opposed to long-term

contracts;

Key outsourcing decisions are taken by the senior management at the corporate level

and implementation is passed top-down to functional units;

Functional expertise and financial stability are considered the most important criteria

in choosing a vendor; 86% of the interviewers ranked technical expertise the number

one conditions, followed by 69% for financial stability.

Broadband Wireless Market in India is all set to take off in a big way. Over 70% of the

households in India have no access to wired lines and the number of mobile phone users far

outnumbers PC owners. Such a scenario presents a very good opportunity for Wireless

Broadband Services.

KEY ISSUES AND FACTS ANALYZED

The research report also addresses the issues and facts that are critical to your success:

What are the emerging trends in the Telecom sector in India?

What is the future Outlook of the Telecom market in India?

Who are the Key players in the Telecom Market in India?

What opportunities exist for the Telecom market?

What are the Challenges faced by the industry?

How is the market affected by other factors prevailing in the economy?

What are the emerging technologies in the Telecom Sector?

KEY PLAYERS ANALYZED

This section provides the overview, key facts, financial information, future plans and

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business strategies of prominent players in the Indian Telecom market like Reliance

Communications, Bharti Airtel, Hutchison Essar, Idea Cellular, Aircel Ltd, MTNL, BSNL

VSNL and Sify Ltd.

OVERVIEW OF TELECOM INDUSTRY

India's buzzing telecom sector

A major BSNL expansion plan is about to set India's telecom sector abuzz. Expect price-

value acrobatics, big time stretching and casualties.

Hold your breath, and look into the air. See something? A big display of network acrobatics is about to begin, and you need a ringside seat for it. Up for grabs: $10 billion (Rs 45,700 crore) in revenues over the next two years or so.

It is the Indian market for mobile telephony equipment. No one wants to miss the action.

Alcatel, Siemens, Ericsson, Nortel and Nokia have been around. But now come new entrants such as China's Huawei with the capacity to unsettle everyone else.

Telecom equipment is in a peculiar phase.

Globally, the first burst of business is over.

"While other markets are slowing down, India, Brazil and China are showing big growth.

The market for mobile equipment in India will double in the next two years," says Harish Gandhi, director, marketing and technology, Nokia.

In these markets, though, it is all about pushing the frontier: covering the yet uncovered. This

means providing cheap telecom.

On current projections, in two years, India will account for a tenth of the annual world mobile equipment market (placed at some $50 billion (Rs 228,500 crore).

The government expects the country to have 250 million phone lines, both fixed and mobile,

by the end of 2007.

Most additions will be mobile, with the base expected to hit the 200 million mark by then, up from 70 million now.

Will it happen? After all, telecom projections have gone awry in the past. This time round,

the state-owned phone operator Bharat Sanchar Nigam Ltd is aiming to lead the thrust. It intends to get itself at least half of India's subscriber base by 2007-end.

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It is about to float a tender for equipment to handle as many as 60 million GSM lines — with the option of going up to 90 million — to be delivered over two years. This would be one of

the world's largest ever phone contracts. That very ambition is enough to set private players scurrying to add on capacity.

GSM operator Hutch has decided to order 30 million lines over two years, and all this will do

is keep its market share intact. Its GSM archrival Bharti, which operates Airtel, is to put up 10,000 base stations by March 2006, virtually doubling its capacity across the country. Idea, the Tata-Birla venture, has aggressive plans too.

The focus of attention is the BSNL business. Union Communications Minister Dayanidhi Maran has made it clear that the BSNL tender will insist that all vendors set up some manufacturing facilities in the country as a precondition. Confirms a senior BSNL official,

"Yes, there will be a clause and weightage for manufacturing in India."

"It is clear that the government wants to develop an indigenous equipment industry. To give it a fillip, it has also changed the inverted duty structure regime in the Budget which used to

make local manufacturing more expensive," says Ravi Sharma, president, Alcatel South Asia.

But existing vendors argue that there is already enough competition (there are five vendors supplying BSNL), so there is no need for more players to get in.

"It is important to keep each vendor to one region, because every time you bring in a new vendor, it leads to huge operational challenges as you have to shift the old system (owned by another company) somewhere else. And that effects quality of service," says Nortel India's

vice president, Rajan Mehta.

New equipment makers who want to get in with BSNL dismiss that as self-serving logic. The tendering should be free for all, they say, to maximise overall benefits, especially since

Chinese bids could be drastically lower.

By the sound of things, this is the view that is likely to prevail. D K Ghosh, executive director, Siemens Public Communication Network says, "I think the view is that all companies will be allowed to bid for the tender."

While all that is under debate, contract hopefuls are not idle. They are already reworking

their strategies. Nokia, for instance, is setting up a $150 million (Rs 6,855 crore) plant near Chennai that will make base station controllers.

Others are looking for partnerships that could help meet the local-manufacture condition.

Alcatel, for instance, plans to support a bid by the state-owned Indian Telephone Industry, to which it is a technology provider; ITI qualifies as a domestic manufacturer (it has a unit in

Rae Barelli, among other locations).

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India continues to be one of the most dynamic and fastest growing major telecom markets in

the world. Indian Telecom sector, like any other industrial sector in the country, has gone

through many phases of growth and diversification. Starting from telegraphic and telephonic

systems in the 19th century, the field of telephonic communication has now expanded to

make use of advanced technologies like GSM, CDMA, and WLL to the great 3G Technology

in mobile phones. Day by day, both the public players and the private players are putting in

their resources and efforts to improve the telecommunication technology so as to give the

maximum to their customers.

The Indian telecom sector can be broadly classified into fixed line telephony and mobile

telephony. The major players of the telecom sector are experiencing an intense competition

in both the segments. The major players like BSNL, MTNL, VSNL in the fixed line and

Airtel, Hutch, Idea, Tata, Reliance in the mobile segment are coming up with new tariffs and

discount schemes to gain the competitive advantage. The public players and the private

players share the fixed line and the mobile segments. Currently the public players have more

than 60% of the market share.

Both fixed line and mobile segments serve the basic needs of local calls, long distance calls

and the international calls, with the provision of broadband services in the fixed line segment

and GPRS in the mobile arena. Traditional telephones have been replaced by the codeless

and the wireless instruments.

Regulatory reform has been central to the development of India’s telecoms market. Changing

reforms by successive governments over the last decade have dramatically changed the

nature of telecommunications in the country. The Telecom Regulatory Authority of India

(TRAI) has predicted that the rate of market expansion would increase with further

regulatory and structural reforms. The adoption of Unified Licensing, a change in the Access

Deficit Charge (ADC) regime, increased sharing of infrastructure and coverage of new areas

by operators were all expected to contribute to ongoing growth.

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By early 2007, the total telephone subscriber base (mobile and fixed) had passed the 200

million subscriber milestone. The number of phone subscribers was rising by an average of 6

million each month coming into 2007. With fixed-line subscribers at just over 40 million,

growth in that segment of the market had stalled in 2006 and was not likely to pick up again

for some time.

Regulatory change in the industry has not been easy. In the early stages of reform, the

structure of the market was frequently criticized. However, there has been an evolution

through a series of mergers and takeovers among the mobile operators that has seen a

welcome and productive consolidation. But, with what has now become a comparatively well

regulated commercial environment and with plenty of growth potential, the Indian market is

proving to be an attractive telecoms market for foreign investment with a clear way forward

to further growth.

In early 2007, estimates put the total worth of India’s telecommunications sector at nearly

US$100 billion. This was on the back of standard valuations of the country’s

telecommunications companies, both listed and unlisted. Listed companies like Bharti Airtel

and Reliance Communications could claim valuations in the range of US$26-$27 billion and

US$19-$20 billion, respectively. And big operators like Bharat Sanchar Nigam Ltd (BSNL)

and Idea Cellular would be likely to range in value from US$8 billion to US$30 billion if

they were listed. Over a 10 year period, the telecom industry saw numerous high profile exits

by multinational companies such as AT&T, Telecom Italia, British Telecom, Telstra,

Cingular and France Telecom. Others to exit included some local companies as well such as

Aircel, BPL, Escorts, RPG, Usha Martin, JT Mobile and Hindujas. Vodafone, which had also

exited the Indian market earlier on, had made a comeback with its successful bid for Hutch.

Over the years, the exits and entry of new players have been part of market consolidation,

ultimately resulting in strong value creation.

One segment of the market that has been puzzling is broadband Internet. Despite the manner

in which the country’s Internet market has been booming, India’s move into high-speed

broadband Internet access has been distinctly slow. And, while there appears to be

considerable enthusiasm amongst the population for the Internet itself, this has not been

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reflected in broadband subscription numbers. The dial-up Internet subscriber base has been

increasing steadily since 1999, accelerating rapidly in 2005 when the number of subscribers

increased by over 200% during that year. By early 2007, an Internet subscriber in India total

is more than 8.5 million. This equated to an estimated 60 million Internet users throughout

the country or a penetration of almost 6%. It was during 2006 that finally we witnessed a

substantial increase in broadband users with the total subscriber base in the country

expanding by almost 200% to just over 2 million by year’s end. Despite this increase,

broadband penetration in India still remains around only 0.2%; broadband services were still

only accounting for 25% of the total Internet subscriber base, still in itself comparatively low.

The mobile sector has grown from around 10 million subscribers in 2002 to reach 150

million by early 2007, the rate of market expansion being boosted by low tariffs and falling

handset prices. While GSM technology has continued to be dominant in the country’s mobile

market, CDMA has been increasing its market share and had grabbed 30% share by early

2007. With this in mind the mobile industry should continue its present strong growth.India’s

mobile subscriber growth :- GSM versus CDMA - 2000 - 2007Year GSM Subscribers

(millions) GSM Annual growth CDMA Subscribers (millions) CDMA

Annual growth

2000- 3.1 94% - -

2001- 505 76% - -

2002- 10.5 91% 0.8 -

2003- 22.0 110% 6.4 700%

2004- 37.4 70% 10.9 70%

2005- 58.5 57% 19.1 75

2006- 105.4 80% 44.2 131%

2007- 180.0 71% 85.0 92%

Mobile phone providers have also come up with GPRS-enabled multimedia messaging,

Internet surfing, and mobile-commerce. The much-awaited 3G mobile technology is soon

going to enter the Indian telecom market. The GSM, CDMA, WLL service providers are all

upgrading themselves to provide 3G mobile services.

Along with improvement in telecom services, there is also an improvement in manufacturing.

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In the beginning, there were only the Siemens handsets in India but now a whole series of

new handsets, such as Nokia’s latest N-series, Sony Ericsson’s W-series, Motorola’s PDA

phones, etc. have come up. Touch screen and advanced technological handsets are gaining

popularity. Radio services have also been incorporated in the mobile handsets, along with

other applications like high storage memory, multimedia applications, multimedia games,

MP3 Players, video generators, Camera’s, etc. The value added services provided by the

mobile service operators contribute more than 10% of the total revenue.

Bharti Airtel has the largest customer base with 31% market share, followed by Hutch and

BSNL with each holding 22% market share.

The 2007 budget has brought further relief to the customers with the reduction in the tariffs,

both local and long distance, and with slashing down the roaming rentals. This is likely to

lead to even more people going for cellular services and more and more use of the value

added services. However, landline telephony is likely to remain popular too, in the near

future. MTNL, the largest landline service provider, has recently taken some bold initiatives

to retain its market share and, if possible, expand it.

The telecom sector has shown impressive growth during the past decade. Today, more than

125 million telephone networks is one of the largest communication networks in world,

which continues to grow at an intense speed.

The rapid growth in the telecom sector can be attributed to the various pro-active and

positive policy measures taken by the government as well as the dynamic and entrepreneurial

spirit of the various telecom service providers both in private and public sector.

Two striking features of this growth viz. increasing preference for mobile phones and higher

contribution of private sector in the incremental growth have predominated the telecom

sector. The share of mobile phones (including WLL mobile) has overtaken the share of

landlines with 62% in the total number of phones. The private sector's contribution is also

increasing rapidly. Currently more than 30 lakh phones are being added each month and it is

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targeted that by the end of 2007 the total number of phones may reach a level of 250 million

taking the tele-density to more than 22% from the present level of 11.32%.

Network Expansion: The subscriber base for telephony services continued its growth during

March 2007 with 3.93 million subscribers being added during the month. A total of 66.51

millions subscribers have been added during the financial year 2006-2007 as compared to

41.91 millions in 2005-06, registering an increase of 58% in annual growth. This is highest

ever increase in subscribers base during a financial year after the opening up of telecom

sector for competition.

Wireless Service: Wireless services subscriber base increased by 3.53 million in March 2007

as compared with 6.21 million in February 2007. This lower growth in the month of March

2007 can be attributed to insistence by the Government to ensure verification of subscribers.

The total wireless subscribers at the end of March 2007 are 166.05 million as compared to

98.78 million in March 2006 registering an annual growth of around 68%.

Wireline Subscribers: In the Wireline segment a total of 0.40 million subscribers were

added during March 2007 as compared to a decline of 0.02 million in February 2007. With

this the total subscriber base of wireline reached 40.78 million in March 2007 as compared to

41.54 million in March 2006 registering a decline 1.82%.

Teledensity: The gross subscriber base reached 206.83 million at the end of March 2007.

The teledensity is 18.31% at the end of March 2007 as compared to 12.80 at end of the

March 2006 registering an increase of 43%.

Broadband Subscribers: The Broadband connections (256 Kbps download) in the country

have touched 2.30 millions at the end of March 2007 as compared to 1.35 millions in March

2006 registering a growth of 70%. The broadband subscribers were 2.21 million in February

2007 and thus there is addition of 0.09 million broadband subscribers in March 2007.

Increasing Role of Private Sector: The private sector has played a significant role in the

growth of telecom sector. The share of private sector has risen from 54.54 per cent in

December 2005 to 64.14 per cent in November 2006.

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Tariff Rebalancing Measures: There has been a dramatic fall in the tariffs due to increased

competition. The minimum effective charges for local calls have fallen considerably in recent

months especially for cellular service. The long distance domestic as well as international

charges have also fallen considerably.

Telecom Regulatory Authority of India (TRAI): TRAI was established under the Telecom

Regulatory Authority of India Act, 1997 enacted on March 28, 1997. The goals and

objectives of TRAI are focused towards providing a regulatory framework that facilitates

achievement of the objectives of New Technology Policy (NTP) 1999.

Investment Opportunities:

Manufacturing of equipment and components

Exports of telecom equipment and services

Setting up a national long distance bandwidth capacity in the country

Tele-banking

Telemedicine

Tele-education

Tele-trading

Telecom and value added services

"One-India" Tariff Plan

The Ministry of Communication and Information Technology had unlikely the idea of

introducing “One India Plan" scheme with the objective of providing an affordable tariff

throughout the country. In consonance with this vision, the public sector operators (BSNL &

MTNL) launched the "One India plan" with effect from March1, 2006. The new plan enables

the customers of BSNL & MTNL to call from one end to other of India at the cost of Rs. 1.00

per minute anytime of the day to any phone. The new plan makes the tariff technology

independent, taking away the distinction between the fixed line tariff and cellular tariff.

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HISTORY OF REFORMS

INTRODUCTION OF THE TELEPHONE In 1880, two telephone companies namely The Oriental Telephone Company Ltd. and The

Anglo-Indian Telephone Company Ltd. approached the Government of India to establish

telephone exchanges in India. The permission was refused on the grounds that the

establishment of telephones was a Government monopoly and that the Government itself

would undertake the work. By 1881, the Government changed its earlier decision and licence

was granted to the Oriental Telephone Company Limited of England for opening telephone

exchanges at Kolkata, Mumbai, Chennai and Ahmedabad. January 28, 1882, is a Red Letter

Day in the history of telephone in India. On this day Major E. Baring, Member of the

Governor General of India's Council declared open the Telephone Exchange in Kolkata,

Chennai and Mumbai. The exchange at Kolkata named "Central Exchange" was opened at

third floor of the building at 7, Council House Street. The Central Telephone Exchange had

93 number of subscribers. Bombay also witnessed the opening of Telephone Exchange in

1882 itself.

FURTHER DEVELOPMENTS

In 1902 first wireless telegraph station established between Saugor Islands and Sandheads. In

1907, first Central Battery working of telephones introduced in Kanpur. Between 1913 and

1914 first Automatic Exchange was installed in Simla. On July 23, 1927 Radio Telegraph

started working between UK and India. The beam station at Kirkee and Dhond opened by

Lord Irwin and greetings exchanged with the King of England. In 1933 Radio-Telephone

also started between India and UK. 12 channel carrier system was introduced in 1953. First

subscriber trunk dialing route commissioned between Kanpur and Lucknow in 1960. First

PCM system between city and Andheri telephone exchanges commissioned in Mumbai in

1975. First digital microwave junction was introduced in 1976. First optical fibre system for

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local junction commissioned at Pune in 1979. First satellite earth station for domestic

communications was established at Secunderabad(U.P.). First analog Stored Program Control

exchange for trunk lines was commissioned at Bombay. In 1984 C-DOT was established for

indigenous production and development of digital exchanges. In 1985, mobile telephone

services started(not commercially) in Delhi.

While all the major cities and towns in the country were linked with telephones during the

British period, the total number of telephones in 1948 was only around 80,000. Even after

independence, growth was extremely slow. The telephone was a

status symbol rather than being an instrument of utility. The number of telephones grew

leisurely to 980,000 in 1971, 2.15 million in 1981 and 5.07 million in 1991, the year

economic reforms were initiated in the country.

While certain innovative steps were taken from time to time, as for example introduction of

the telex service in Mumbai in 1953 and commissioning of the first [subscriber trunk dialing]

route between Delhi and Kanpur in 1960, the first waves of change were set going by Sam

Pitroda in the eighties. He brought in a whiff of fresh air. The real transformation in scenario

came with the announcement of the National Telecom Policy in 1994.

The telecom sector reforms so far have been undertaken in three phases. The first phase

began in the early 80s, when private manufacturing of customer premise equipment was

given the go-ahead in 1984. A large number of individual STD/ISD/PCO networks also took

place throughout the country, by way of private individual franchises. Mahanagar Telephone

Nigam (MTNL) was created out of the Department of Telecommunications (DOT) to handle

the sectors of Mumbai and Delhi respectively. A high-powered telecom commission was set

up in 1989, and Videsh Sanchar Nigam (VSNL) was made the international service provider

catering to all telecom services originating from India.

The second phase of reforms in the telecom sector commenced in, 1991 with the

announcement of a new economic policy. To begin with, the government delicensed the

manufacture of telecom equipment in 1991. It also opened up telephone lines services in

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1992. In 1994, basic telephony was opened to the private sector by granting six companies

with operating licenses. These companies were Bharti Telenet, Shyam Telecom, Tata Tele-

services and Reliance.

The National Telecom Policy announced in 1994 was part of this second phase of reforms. It

emphasized Universal Service and Qualitative Improvement in telecom services, among

other objectives. An independent statutory regulatory was established in 1997, and pursuant

to the policy intentions, Internet services were opened up. This was, however, only in 1998,

rather too late in comparison to the rest of the world. Since then, more companies have been

given the go-ahead to offer various telephony and other telecom services in the voice and

data segments.

The third phase of reforms began with the announcement of the New Telecom Policy in

1999. The underlying theme of NTP was to accompany in full competition through

unrestricted entry of private players in all service sectors. The policy favoured the migration

of existing operators from the era of fixed license payment system to that of revenue sharing.

The policy further outlined the strengthening of the regulator, opening up of International

Long Distance (ILD) and National Long Distance (NLD) services to the private sector and

corporatization of telecom services. Accordingly, the year 2001 witnessed the entry of

private operators in offering basic telephony and NLD services and the introduction of

additional players, in every cellular circle. This phase of reforms also saw VSNL's monopoly

ending too early in April 2002, when the ILD sector was thrown open to the private sector to

sign the era of unlimited competition in the industry.

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OUTCOME OF REFORMS

With these reforms, the telecom sector began witnessing a trend of growth never seen before.

Basic services have been opened for unlimited competition; more licenses have been issued

to the private sector for cellular services. Tele-density, too, has increased from 1.07 in 1995

to 2.8 in 2000 and stood at 5.72 as of August 2003. While it is expected to continue rising

sharply in a very short period, the issue of telephone accessibility remains to be addressed

satisfactorily.

The telecom sector has thus completely changed, both in terms of coverage, and efficiency of

services offered. Provision of landlines on demand in certain places, telephone exchanges

going digital, and the acceptability of optic fibre and wireless technology are but a few

instances of the change that swept the industry.

In the area of cellular services, the number of licenses stood at four operators in each circle,

with the services are being run in eighteen telecom circles and four metro cities. The state of

Jammu and Kashmir was the nineteenth telecom circle to be made operational, although this

was only in August 2003. The current subscriber base in the cellular market has risen to 183

lakh as of September 2003. The cellular service providers also providing a lot of value-added

services such as SMS, location based services, etc, and these to now form an important

constituent of the cellular service providers revenues.

In the Internet Service Provider (ISP) business, 460 licenses have already been granted, more

than 240 clearances have been issued to set up their own international data gateways. In the

first quarter of 2003-04, around 194 ISPs were operational of which 40 ISPs were also

providing Internet Telephony services.

In the meantime, the private basic service providers have started a level of fixed wireless

telephones. The level of these services along with the fast growth in the cellular subscriber

base has affected the growth of the fixed line subscribers to a large extent.

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CURRENT ISSUES

However, technological advancements in a sector do not in any way guarantee a smooth ride

for all the players in the industry. And the telecom sector in particular has seen more than its

share of controversies. In fact, it may even be argued that the third stage of reforms took

place only due to the problems faced by the sector at that point of time.

The most recent rise of controversies took place as a result of the entry of more WLL

operators on the scene with low costs. This threatened the survival of cellular players who

entered at a peak time. The major worry for the cellular industry was that just like the arrival

of SMS saw the paging industry lose most of its business, the entry of WLL would have a

similar effect on them.

As a result, in January 2002, the legal power struggle between the cellular operators based on

the Global System for Mobile communication (GSM) and the basic operators providing

limited mobility WLL services commenced. The first sign of the things to come was when

the cellular operators threatened not to offer interconnectivity to WLL operators and block

calls on those networks unless the government solved the issue of access charges. This was

followed by a rise in other issues, which required clarifications, legal opinions, and delivery

of judgements.

Of all the issues, two specific grievances of the cellular operators stood out. Firstly, all

cellular operators were made to pay an access charge of Rs. 1.20 for every 3 minutes for any

call terminated in the network of the basic operator. To provide interconnectivity between

cellular and fixed services, basic phone operators asked cellular operators for an access

charge for terminating calls on their network. On the other hand, for calls made from a basic

phone to a cellular phone, the basic operator paid nothing to cellular operators. The reason

being that basic operators have to provide cheap telephonic services to far-away areas; it

could not be made more expensive by paying access charges.

Their, other grievance was with regards to fee. When cellular phone operators raided into the

telecom sector, they had to pay immense fees of around Rs 3000 crore for getting their

licenses. On the other hand, WLL firms providing limited mobility services, had to pay a

- 20 -

small amount of Rs 500 crore. It is this large fee, combined with a rate of access charge,

which has made cellular telephony more expensive.

As a result, the Interconnect Usage Charges (IUC) rule was eventually announced. This also

led to the system of the calling party paying for the calls made on all networks, whether

basic, cellular, or wireless. However, the initial set of IUCs was not found to be efficient and

easily implementable. This led to the announcement of new IUC by TRAI towards the fag

end of October 2003. In addition to the IUC, TRAI also decided to impose an access deficit

charge. The players have been given a free hand to decide their tariffs by TRAI, and it has

announced its intention to interfere only in extreme cases.

There was another controversy that surrounded the telecom sector in 2003, which was

regarding the roaming facility being offered by limited mobility players. At the time of the

introductory launch of its WLL services (Reliance India Mobile) in December 2002,

Reliance Infocomm promised national roaming facility to its customers. As WLL services

were designed only to offer limited mobility within a specific Short Distance Charging Area

(SDCA), the advertisements put the cellular operators in a fix. According to them, the

offering of roaming services was a clear breach of existing regulations.

The Cellular Operators Association of India (COAI) eventually moved the Telecom Disputes

Settlement and Appellate Tribunal (TDSAT) accusing WLL operators for violating license

conditions by offering roaming facility. The clarification given by Reliance Infocomm that

the company had planned to offer multiple subscriptions to customers, thereby making the

roaming facilities being offered within the range of mental vision of the WLL license was

eventually not found to be satisfactory by the authorities.

The TDSAT verdict on the issues relating to the coverage provided by the WLL players was

given in August 2003. A majority verdict of the TDSAT, while clearing the WLL limited

mobility services directed the Government to restrict their mobility to a Short Distance

Charging Area (SDCA). This decision meant that the surrogate roaming facilities offered by

the WLL players were no longer permissible..

- 21 -

MARKET LEADERS AND THEIR SHARES IN TELECOM

SECTOR

Mobile telephony services are rapidly expanding and have contributed approximately

941% to new subscriber additions in January 2006. The segment’s subscriber base grew

5.16% mom to 80.61mn. Of the total subscriber’s added, almost 75% subscribers

belonged to the GSM segment and the rest were CDMA segment. This strong growth is

largely attributed to the lifetime validity cards launched by all major operators.

Further, telecom sector is divided in three segments they are as follow:

1. Global system for mobile communication (GSM)

2. Code division multiple access (CDMA)

3. Fixed wireless terminals (FWT)

- 22 -

The market share of different GSM operators is given below

The market share of different CDMA operators is given below

- 23 -

Subscribers Base of Cellular Services Operators

Market Share of Mobile Operators

- 24 -

GROWTH IN INDUSTRY

GROWTH OF MOBILE TECHNOLOGY

India has become one of the fastest growing mobile markets in the world. The mobile

services were commercially launched in August 1995 in India. In the initial 5-6 years the

average monthly subscribers additions were around 0.05 to 0.1 million only and the total

mobile subscribers base in December 2002 stood at 10.5 millions. However, after the number

of proactive initiatives taken by regulator and licensor, the monthly mobile subscriber

additions increased to around 2 million per month in the year 2003-04 and 2004-05.

Although mobile telephones followed the New Telecom Policy 1994, growth was tardy in the

early years because of the high price of hand sets as well as the high tariff structure of mobile

telephones. The New Telecom Policy in 1999, the industry heralded several pro consumer

initiatives. Mobile subscriber additions started picking up. The number of mobile phones

added throughout the country in 2003 was 16 million, followed by 22 millions in 2004, 32

million in 2005 and 65 million in 2006. The only countries with more mobile phones than

India with 156.31 million mobile phones are China – 408 million and USA – 170 million

India has opted for the use of both the GSM (global system for mobile communication) and

CDMA (code-division multiple access) technologies in the mobile sector. In addition to

landline and mobile phones, some of the companies also provide the WLL service.

The mobile tariffs in India have also become lowest in the world. A new mobile connection

can be activated with a monthly commitment of US$ 5 only. In 2005 alone 32 million

handsets were sold in India. The data reveals the real potential for growth of the Indian

mobile market. (Ref:TRAI)

- 25 -

Next Generation Networks

In the Next Generation Networks, multiple access networks can connect customers to a core

network based on IP technology. These access networks include fibre optics or coaxial cable

networks connected to fixed locations or customers connected through wi-fi as well as to 3G

networks connected to mobile users. As a result, in the future, it would be impossible to

identify whether the next generation network is a fixed or mobile network and the broadband

wirelessaccess would be used both for fixed and mobile services. It would then be futile to

differentiate between fixed and mobile networks – both fixed and mobile users will access

services through a single core network.

A rural network based on the extensive optical fibre network, using Internet Protocol and

offering a variety of services and the availability of open platforms for service development,

viz. the Next Generation Network, appears to be an attractive proposition and then used for

delivering multiple services at cheap cost.

The Telecommunication services were introduced in India soon after the invention of

telegraphy and telephone. The first Telegraph line between Kolkata and Diamond Harbour

was opened for traffic in 1851. By March 1884, telegraph messages could be sent from Agra

to Kolkata. As in the case of telegraph, telephone service was also introduced in Kolkata in

1881-82, barely six years after the invention of telephone. By 1900, telegraph and telephone

started serving Indian Railways. The first automatic exchange was commissioned at Shimla

in 1913-14 with a capacity of 700 lines.

The Telecommunication services in India have improved significantly since independence.

India operates one of the largest telecom networks in Asia and the 10th largest in the world

measured in terms of number of phones (as of end of 2004- 05). As on April 30, 2005, the

network comprises of 99.17 million telephone connections and over 2.15 million Public Call

Offices (PCOs). There are over 42.12 million cellular subscribers in India and the cellular

customer base is growing at the rate of over one million per month. The number of

- 26 -

departmental exchanges which was around 321 as on March 31, 1948, has increased to

37,565 by April 2005.

Tele-density per hundred population has grown from 7.08 in March 2004 to 8.95 in March

2005 and to a level of 12.74 in March 2006. Fully automatic International Subscriber Dialing

(ISD) service is available to almost all the countries. The total number of stations connected

to National Subscriber Dialing (NSD) is over 31,686. The growth in rural demand has

outstripped urban demand with telecom penetration in villages increasing in multiples.

Higher telecom dispersal is indicative of reduced economic disparities, experts point out.

Initially, the telephone exchanges were of manual type, which were subsequently upgraded to

Automatic Electro-Mechanical type. In the last one-and-a-half decades, a significant

qualitative improvement has been brought about by inducting Digital Electronic Exchanges

in the network on a very large scale. Today all the telephone exchanges in India are of

electronic type.

The voice and non-voice telecom services, which include data transmission, duplicate,

mobile radio, radio paging and leased line service, provide a wide variety of needs of both

residential and business customers. Integrated Services Digital Network (ISDN) facility is

available in a number of cities. A dedicated Packet Switched Public Data Network (I-NET)

with international access for computer communication services is also made available.

In the field of basic telecom service, there were 31 private licenses and two public sector

licenses at the end of March 2004. After the introduction of Unified Access Service License

regime in November 2003, 27 licenses out of these 31 licenses were converted to Unified

Access Service Licenses. Eighteen more licenses were issued for Unified Access Service

during 2004- 05.

In the area of mobile telephone, of the total 78 licenses, 55 were in the private sector and 23

in public sector. Of the total roll out of telephone connections (basic and cellular) as on April

30, 2005, private sector accounted for about 47 per cent and public sector accounted for 53

per cent.

- 27 -

DRIVERS IN TELECOM SECTOR IN 2007

Telecom sector will drive up the rate of growth of Indian GDP in the coming years. The

growth rate of mobile subscribers in India is currently an amazing 82.2%.

According to Union Minister of Communications and Information Technology, Dayanidhi

Maran, by the end of the year 2007 India will have 250 million mobiles subscribers (a

teledensity of 22 %) of whom 50 million will be rural connection. The 2007 geographical

coverage by mobile connectivity is targeted at 85% of the country.

By end of Nov ’06 India had 100 million GSM subscribers and 36 million CDMA

subscribers taking the tally to 136 million. Of the total GSM subscriber base of 100,786,048,

Metro contributed 19,471,600, A Circle cities -36,058,626, B Circle - 35,096,746 and C

Circle - 10,159,076.

Drivers for increasing mobile coverage are:

1. Infrastructure sharing – The government’s decision of providing support from USO

Fund will open up the vast unexploited market in rural areas. By 2007 rural areas will see

sharing of 8000 towers for mobile telephony as well as broadband coverage and an increase

in urban area from current 25% to 40%.

2. Research and Development – India will play most excellent role as a technology solution

provider. Affordable technology for masses and a comprehensive security infrastructure for

telecom network will be major focus areas in 2007.

3. Government Policies - Facilitating the availability of adequate bandwidth at competitive

prices to roll out advanced technologies like 3G and Wimax.

The telecom equipment sector is expected to hit the $100 billion mark within next three years

according to P. S. Ramesh, president, Telecom Equipment Manufacturers’ Association of

India(TEMA). The current size of the sector is $26 billion.

- 28 -

Major drivers would be:

1. High rate of investment - Already $1.5 billion has been committed and the next year is

likely to see another $2 billion of investment.

2. Government initiatives- like 100% FDI in telecom equipment manufacturing sector,

proposed setting up of Telecom Equipment and Services Export Promotion Council and

Telecom Testing and Security Certification Centre (TETC) makes the sector very attractive

for the investors.

3. India as centre seat - Companies like Cisco are making India their global center while

Indian concerns are very upbeat the sector’s growth.

4. Exports- Exports will form a sizeable component of the domestically manufactured

equipment.

5. High-end Technology - 3G mobile services, expected to roll out in 2007, will see $6

billion investment in the infrastructure. Domestic manufacturing centres will be major source

of the 3G network equipment. WiMax services will require WiMAX compatible high-end

technology equipment for its networks. This will lead to increasing domestic production to

reduce costs.

6. India as a manufacturing base - Major telecom companies like Nokia, Motorola and LG

have already set up their manufacturing facilities in the country to provide to the enormous

domestic demand. Decreased cost of production, high volume of sales and increasing

research to produce equipment to suit the Indian reality has led to drop in the cost of entry

level mobile handsets which fuels greater demand for it.

- 29 -

Average revenue per user stands at under $8 per month in 2006. Value Added Services will

boost the falling ARPU in the mobile sector. Messaging revenues will pass 1$bn annually in

2007. The major drivers of VAS are:

1. Local content development - Increasing focus on localization and development of

local content will make the VAS services more attractive. Decreasing revenue from

voice services will be protected by revenue from availability of local content

especially the local language songs as ring tones/hello tunes, localized wallpapers,

screensavers, contests.

2. Development of local language compatibility - Development of tools and fonts in

all major Indian languages by 2007.

3. M–commerce – Increasing development of applications like M-Ticketing for movies,

Air Travel, Electricity bill payment.

4. Mobile TV - Telecom ministry’s target of making Mobile TV available in top 20

cities/towns in 2007.

5. Entertainment – Release of the first bollywood film for mobile and expected flow of

more such films, mobile episodes of TV soaps, conversion of popular content like

Mahabharat, Malgudi days for mobiles.

6. M-education – Projects like LILA ‘Learn Indian Language through Artificial

Intelligence’ are the ancestor of the development and usage of the medium in an

economy like India.

7. Advertising – The availability of complete profile data of subscribers along with

tracking via GPRS makes it possible to deliver message to the niche audience. This

unique feature in combination with the available potential will see increasing focus of

advertisers and a growth in revenue from advertising.

8. Video based applications – With 2.5G networks and expected roll out of 3G in 2007,

video based applications like video SMS, accessing and sharing of video clips, pod

casts and others.

- 30 -

CONSTRAINTS Slow Pace of the Reform Process

It would be difficult to make in-roads into the semi-rural and rural areas because of the lack

of infrastructure. The service providers have to incur a huge initial fixed cost to make inroads

into this market. Achieving break-even under these circumstances may prove to be difficult.

Hugh Financial Requirement

The sector requires players with huge financial resources due to the above mentioned constra int.

Upfront entry fees and bank guarantees represent a sizeable share of initial investments. While

the criteria are important, it tends to support the existing big and older players. Financing these

requirements require a little more liberal approach from the policy side.

Supply

Intense competition has resulted in prompt service to the subscribers. However, smaller towns

and villages continue to have waiting periods on account of non-availability of adequate

infrastructure.

Barriers to Entry

High capital investments, older and well-established players who have a nation wide network,

license fee, continuously evolving technology and falling tariffs.

Bargaining Power of Customer

A wide variety of choices available to customers both in fixed as well as mobile telephony has

resulted in increased bargaining power for the customers.

Competition

The entry of fourth cellular player and commencement of WLL services has resulted in intense

competition in the bigger cities. Reducing tariffs will hurt the new entrants, as they will be unable

to recover their high capital investments.

- 31 -

INTERNET SERVICE PROVIDERS IN INDIA

The federal government of India ended the monopoly of VSNL over provision of Internet

services with effect from October 7, 1998. Today, there are more than 200 private sector ISPs

(Internet Service Providers) either already active or about to start operations. Satyam

Infoway Ltd. is the first private sector ISP in India.

There is no bar on the number of companies which will be given licenses and license fees is

virtually non-existent – none for the first five years and a mere Rs. 10 for the next 10 years.

The equity for foreign investment has been kept at 49 per cent as is the norm with other

telecom services opened to the private sector.

The interested companies are free to fix their tariff and there is no insistence on coverage. E-

mail companies have been allowed to automatically become Internet Service Providers

(ISPs). However, pending a more defined policy, 'conditional licenses' will be given to

companies which have defaulted on license fees in other services such as cellular, radio

paging and basic phone services.

The present policy is not very different from the previous one prepared by a committee

headed by Dr. Bimal Jalan and announced by a previous government. The policy based on

Dr. Jalan Committee recommendations was announced on January 15, 1998. But barely a

month later, the Telecom Regulatory Authority of India (TRAI) invalidated the Internet

licensing policy on grounds that its recommendations on the terms and conditions of licenses

were not obtained. The DoT filed an appeal in the Delhi High Court, which on July 16

upheld its appeal. The case is now (as at November 29, 1998) pending before a multi-

member bench, but its verdict is unlikely to affect the overall progress of matters in this field.

The few points of departure from the Dr. Jalan report are a result of inputs provided by the

national task force on information technology, the TRAI and the Law Ministry where the

policy was held up for seven weeks. As compared to the previous policy, the license period

- 32 -

has been extended from 10 years to 15 years and the fees to be paid from the sixth year

onwards has been fixed at Re. 1 per year per licensee. The Government was in favour of

waiving license fees altogether instead of the initial period of five years but was compelled to

fix a token amount of Re. 1 following objections from the Law Ministry.

Three categories of ISPs have been specified. In the category A, licenses are given on an all-

India basis, under the second category fall the 20 territorial circles and the four metro

telephone systems of Delhi, Mumbai, Chennai and Calcutta as well as Bangalore, Hyderabad,

Ahmedabad and Pune. Any secondary switching area (equivalent to a district) form a

separate category C service area with the exception of the eight cities defined in B category.

The security deposit has been fixed at Rs. 2 crores, Rs. 20 lakhs and Rs. 3 lakhs (note: 1

lakh=100,000, 1 crore=100 lakhs) respectively.

Private companies have been allowed to establish their own gateways in addition to using the

gateways of DoT, VSNL or authorized public/government organizations. But this concept is

only in principle because the Government has set up an inter-ministerial committee which

will first go into security-related issues before granting permission to ISPs to set up alternate

international gateways. Till then subscribers to ISPs will have to tackle with the problem of

congestion facing existing Internet subscribers unless the VSNL dramatically increases the

number of access nodes.

In addition to leasing transmission links from the DoT, ISPs are also allowed to utilize the

infrastructure planned to be set up by the railways, State Electricity Boards, Power Grid

Corporation etc.

POLICY FRAMEWORK

- 33 -

FDI Policy for Telecom sector:

The Government, vide Press Note 5 (2005 Series) dated 3.11.2005, had notified the

enhancement of Foreign Direct Investment (FDI) limits from 49 per cent to 74 per cent in

certain telecom services subject to specified conditions. The Government has on a review of

the policy in this regard, decided to enhance the Foreign Direct Investment limit from 49 per

cent to 74 percent in telecom services subject to the following conditions;

(i) The enhancement of the FDI ceiling will be applicable in case of Basic, Cellular, Unified

Access Services, National/ International Long Distance, V-Sat, Public Mobile Radio Trunked

Services (PMRTS), Global Mobile Personal Communications Services (GMPCS) and other

value added Services.

(ii) Both direct and indirect foreign investment in the licensee company shall be counted for

the purpose of FDI ceiling. Foreign Investment shall include investment by Foreign

Institutional Investors (FIIs), Non-resident Indians (NRIs), Foreign Currency Convertible

Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts

(GDRs) and convertible preference shares held by foreign entity. Indirect foreign investment

shall mean foreign investment in the company/ companies holding shares of the licensee

company and their holding company/companies or legal entity (such as mutual funds, trusts)

on proportionate basis. Shares of the licensee company held by Indian public sector banks

and Indian public sector financial institutions will be treated as `Indian holding’. In any case,

the `Indian’ shareholding will not be less than 26 percent.

(iii) FDI up to 49 percent will continue to be on the automatic route. FDI in the licensee

company/Indian promoters/investment companies including their holding companies, shall

require approval of the Foreign Investment Promotion Board (FIPB) if it has a bearing on the

overall ceiling of 74 percent. While approving the investment proposals, FIPB shall take note

that investment is not coming from countries of concern and/or unfriendly entities.

(iv) The investment approval by FIPB shall envisage the conditionality that Company would

adhere to license Agreement.

- 34 -

(v) FDI shall be subject to laws of India and not the laws of the foreign country/countries

The details of policy initiatives taken during the year 2005-06 are as under:

Annual licence fee for NLD as well as ILD licenses reduced to 6% of AGR w.e.f.

January 1, 2006.

Entry fee for NLD licenses reduced from Rs.100 crore to Rs. 2.5crore w.e.f.

December 14, 2005.

Entry fee for ILD reduced from Rs.25 crore to Rs.2.5 crore.

NLD service providers shall be permitted to carry intra circle traffic with mutual

agreement of originating service provider. Agreement with terminating service

provider shall not be required.

Mandatory roll out obligations for future NLD licences as well as existing NLD

licensees waived off.

No more mandatory roll out obligations for ILD services licensees except for having

atleast one switch in India. Roll out obligations for existing ILD service licensee

stands waived off from December 14, 2005

Networth and paid up capital of the applicant company for NLD as well ILD service

licence shall be Rs.2.5 crore only and while counting the networth, the networth of

promoters shall not be counted.

NLD service providers can access the subscribers directly for provision of leased

circuits/closed user groups and can provide last mile connectivity. The ILD service

providers can access the subscribers directly only for provision of leased

circuits/closed user groups.

Access service provider can provide internet telephony, internet services and

broadband services. If required, access service provider can use the network of

NLD/ILD service licensee.

IP-II and IP VPN licences abolished with effect from November 10, 2005. The

existing licensees allowed to migrate to NLD / ILD service licence.

ISP with Internet telephony (restricted) to be charged license fee at 6% of AGR w.e.f.

January 1, 2006.

- 35 -

Annual license fee in respect of VSAT commercial to be charged at 6% of AGR

w.e.f. January 1, 2006.

BSNL announced 33% reduction in call charges for all the countries for International

calls.

Prior experience in telecom sector no more a prerequisite for grant of telecom service

licences.

Call centres permitted to use internet telephony to the extent it is permitted by the

telecom service providers / ISPs.

Sharing of common Infrastructure between domestic and International OSP centres

permitted.

In the Budget 2005-2006, various specific measures are included to encourage

telecom equipment manufacturing activity and to enable faster expansion of the

telecom network. To mention a few:

217 ITA-1 items will be at zero Customs Duty. (110 items were already at

zero).

Specified capital goods required to manufacture ITA-1 items shall be at zero

Customs Duty.

All inputs required to manufacture ITA-1 items shall be at zero Customs

Duty.

No Counter Vailing Duty (CVD) on IT software.

Mobile phone components exempted from 4% CVD.

Mobile phone removed from the "One out of the six criterion" for income tax

return purpose.

Corporate tax reduced from 35% to 30%.

SALES PROSPECTS

- 36 -

EQUIPMENT MARKET

The total network equipment market is estimated at approximately $6.3 billion in 2003.

India represents a huge opportunity for handset vendors. Gray market accounts for over 60%

of the handset market in India. Despite the market for over 10 million handsets, all handsets

are imported into India. Nokia, which has a 45% market share, has not ventured to

manufacture locally and has instead recently got permission for wholesale trading of

imported handsets. Samsung follows with 21% share, Motorola has 8% share. LG, Alcatel,

Sony-Ericsson, National Panasonic, Siemens, Phillips and Mitsubishi together hold the

remaining 26% market share.

The cellular sector is witnessing dynamic technology trends across the globe with the entry

of GPRS/EDGE networks and the anticipated entry of 3G networks in the future. With voice

revenues projected to shrink in the near future, GSM cellular operators are turning to GPRS

to keep their business growing. These technologies would help enhance revenues for telecom

operators by allowing data applications such as:

Value-added services (news, stocks, sports results, weather information), Geographic

positioning systems (one’s whereabouts, the nearest hotel, the route to any destination), e-

commerce for micro-payments, banking, e-mails and images.

Indian communication equipment industry:

Category Revenue in US$ Million Growth

FY 2002-03 FY 2001-02 (stated as %)

Carrier Equipment

Product 2,813 - -

Services 522 - -

Enterprise Equipment

- 37 -

Product 897 828 1.39

Services 158 127 21.99

Others

GSM phones 398 224 78.07

CDMA phones 125 - -

T&M 65 49 34.0

Telecom Software 1238 1038 19.25

Cellular service 243 161 50.05

Others 1886 1466 28.65

According to JP Morgan Stanley, the cellular segment will be a key driver in the growth in

telecom services in India. The share of public operators in this market is likely to diminish

and competition would establish itself faster and get a bigger portion of the market. This

would be led by further liberalization, increasing customer expectations, convergence of

technologies, and the ability of private players to offer it to the market faster than the current

operator. The market share of CDMA services would increase considerably, with Reliance

deploying it on a national scale and using it as their primary service offering. Telecom

service providers are increasingly focusing on corporate telecom services. Though retail

contributes more than 95 percent of the market, it is the remaining 4-5 percent of the market,

which is getting more important for revenue generation.

- 38 -

Until late 2003, frequent proceedings between GSM and CDMA operators around the issue

of full versus limited-mobility franchise rights had slowed down market progress. With the

ending of proceedings and the adoption of a unified licensing regime, all operators can now

concentrate on rolling out networks, attracting subscribers and improving services instead of

fighting battles in the press and in court.

India’s telecommunications sector is now among the most deregulated in the world and

presents potentially worthwhile opportunities for service providers and equipment vendors

alike. A few of the international companies that have successfully seized the opportunity on

big scales are Agilent, Cisco, HP, Hughes Network Systems, Lucent Technologies, Motorola,

Qualcomm, Tekelec, Sprint, AT&T, MCI, Lightbridge, and UT Starcom.

Opportunities for Telecom equipment vendors:

Buyer Project Name Potential U.S. Export Value (in

Millions)

BSNL Fixed and Mobile Network Expansion $2,900

MTNL Fixed and Mobile Network Expansion $120

Reliance Reliance CDMA & Optic Fiber Network $4,000

Bharti Bharti Tele-Ventures $250

Idea Idea GSM Rollout $1,100

Hexacom Expansion of GSM Network in Rajasthan $10

Hutchison Hutchison-Essar GSM Network Expansion $400

BPL GSM Expansion $700

Tata Expansion of CDMA fixed and mobile services $4,00

COMPETITION

- 39 -

HIGH ON OPPORTUNITY

Indian Cellular Services Market to Exceed US$25 billion by 2011 : Indian cellular services

revenues were US$8.95 billion in 2006 and are projected to grow at a compound annual

growth rate (CAGR) of 18.4 percent from 2007 to 2011 to reach US$ 25.617 billion. Data

revenues will outpace growth of voice revenues and contribute 22 percent of revenue in 2011

from 9.6 percent in 2006.

According to a Frost & Sullivan study for the period of 2002-2006, the telecommunication

market in India is expected to increase by 13%annually. The teledensity in India is expected

to increase to 10% because of the aggressive marketing efforts of telecom players.

Major telecom players in India are MTNL, BSNL, Tata Indicom, Reliance Infocomm, Airtel

(Bharti Telecom), Hutch and BPL. According to Morgan Stanley's report, the telecom market

in India (including basic, mobile. NLD. and data service) will increase to Rs. 81000 crore in

2007 from Rs.41.000 crore in 2002 .

According to report presented by Nasscom and Morgan Stanley, mobile service segment will

be the fastest growing segment in India with revenues increasing to 12.41 billion dollars in

2004-05. The subscriber base of cellular service providers using WLL-CDMA technology

will increase by 86.6% (amounting to 14 million subscribers) in 2004-05 whereas the

increase will be only 40% (amounting to 35 million) in the subscriber base of providers using

GSM technology. The revenue of the cellular operators using WLL-CDMA technology will

increase to 681.32 million dollars.

Telecom players are reducing their prices drastically to attract customers and increase their

market share. Therefore, telecom players are concentrating on effective utilization of existing

infrastructure rather than making investments on advanced technology and enhancing the

quality of their services. According to a report, basic communication service providers are

not able to meet the benchmark for quality set by TRAI.

- 40 -

As, the government permitted only two operators in each circle. But the government has

now moved to unrestricted entry and unlimited competition in all types of services. As a

result, there are now multiple operators in each service and in each license area. The entry of

additional operators (typically BSNL or MTNL) had led to drastic tariff reductions. Indeed,

the competition was so intense that the Telecom Regulatory Authority of India (TRAI)

stopped setting the price for mobile services and allowed the market to set prices.

The unified access license and the liberal takeover and foreign direct investment norms are

expected to catalyze consolidation. In addition, in early 2004, TRAI published norms that

would, under certain conditions, allow intra-circle mergers (i.e., at the regional level)

between operators. Mergers will be allowed, for example, if the new entity does not have a

market share above 50%, or if the top two firms in a given circle do not together account for

a market share of 75% or higher. If these conditions are not met, TRAI has asked the DOT

to conduct a detailed impact study on the proposed merger before granting its approval.

The competitive nature of the Indian market leads analysts to predict that there will be a

increase in takeovers at the national level in 2004 and 2005, and that only the large operators

- BSNL/MTNL, Reliance Infocomm, Tata, Hutchison-Essar, Idea and Bharti - will survive.

The consolidation has already begun. Aircel, which operates GSM mobile services in the

southern state of Tamil Nadu (except Chennai), has in 4Q03 taken 100% stake in RPG

Cellular in the city of Chennai. Aircel will now be able to offer services in the capital city

also. Aircel had 475,705 customers in Tamil Nadu while RPG Cellular has 212,823

customers in Chennai.

Idea Cellular, the three-way joint venture between the Tata group, the Aditya Birla group and

AT&T, has signed a purchase agreement to buy 100% stake in Escotel, which operates in the

six states of Kerala, Haryana and UP (west), Uttar Pradesh (east), Rajasthan and Himachal

Pradesh. The subscriber base in these states exceeds 800,000. The 100% takeover comprises

the 51% stake held by Escotel and the 49% stake held by First Pacific. Hutchison is

consolidating all its 11 operating circle licenses into a single holding company, Hutchison-

Essar. Post consolidation, Essar is likely to have a 35% stake in the company. The Tata-

- 41 -

owned and recently privatized VSNL has purchased Dishnet Internet and DSL business for

$65.7 million while Tata Teleservices may buy HFCL Infotel’s Punjab circle operations.

Reliance Infocomm has acquired Flag Telecom for $112 million. With this, Reliance

Infocomm will become a leading supplier of bandwidth to over 100 telecom players round

the globe.

There are three types of players in telecom services:

- State owned companies (BSNL and MTNL)

- Indian owned companies (Reliance Infocomm, Tata Teleservices)

- Foreign invested companies (Hutchison-Essar, Bharti Tele-Ventures, Escotel, Idea Cellular,

BPL Mobile, Spice Communications)

BSNL

On October 1, 2000 the Department of Telecom Operations, Government of India became a

corporation and was renamed Bharat Sanchar Nigam Limited (BSNL). BSNL is now India’s

leading tele-communication company and the largest public sector undertaking. It has a

network of over 45 million lines covering 5000 towns with over 35 million telephone

connections.

The state-controlled BSNL operates basic, cellular (GSM and CDMA) mobile, Internet and

long distance services throughout India (except Delhi and Mumbai). BSNL will be

expanding the network in line with the Tenth Five-Year Plan (1992-97). The aim is to

provide a telephone density of 9.9 per hundred by March 2007. BSNL, which became the

third operator of GSM mobile services in most circles, is now planning to overtake Bharti to

become the largest GSM operator in the country. BSNL is also the largest operator in the

Internet market, with a share of 21 per cent of the entire subscriber base.

BSNL plans to add 21.8 million GSM phone and 6.76 million CDMA phone between 2002-

2007. BSNL will buy GSM and CDMA switches and transmission equipment and SIM cards.

BHARTI

- 42 -

Established in 1985, Bharti has been a pioneering force in the telecom sector with many firsts

and innovations to its credit, such as being the first mobile service in Delhi, the first private

basic telephone service provider in the country, the first Indian company to provide

comprehensive telecom services outside India in the Seychelles, and the first private sector

service provider to launch National Long Distance Services in India. Bharti Tele-Ventures

Limited was incorporated on July 7, 1995 for promoting investments in telecommunications

services. Its subsidiaries operate telecom services across India.

Bharti’s operations are broadly handled by two companies: the Mobility group, which

handles mobile services in 16 circles out of a total 23 circles across the country, and the

Infotel group, which handles the NLD, ILD, fixed line, broadband, data, and satellite-based

services. Together they have so far deployed around 23,000 km of optical fiber cables across

the country, coupled with approximately 1,500 nodes, and have presence in around 200

locations. The group has a total customer base of 6.45 million, of which 5.86

million are mobile and 588,000 fixed line customers, as of January 31, 2004. In mobile,

Bharti’s footprint extends across 15 circles. The company plans to invest $444 billion in the

current financial year. It plans to install 29 mobile switching centers, buy transmission

equipment and also roll out new networks in five new circles with an additional investment

of $155 million.

MTNL

Mahanagar Telephone Nigam Limited (MTNL) was set up on 1st April 1986 by the

Government of India to upgrade the quality of telecom services, expand the telecom network,

introduce new services and to raise revenue for telecom development needs of India’s key

metros in Delhi, the political capital, and Mumbai, the business capital. In the past 17 years,

the company has taken rapid step to emerge as India’s leading and one of Asia’s largest

telecom operating companies.

MTNL operates basic, cellular and internet services in the metro cities of Delhi and Mumbai.

These two cities already have a high telephone density compared to the rest of India. MTNL

has over 5 million subscribers and 330,000 mobile subscribers.

- 43 -

MTNL plans to add 1.6 million landline/CDMA phones and 1.15 million GSM mobile

phones between 2002-2007. The company plans to invest $500 million during 2004-2005 to

expand GSM and CDMA services.

RELIANCE INFOCOMM

Reliance is a $16 billion corporation involved in businesses ranging from oil exploration and

refinery to power and textiles. It is also an integrated telecom service provider with licenses

for mobile, fixed, domestic long distance and international services. Reliance Infocomm

offers a complete range of telecom services, covering mobile and fixed line telephony

including broadband, national and international long distance services, data services and a

wide range of value added services and applications. Reliance India Mobile, the first of

Infocomm's initiatives was launched on December 28, 2002. Reliance Infocomm plans to

extend its efforts beyond the traditional value chain to develop and install telecom solutions

for India's farmers, businesses, hospitals, government and public sector organizations.

Recently, Reliance was permitted to provide only “limited mobility” services through its

basic services license. However, it has now acquired a unified access license for 18 circles

that permits it to provide the full range of mobile services. It has rolled out its CDMA

mobile network and enrolled more than 6 million subscribers in one year to become the

country’s largest mobile operator. It now wants to increase its market share and has recently

launched pre-paid services.

TATA TELESERVICES

Tata Teleservices is a part of the $12 billion Tata Group, which has 93 companies, over

200,000 employees and more than 2.3 million shareholders. Tata Teleservices provides basic

(fixed line services), using CDMA technology in six circles: Maharashtra (including

Mumbai), New Delhi, Andhra Pradesh, Tamil Nadu, Gujarat, and Karnataka. It has over

800,000 subscribers. It has now migrated to unified access licenses, by paying a $120

million fee, which enables it to provide fully mobile services as well.

- 44 -

The company is also expanding its footprint, and has paid $90 million to DoT for 11 new

licenses under the IUC (interconnect usage charges) regime. The new licenses, coupled with

the six circles in which it already operates, virtually gives the CDMA mobile operator a

national footprint that is almost on par with BSNL and Reliance Infocomm. The company

hopes to start off services in these 11 new circles by August 2004. These circles include

Bihar, Haryana, Himachal Pradesh, Kerala, Kolkata, Orissa, Punjab, Rajasthan, Uttar Pradesh

(East) & West and West Bengal.

Market share of mobile service operators:

Company Million Subs (Feb 2004) % share

Reliance 6.82 21.53

Bharti 6.19 19.58

BSNL 5.16 16.03

Hutchison 4.82 15.03

Idea Cellular 3.52 11.13

BPL 1.76 5.58

Spice 1.18 3.74

Aircel 0.84 2.68

Tata Indicom 0.63 1.99

MTNL 0.40 1.29

Hexacom 0.27 0.87

HFCL 0.02 0.0

MARKET OVERVIEW

The growth trend in Indian telecom reflects those in the global industry. Wireless has been

the principal growth engine, accounting for two-thirds of the total telecom subscriber

additions during the last three years. The Indian telecom industry is balanced to grow

- 45 -

exponentially. Wireless sector will become stronger in the unified licensing environment,

and wireless has already exceeded wireline connections. Teledensity will cross 20 percent in

the next five years, beating the Government of India’s target by three years, while telecom

revenues will almost triple from $9 billion in 2003 to $23-25 billion by 2007.

The wireless revolution will be fuelled by several factors. The affordability of wireless for

the masses will be sustained on account of low tariffs, cheap handsets and attractive

financing schemes. Wireless operators will continue to focus on prepaid products in order to

increase the adoption of wireless among the lower middle income and low-income groups.

Wireline users will increasingly migrate to wireless, lured by the benefits of mobility and the

attractive bundled plans that are being launched by the wireless operators. Wireless data

services will also become a growing revenue steam. Some operators have already deployed

3G technologies on their networks. With further level, it will account for a significant

portion of the wireless revenue pie.

As of February 2004 the total mobile market had reached 31.67 million, of which 24.65

million subscribers were GSM and 7.02 million were CDMA (excluding Bharat Sanchar

Nigam Limited [BSNL] and Mahanagar Telephone Nigam Limited [MTNL]). Of these

totals, Reliance Infocomm had 6.822 million subscribers (6.065 CDMA and 0.757 GSM),

Bharti had 6.199 million (GSM), BSNL had 4.954 million, (GSM) Hutch had 4.826 million

(GSM), and Idea Cellular had 2.584 million (GSM). Mobile connections have reached to 56

million by the end of 2004, representing a 96 per cent increase over 2003, according to

Gartner. As per the Cellular Operators Association of India, GSM mobiles phone will reach

471 million by 2010. The pace of growth will accelerate with the introduction of “full

mobility” CDMA loop services and the adoption of unified licenses.

MARKET ACCESS

In order for international companies to enter the mobile services in India, they have to

complete the following formalities:

- Find a JV partner (Indian company) who will have 51 percent stake;

- If a new company, it has to file for Unified Access service license;

- 46 -

- One time entry fee of ranging from $ 0.44 to $44 million, depending on the circle;

- Quarterly revenue share (as part of license fee): ranging from 6-10% depending on the

circle;

- Performance bank guarantees which is equivalent to four times the revenues/license fee.

In addition to license fees, the cellular licenses pay range charges on a revenue share basis of

2% of AGR for spectrum up to 4.4 MHz or 3% of AGR for spectrum upto 6.2 MHz. The

charges will be 4% of AGR for spectrum beyond 6.2 MHz, which shall be given if the

subscriber base is more than 500 thousand.

In terms, of NTP-99, cellular operators will be free to provide, within their area of

operations, all types of mobile services, including voice and non-voice messages, data

services and PCOs utilizing any type of network equipment, including circuit and/or package

switches that meet the relevant International Telecommunication Union (ITU)/Telecom

Engineering Center (TEC) standards.

The telecom sector highly capital-intensive and requires huge investments over a prolonged

period of time. Several domestic operators and overseas investors want:

- FDI limit to be increased from the present cap of 49% to 74% and the same has been

done.

Investments by FIIs to be exempt from the sectoral limit imposed on FDI.

There are few other market barriers for entry into the Indian mobile services market, such as:

- High import duty on hand sets and infrastructure import ranging between 20-40 percent

- Huge entry/license fees

- Lack of adequate spectrum for expansion of wireless services

- Lack of rational policy on spectrum management and allocation.

MARKET TRENDS

MOBILE SERVICE TRENDS

Summary findings for GSM Operators

- 47 -

Share of prepaid subscribers in total subscriber base is 80.54% at the end of Mar-06, as

compared to 78.32% at the end of Dec 2005.

Postpaid growth rate continue to decline in this quarter as well from 7% to 4.43%.

Growth rate of prepaid segment increased from 18% to 22% during the quarter.

All India Average Revenue Per User (ARPU) for the quarter ending March 2006 is Rs.

366 showing an increase of 1.2% from Rs.362 (Dec-05).

ARPU of BSNL/MTNL increased by 10.5%, from Rs. 354 to Rs. 391.

All India postpaid ARPU at Rs. 628 per month is about 2.1 times that of all India prepaid

ARPU of Rs. 298 per month.

Average Minutes of Use (MOU) per subscriber per month for the quarter has increased

from 393 to 395.

On an average, a GSM subscriber makes 163 minutes of outgoing calls, sends 46 SMS

and receives incoming calls for 232 minutes in a month.

While MOU per Subscriber per month has increased from 155 to 163 incoming MOU has

declined from 237 to 232.

The ratio of incoming – outgoing traffic has shown a shift towards outgoing, from 61:39

to 59:41.

Overall proportion of roaming revenue to the total revenue for GSM service providers is

14% as against 15% in the previous quarter.

- 48 -

On an average 84.99% of the total outgoing MOUs are local calls (terminating within the

service area), 14.41% are NLD calls and the rest 0.59% are ILD calls.

Mobile-to-Mobile Local (Intra-circle) traffic accounts for 84% of the Local (Intra-circle)

traffic.

The trend indicates that the proportion of local calls (MOU) to total outgoing MOU is

increasing and that of long distance is falling.

Summary findings for CDMA Operators

Share of prepaid subscribers in total subscriber base is 79% at the end of March 2006, as

compared to 82% at the end of December 2005.

All India ARPU for the quarter ending March 2006 is Rs. 256 i.e. same as in the quarter

ending (December 2005).

All India postpaid ARPU, which is at Rs. 547 per month is about 2.9 times that of all

India prepaid ARPU of Rs. 184 per month.

Average MOU per subscriber per month for the quarter is 550, showing an increase of

19% from 462 per month during the quarter ending Dec-2005.

The ratio of incoming – outgoing traffic is reversed and is 48:52 in the quarter ending

March 2006 as against 56:44 in December quarter.

Mobile-to-Mobile Local (Intra-circle) traffic accounts for 81% of the Local (Intracircle)

traffic.

The market for telecom services in 2002-03 has been estimated to be $10.7 billion. The

equipment market is estimated to have reached a turnover of $6.27 billion in 2002-03, up

- 49 -

from $5.71 billion in 2001-02. The telecom industry comprising services and equipment is

expected to increase to $24.29 billion by 2006.

Private players are steadily acquiring an increasing share of the telecom services market.

Ten years after the sector was opened to private participation, they account for more than a

third of the total subscriber base in India. Private operators play the largest role in mobile

services, where the 10 companies that own more than 70 licenses are operating in 23 service

areas (there are six operators of mobile services in each circle). BSNL’s existing market

position -- particularly its authority in remote and rural areas -- has made it harder for private

players to operate. BSNL’s nationwide presence is also allowing it to catch up with private

players in the mobile market, where the state operator provides the most comprehensive

coverage.

Despite the regular concessions to the private operators and the rapid pace at which the

mobile market is growing, foreign investors continue to withdraw from telecom service joint

ventures. Vodafone has sold its 20.76% stake in RPG Cellular, one of the two original

operators in Chennai, to the Sterling Infotech group, promoted by Chinnakannan

Sivasankaran. AT&T decided to exit from its joint venture with BPL Mobile Cellular by

selling its 49% stake to its Indian partner BPL. The acquisition of AT&T’s stake will give

BPL flexibility in approaching other financially strong investors. Telesystem International

Wireless of Canada sold its 27.5% stake in Hexacom, operator of mobile services in

Rajasthan, to Hexacom. First Pacific sold its 49% stake in Escotel to Idea Cellular. And

Qualcomm dropped plans to invest $200 million for a 4% equity stake in Reliance

Infocomm.

MERGERS & AQUISIONS

In telecom industry, there have been many mergers, acquisitions and tie-ups between various

service providers. The players seem to be consolidating to achieve economics of scale and

improve their profitability. There may be further consolidation in the telecommunication

- 50 -

market Tatas merged with Birla-AT&T. Bharti Telecom acquired Spice Telecom. Further

Tata Teleservices acquired VSNL in 2002 and Tata's Idea bought Escotel. To enhance its

basic telephone service business, Tata also tied up with Hughes Telecom. There may be

further consolidation in the telecom industry leading to only a few major players operating in

the industry.

Year ’06 will be the period in which foreign players throng the Indian telecom market,

broadband faces a boom in subscriber numbers, value-added services are showered on the

subscribers and convergence takes on a new meaning.

“We can look forward to the introduction of latest technologies such as 3G that will offer

consumers a more enriching mobile experience,” says Sunil Bharti Mittal, chairman and

group MD, Bharti Enterprises.

According to market analysts, more foreign players, especially from the European and Asia

Pacific regions, are likely to enter India.

TELECOM COMMISSION

The Telecom Commission was set up by the Government of India wide notification dated

April 11, 1989 with administrative and financial powers of the Government of India to deal

- 51 -

with various aspects of Telecommunications. The Commission consists of a Chairman, four

full time members, who are ex-officio Secretary to the Government of India in the

Department of Telecommunications and four part time members who are the Secretaries to

the Government of India of the concerned Departments.

The Telecom Commission and the Department of Telecommunications are responsible for

policy formulation, licensing, wireless spectrum management, administrative monitoring of

Puss, research and development and standardization/validation of equipment etc. The multi-

pronged strategies followed by the Telecom Commission have not only transformed the very

structure of this sector but have motivated all the partners to contribute in accelerating the

growth of the sector.

BUDGET 2007-08: TELECOM

The telecommunication industry is growing at a neck break speed with leading players

lapping up mobile subscribers by millions. The country's telecommunication market is the

- 52 -

4th largest in the world in terms of wireless subscribers and 5th largest in terms of total

telecom subscribers. After growing its wireless (GSM and CDMA) subscriber base at a

CAGR of over 122% during the period January 2004 to January 2007, the country is

expected to take the number to 500 m telecom subscribers by the end of March 2010. It will

be aided in achieving this by the availability of cheaper handsets, focus of regulatory

measures to take telephony to rural markets, lower tariffs and general enthusiasm in the

economy.

BUDGET MEASURES

Developers and suppliers of content for use in telecom to be brought under the service tax

Department of Telecommunication asked to constitute a committee to study the present

structure of levies and make suitable recommendations to the government with regards to the

applicability of unified and single rates on the revenue. Nil additional duty of customs, on

parts of components and accessories of mobile handsets including cell phones, being

extended upto 30th June, 2009. Hike in dividend distribution tax from 12.5% to 15% on

dividends distributed by the companies. Additional cees of 1% on all taxes to fund secondary

education and higher education.

BUDGET IMPACT

With developers and suppliers of content being taxed, the cost of content is set to rise as also

the cost of the Value Added Services (VAS) that are rich in content. If the proposed

committee approves the case of single tax for the telecom sector it will be a big positive for

the sector (reduction in tax levels) as also for the government (lowering of administrative

burden).

SECTOR OUTLOOK

The budget has been more or less neutral towards the telecom sector. The levy of service tax

on providers of content to the telecom sector may in the short run confound the off take of

value added services but this is not a major concern at the moment as the companies are more

focused on organic growth and subscriber worshippers. The finance minister has

- 53 -

acknowledged the demands of the telecom sector to have a single levy instead of the current

multiple levies and has also proposed to the Department of Telecommunication to set up a

committee to look into the present structure and make suitable regards to the government

with regards to the same. If the proposal of single levy goes through, it could conduct relief

for the telecom service providers. With the government envisioning a telecom subscriber

base of 650 m by 2012 in the economic survey it looks like the government is going to put its

best foot forward in helping the sector to boom.

COMPANY IMPACT

Currently none of the major telecom companies are paying out dividend owing to their turbo

charged expansion plans that require them to entail huge capex. As such, the increase in

dividend distribution tax is not expected to impact the companies in the near future. All

companies will have to bear the burden of additional 1% cases for higher education. Reliance

Communication carries out the content development in-house. So, despite it having to bear

the load so service tax it will be in a position to offer value added services at more

competitive rates as opposed to its peers due the absence of revenue sharing agreements that

its peers have with the content providers.

INDUSTRY WISH LIST

COAI – CELLULAR OPERATORS ASSOCIATION OF INDIA

Revenue share license fee should be reduced to 6% (including USO levy of 5%) and

brought down further in the coming years.

Multiple levies imposed on the sector should be replaced with simple investor

friendly and industry friendly tax structure.

Exempting the telecom software being imported by telecom service providers from

the 8% CVD (countervailing duty) currently imposed.

20% limit on CENVAT credit for telecom sector should be removed.

- 54 -

MAT credit should not be restricted to the extent of the difference between the

normal tax and MAT in that year.

TDS and Service tax should not be applicable on the interconnection usage charges

paid by companies.

BUDGET OVER THE YEARS

Budget 2004-05

FDI limit in the sector

increased to 74% from

49%.

Customs duty

exemption on mobile

switching centers

imported by telecom

service providers now

extended to universal

access service

providers.

Service tax increased to

10% from 8%.

2% education cess on

direct and indirect tax.

Budget 2005-06

Bharat Nirman Project

to give telephone

connectivity to the

remaining 66,822

villages through BSNL.

A provision of Rs 12

bn for USO Fund in

FY06 for telecom.

Mobile telephone

removed from the 1/6

criterion for filing

income-tax returns.

Custom duty on copper

reduced from 15% to

10%.

Custom duty and CVD

exemption on parts,

components and

accessories of mobile

handsets including

Budget 2006-07

Estimated outlay for Jawaharlal Nehru

National Urban Renewal Mission to be

Rs 62.5 bn during 2006-07, including a

grant component of Rs 45.9 bn. Through

this mission, the government intends to

promote establishment of new towns,

preferably focused on a specific industry

(IT) or a specific theme (education or

health).

Telecommunication to reach 250 m

connections by December 2007.

Provision of Rs.15 bn for Universal

Services Obligation Fund in 2006-07.

More than 50 m rural connections to be

rolled out in the next three years.

Peak rate of customs duty on non-

agricultural products has been reduced

from 15% to12.5% with a few

exceptions.

- 55 -

cellular phones

continued.

Customs duty

exemption for specified

telecom network

equipment and parts

thereof, if imported by

TSPs, extended beyond

March 2005 without

any specified time limit.

Custom duty on optical

fibres and optical fibre

cables reduced from

20% to 10%.

The rate of service tax is being raised

from 10% to 12%.

DEPARTMENT OF TELECOM

- 56 -

The Department of Telecom has been formulating developmental policies for the accelerated

growth of the telecommunication services. The Department is also responsible for grant of

licenses for various telecom services like Unified Access Service Internet and VSAT service.

The Department is also responsible for frequency management in the field of radio

communication in close coordination with the international bodies. It also enforces wireless

regulatory measures by monitoring wireless transmission of all users in India.

RECENT NEWS

STATISTICS OF INDIAN TELECOM INDUSTRY

- 57 -

Following table gives the brief idea of the teledensity in some developed or developing

countries of the world:-

COUNTRY TELEDENSITY

UK

Australia

USA

Brazil

China

India

Sri Lanka

Indonesia

Pakistan

Nepal

Bangladesh

143.13

126.18

116.43

42.38

42.32

10.38

9.57

9.17

4.42

1.70

1.56

BSNL is in the process of finalising a mega tender for rollout of 60 million GSM lines.

The tender has invited a controversy, when one of the bidders Motorola was disqualified by

BSNL on technical ground and Motorola has approached the court.

BSNL was allowed to process the tender, however, the Court had restrained BSNL from

awarding the tender. Motorola on April 16, 2007 has withdrawn its petition from the High

Court thus clearing the decks for BSNL for placement of order.

BSNL has narrowly missed out the coveted 'Navratna' status of Indian PSUs because of a

technicality, however the apex committee has kept its case alive, and same may be

reconsidered.

- 58 -

Shri Kuldeep Goyal (earlier CGM, BSNL Maharashtra, now working as Director (Planning),

BSNL) is tipped to take over as next CMD (Chairman & Managing Director) of BSNL on

August 01, 2007, i.e. when term of current CMD Shri A.K. Sinha ends.

Indian Telecom Minister Thiru Dayanidhi Maran has set an aggressive targets for BSNL.

They have been asked to double their annual turnover to US$ 20 billion in next 3 years by 27

percent year on year growth.

Indian Communications Minister Thiru Dayanidhi Maran has resigned from Union Cabinet.

Shri Andimuthu Raja has been tipped to take over as Indian Communications Minister. Thiru

Raja is currently Indian Environment & Forest Minister.

BSNL is going to invest US$ 13.7b (Rs 60,000 crores) in next 3 years.

BSNL is India's no. 1 brand recall.

During March 2007, BSNL has added 2.6 million customers, highest addition by BSNL in a

month so far.

India hails Vodafone entry in telecom market

New Delhi (AP) - Vodafone's winning bid of $ 18.8 billion for Hutchison-Essar Ltd., India's

fourth largest private mobile services operator, has been hailed by Indian corporate honchos,

increase in competition notwithstanding.

"We are pleased to welcome Vodafone and congratulate them on their Hutch acquisition. The

Indian telecom sector is one of the most sought after in the world and the bid is a strong

endorsement of the government policy to promote the telecom sector," said Bharti Airtel’s

Sunil Mittal. Airtel is the largest private mobile services operator in India having about 32

million mobile phone subscribers.

"Bharti and Vodafone have enjoyed a very fruitful partnership and both companies will work

with the industry towards connecting millions of people across India," he added.

- 59 -

Vodafone, which has a 10 percent stake in Bharti Airtel, has sold back 5.6 percent to the

promoter Sunil Mittal's group for $ 1.6 billion.

"Vodafone has sold its 5.6 percent direct stake in Bharti Airtel to the group," Mittal said,

elaborating that the deal was on a deferred payment basis.

Vodafone will, however, continue to hold an indirect 4.4 percent stake in the company, as a

financial investor and will neither have any representation on Bharti Airtel's board nor any

management rights.

As per the telecom norms, an operator cannot hold more than 10 percent stake in two service

providers. This is why Vodafone is shedding its stake in Bharti.

Bharti Airtel and Vodafone have also entered into a comprehensive memorandum of

understanding (MoU) on a range of significant areas, including infrastructure sharing,

roaming and long distance services. Bharti Airtel will be the preferred vendor of Vodafone

for NLD, ILD and leased line services. Vodafone will also give 50 percent of its in-bound

international roaming traffic to Bharti Airtel for three years.

The two companies will also work on a comprehensive range of significant infrastructure

sharing options, including around 70,000 towers in India, enabling rapid network expansion

to connect sub urban and rural areas across the country and reducing costs.

However, Bharti is in no mood to relinquish its dominant position in the telecom market.

"If Vodafone ups aggression and goes for further acquisitions (in India), we will have to up

our ante... we would like to defend our legacy... we are market leaders," Mittal warned.

Reliance Communications Ltd.'s chairman Anil Ambani has also welcomed Vodafone to

India, after the UK giant emerged the top bidder for Hutch-Essar.

- 60 -

"We congratulate Vodafone and welcome them to India. Vodafone's participation is a further

endorsement of the exciting future growth potential, and the progressive policies, prevailing

in the Indian telecom sector," Ambani said.

Interestingly, Ambani was one of the rival bidders in the Hutch-Essar buyout. "Reliance's bid

was made in line with our publicly declared and consistent philosophy of sustainable value

creation, and financial conservatism, in the face of truly challenging acquisition valuations,"

he said.

A consortium led by NRI business group Hindujas and Essar, were the other bidders in the

fray for Hutch-Essar.

"The entry of Vodafone in India will increase competition, bring global practices and better

services to the domestic market, which will benefit the end consumers," industry body

Federation of Indian Chambers of Commerce and Industry (FICCI) said in a statement.

There are large business opportunities in India and more cross border corporate deals may

take place in the future as well, it said.

Terming the Vodafone development as highly beneficial for the country and consumers, the

Associated Chambers of Commerce and Industry of India (ASSOCHAM) Telecom

Committee chairman C.S. Rao said, "Vodafone is the largest global mobile service provider

and has already mastered innovative services for subscribers be it in voice, data or video

streaming."

India would be benefited by the experienced player's entry in the domestic market, since the

telecom sector is set for high growth, he said.

The next growth target of 250 million subscriber-base is expected to come from tier III and

tier IV towns of hinterland India, Rao added.

- 61 -

ASSOCHAM said innovation, coupled with right business model and affordable services

would be required for the semi-urban and rural Indian market, which is different from the

European market.

Congratulating Vodafone on its winning bid, Union Commerce and Industry Minister Kamal

Nath said that the entry of Vodafone as a major player in the telecom sector reflect the

growing global confidence in India.

"It reflects the growing global confidence in India, its strong fundamentals and the resilience

of the Indian economy," Nath said in a statement.

"The developments underline the tremendous value creation by Indian ventures which are

now being recognized by the world," he added.

VSNL to roll-out 1000 WiFi hotspots

Videsh Sanchar Nigam Limted (VSNL) plans to enhance its Wi-Fi service network in India.

The former public sector company has been leading the growth of Wi-Fi hotspot industry in

India and today has the largest public hotspot network in India with over 250 hotspots. It now

plans to open another 1,000 hotspots this year to increase internet access to business and net-

savvy travellers on the move.

VSNL to join WBA board

Wireless Broadband Alliance (WBA), a global consortium of Network Wi-Fi service

providers, has invited VSNL to join the its executive committee board, which currently has

worldwide telecommunication leaders, British Telecom, France Telecom, Korean Telecom,

StarHub, Swisscom Mobile and T-Mobile-US. VSNL is a member of WBA since June

2006.“VSNL is deeply honoured to be invited to join the WBA ExCo board and believe that

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India would play a significant role in shaping the global wireless broadband market,” said

Prateek Pashine, Vice President, Marketing and Technology, VSNL. “India has become a

key destination for business travelers across the world, thanks to its booming IT industry and

large consumer market and WBA has always been very keen to expand its footprint in India.

Partnering with VSNL, will enable the WBA members to use VSNL’s large network to help

their customers across the world to stay in touch continuously,” said Julie Ragbourne, BT,

Co-Chair, WBA.

Ministerial Group for rural broadband rollout

The Government has formed an Inter-Ministerial Group for planning the rollout of broadband

infrastructure in rural areas with support from the Universal Services Obligation (USO) fund.

The group, comprising Ministries of Health, Home, Human Resource Development,

Panchayati Raj and IT, will discuss how the various Government Departments and agencies

spread across the country can promote the usage of broadband. The various Ministries will

indicate their requirement for broadband infrastructure, which in turn will enable telecom

operators to build their business plan while bidding for the USO fund-initiated rural

broadband project. The Government has set a target of adding 6.5 million broadband

subscribers in 2007, of which 4.5 million are expected to be provided by BSNL.

ISPs rubbishes cellular firm's allegations

Internet service providers (ISPs) rubbished Cellular Operators Association of India’s (COAI)

objections towards the Net telephony by ISPs COAI’s allegations and said that the Trai’s

recommendations only protected the Telcos further, as the regulator, while proposing that all

ISPs be permitted to offer internet telephony, has however called for a continuation of the

existing norms that bars ISPs from terminating internet telephony calls on landlines or

mobiles within India. "While ISPs can carry calls from a PC in India to landlines and mobiles

abroad, we cannot do the same in India. Since we cannot compete with telecom operators

here, it is the ISPs which do not have a level playing field," Internet Service Providers

Association of India president Rajesh Charia stated.

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DoT asks Trai to review access provider licence

The department of telecommunications has referred the issue of using multiple technologies

under a single unified access services licence to the Telecom Regulatory Authority of India.

At present, the department allots spectrum depending on the technology, and operators offer

services for which the licence has been issued. For example, if the licence is issued for

CDMA services, the operator offers services under this technology. At present, there is no

clarity on whether a CDMA operator should go for another licence to offer GSM service, or

whether the existing licence will suffice. With the industry expecting allocation of 1,800

MHz spectrum soon, a technology that can support both CDMA and GSM services, The

DoT's move will remove the ambiguity in the existing UASL.

ISPs seeks DoT’s support

ISPAI is counting on Department of Telecom taking action in its favour. "The move is

regressive considering this is the year of broadband. The government wants to take India

from 2.1 million broadband users in March 2007 to nine million by March 2008 and make

broadband free. Trai's prescriptions will not allow this to happen," says Col RS Parihar,

COO, Tulip IT Services and secretary, ISPAI, about 6% licence fee of on annual gross

revenue. Strangely, despite its strong views, the ISPAI has not considered asking Trai for a

review of its recommendations. "The industry can seek a de novo review. Though this step is

unprecedented, it is better than engaging in an outright confrontation with Trai. Especially if

ISP's can point out factual inaccuracies in Trai's work," say telecom analysts.

Yahoo! intros mobile search in India

Yahoo! has announced the expansion of its mobile search service, Yahoo! One Search beta,

to consumers in India. Yahoo! One Search makes finding information faster by providing

relevant results right on the first page such as news headlines, images, weather, financial

updates and easy navigation to other web sites. It provides consumers exactly what they want

on their mobile device – instant, relevant answers. This beta version of one Search can now

be accessed through Yahoo!’s mobile Web site, on any mobile phone with a browser and

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Internet access, Yahoo! said in a statement. “Consumers want search on their mobile phone

to be entirely different from search on the PC,” said David Ko, vice president and general

manager, Connected Life Asia, Yahoo!.

Regulator wants all ISPs connected to Internet Exchange

The Telecom Regulatory Authority of India (TRAI) has suggested to make it mandatory for

all Internet Service Providers in the country to connect directly or indirectly (through another

ISP) to the National Internet Exchange of India (NIXI). TRAI has also said that NIXI nodes

should be set up in all the State capitals to make it convenient for ISPs to connect to the

Internet exchange. At present, there are only four nodes across the country making it

expensive for smaller ISPs located away from the metro cities to get connected to the NIXI.

Out of the 135 operational ISPs in the country, only 27 have connected to the Internet

exchange.

DSL is lead technology for broadband in India

More than 85 per cent of the two million broadband subscribers in the country are using

copper-based Digital Subscribers Lines (DSL) for accessing the Internet. DSL technology,

which essentially uses the fixed line telephone lines to offer broadband services, is being

rolled out primarily by the two State-owned telecom majors Bharat Sanchar Nigam Ltd and

Mahanagar Telephone Nigam Ltd. Of the 20.5-lakh broadband users, more than 17 lakh

subscribers are using the DSL technology. In comparison, there are only 10,513 wireless

based broadband subscribers. What makes DSL appealing is that it is always on dedicated

line and allows subscribers to use the telephone even while surfing the net.

INDIA HEADING FOR NO. 2 POSITIONS IN TELECOM WORLD

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The telephone subscriber base in India has crossed 200 million. The GSM has more than half

of this subscriber base - that is 115.3 million. And, the Economic Survey of the government

of India predicts that the country will have 650 million telephone connections, including 66

million wired and 584 million wireless, by 2012.

It was less than two years ago in April 2005 that telecom user numbers in India had hit 100

million. The country has already crossed the 200-million-mark as on January 2007. Going by

current trend, India is now set to overtake Russia to boast of the third largest number of

mobile subscribers in the world in March 2007. And, toppling America's No 2 position is just

another 20 months away.

The data issued by the Cellular Operators Association of India last week shows that the all-

India GSM (global systems for mobile communications) subscriber base has added 4.9

million in February to touch 115.3 million.

Although the CDMA (code division multiple access) mobile group is yet to release the

February data, the total subscriber base (mobile and fixed) has already crossed the 200-

million-mark. End of January 2007, the total phone subscriber base was more than 196

million. It is believed that the CDMA base would have grown by around 1.7 million to 1.8

million in February.

COAI director general TV Ramachandran said the GSM industry was primarily responsible

for powering the overall growth of the telecom sector and is a key contributor in the 200

million mile stone reached by the telecom sector as a whole in February 2007. According to

Ramachandran, the growth was achieved as a result of industry efforts coupled with forward

looking government policies.

At the end of December 2006, India had 149.50 million wireless phones and 40.43 million

fixed- line phones. This number grew to 196.71 million by January 2007. The 200-million

mark translates into a tele-density of about 18 phones per 100 people. "This excellent

progress is a result of the strong spirit of co-operation and commitment that's been building

for the last three years between government and industry," stated telecom minister Dayanidhi

Maran.

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According to analysts, going by the current trend, India is poised to have the second largest

mobile subscriber base before the close of 2008, displacing US, which will cross the 250

million mark before December. According to the present ranking, China (450 million) has

the largest number of mobile subscribers, followed by US (235 million), Russia (154 million)

and India (148 million). This is set to change.

While Bharti Airtel continues to be the industry leader with 35.4 million users and a 30.74%

of the GSM market share, the gap between the second and the third players is marginal. The

state-run Bharat Sanchar Nigam Ltd (BSNL) as the second biggest GSM player has 25.4

million subscribers (22.07% share), and the third largest GSM player Hutchison Essar has

25.3 million users (21.98%).

MTNL's GSM subscriber base in Delhi and Mumbai touched 2.578 million, while Spice

Telecom has also over 2.5 million subscribers. Aircel's user base in February stood at 5.094

million, followed by Reliance Telecom's 4.11 million subscribers.

Meanwhile, according to the latest Economic Survey, the Indian telecom sector proposes to

connect 650 million subscribers over the next five years, which is more than triple its current

size.

The number of Internet subscribers grew at 25 per cent, while broadband users grew from

0.18 million to 1.32 million in 2005-06. The number of broad-band and Internet subscribers

in India is expected to reach 20 million and 40 million respectively by 2010.

The Survey has sought the provision of 200 million rural telephony connections to boost

rural tele-density and on demand broadband connectivity.

SWOT ANALYSIS

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SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis of the telecom industry in

India:

STRENGTHS:

-Large talent pool of skilled graduates

-Low cost and high education levels of staff compared with counterparts in Western

countries

-Lower staff churn

-Language skills, large number of English speakers suitable for addressing the largest BPO

market (USA)

-Relatively well-developed software and call centre industry

-Strong existing customer base of blue-chip companies

-Powerful venture capital interest in investing in growth opportunity

-Developing track record of demonstrated delivery and systems/processes.

WEAKNESSES:

-Language skills other than English are scarce

-English can be spoken with a heavy dialect

-Lack of customer service culture

-Poor and expensive telecoms infrastructure

-Poor electricity infrastructure

-Cultural differences

-Few people with extensive call centre experience

-Local capabilities in process implementation and marketing are generally still in their

infancy

-Some failed contracts due to poor cost control

-Poor infrastructure can inhibit efforts to integrate systems between outsourcer and customer

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OPPORTUNITIES:

-Expansion into new markets either vertically or horizontally from existing customer base

-Exploitation of time differences between India and main target markets

-Riding the back of the broad trend towards and awareness of outsourcing to India

-Exploitation of current economic downturn which is making many customers re-examine

their cost base and core business activities

THREATS:

-Billing rates under pressure due to rapid commoditization of basic outsourcing services

-Regional political instability and security

-Other low-cost alternative bases for outsourcing in Eastern Europe, Latin America and the

Asia Pacific regions

-Increasing automation of technologies.

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OUTLOOK FOR THE FUTURE

The outlook for Indian telecommunications has been a subject of domestic and international

concern for several years, especially since the Athreya Committee report of 1991. In spite of

a numerous obstacles and grim prospects at certain times, there is now a rising expectation

that the future is looking much more promising.

The Ministry of Communications and Information Technology (MCIT) is targeting 250

million telephone subscribers by end-2007 and 500 million by 2010. Most of the expansion

in subscribers was set to occur in rural India. The ministry noted in setting its targets that

India’s rural tele-density had been lacking at around 1.9%; officials stressed that the country

could not move forward unless it supported the 70% of the population who lived in rural

India.

India continues to see its mobile market boom, by early 2007, the country had 150 million

mobile subscribers, with growth continuing into 2007 at an annual rate approaching 90%.

The telecom industry is focusing on implementing highly complex technology to:

Improve the way they maintain the relationships and the loyalty with their customers

in a extremely competitive environment

Integrate with global organizations and their infrastructure so that they can work in

partnership to deliver mobile and distributed solutions

Improve the security of information and systems as this becomes more complex and

greater confidentiality is required

With two of the three major issues getting resolved, the only issue that remained was

pertaining to the disparity in the entry fees paid by the cellular and basic operators. This gave

further impetus to have unified licensing for basic, cellular, and wireless services, and

eventually, in a landmark decision, the Group of Ministers constituted to look into the issue

approved TRAI’s recommendations on the same.

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The players have been given the option of migrating to a new agreement under the aegis of

the unified license, or continuing under the previous agreements. The cellular license has

been broadened, and these players now have the option to commence basic telephony

services. The basic service providers in order to avail of the unified license now have to pay

the difference between the license fees paid by them and the fourth cellular operator, doing

which will permit them to offer full mobility services.

This process of unified licensing will be completed in a period of six months, provided there

are no hitches. This move is a positive step towards a license free environment in the telecom

sector. And in all probability the future holds a unified license not merely a unified license in

select telecom services, but instead for all the services offered in the sector.

In November 2003, the Department of Telecommunications finally issued the order

approving unified licensing. Reliance Infocomm had to pay a penalty of Rs 526 crore for

offering roaming facilities. Reliance Infocomm, Tata Teleservices, Shyam Tele-link and

Himachal Futuristic Communications are issued unified licences. Reliance Infocomm

receives licenses for 17 circles and Tata’s for six circles, including two metros.

However, the seemingly mild penalty imposed upon Reliance Infocomm continues to remain

a bone of contention. And the cellular operators are not too happy with the new regime, and

have approached the Supreme Court for relief.

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CONCLUSION

In summary, clearly, a country’s ability to benefit from this revolution depends heavily on

the modernity of Telecommunications network. Countries that can acquire and assess

information on demand and then integrate them usefully into there industrial structure

through modern telecommunications network is most likely to experience high rates of

growth. Large-scale use of information and telecommunication technologies directly

influences productivity, cost effectiveness and competitiveness in industries with high levels

of product differentiations and low levels of unit prices.

An advanced telecommunications system is equally important for services like banking,

trading, retailing, transportation, maintenance and insurance where information and real-time

communications are vital to the production process. A reduction in costs of these services

will directly enhance international competitiveness within the entire economic system.

telecommunications liberalization in India has moved through a difficult initial path. The

progress may have been halting, but it has been unavoidable. It has moved well beyond the

point of no return. Having lost out on the earlier industrial revolution, there now seems to be

a national aspiration and the political will not overlook out on the information revolution.

India may emerge as a case of at least partial leapfrogging from an agricultural to

information economy.

telecommunications liberalization in India has moved through a difficult initial path. The

progress may have been halting, but it has been unavoidable. It has moved well beyond the

point of no return. Having lost out on the earlier industrial revolution, there now seems to be

a national aspiration and the political will not overlook out on the information revolution.

India may emerge as a case of at least partial leapfrogging from an agricultural to

information economy.

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BIBLIOGRAPHY

References

WWW.RELIANCECOMMUNICATION.CO.IN

WWW.MTNL.IN

WWW.INDIATELECOMNEWS.COM

WWW.DOT.GOV.IN/

WWW.TIMESOFINDIA.COM

WWW.INDIACELLULAR.COM WWW.TRAI.GOV.IN

Newspaper:

Hindustan times

Business times

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ANNEXURES

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ABBREVIATIONS:

TRAI : TELECOM REGULATORY AUTHORITY OF INDIA

ADC : ACCESS DEFICIT CHARGE BSNL : BHARAT SANCHAR NIGAM LIMITED

NTP : NEW TECHNOLOGY POLICY

MTNL : MAHANAGAR TELEPHONE NIGAM

DOT : DEPARTMENT OF TELECOMMUNICATIONS

VSNL : VIDESH SANCHAR NIGAM LIMITED

ILD : INTERNATIONAL LONG DISTANCE

NLD : NATIONAL LONG DISTANCE

ISP : INTERNET SERVICE PROVIDER

GSM : GLOBAL SYSTEM FOR MOBILE COMMUNICATION

IUC : INTERCONNECT USAGE CHARGES

SDCA : SHORT DISTANCE CHARGING AREA

COAI : CELLULAR OPERATORS ASSOCIATION OF INDIA

TDSAT : TELECOM DISPUTES SETTLEMENT AND APPELLATE TRIBUNAL

VAS : VALUE ADDED SERVICES

CVD : COUNTERVAILING DUTY

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TEMA : TELECOM EQUIPMENT MANUFACTURERS ASSOCIATION OF INDIA

TETC : TELECOM TESTING AND SECURITY CERTIFICATION

CENTRE

CDMA : CODE DIVISION MULTIPLE ACCESS

NFAP : NATIONAL FREQUENCY ALLOCATION PLAN

ITU : INTERNATIONAL TELECOMMUNICATION UNION

TEC : TELECOM ENGINEERING CENTER

PCOs : PUBLIC CALL OFFICES ISD : INTERNATIONAL SUBSCRIBER DIALING

NSD : NATIONAL SUBSCRIBER DIALING

ISDN : INTEGRATED SERVICES DIGITAL NETWORK

MoU : MEMORANDUM OF UNDERSTANDING

FICCI : FEDERATION OF INDIAN CHAMBERS OF COMMERCE AND

INDUSTRY

ASSOCHAM : ASSOCIATED CHAMBERS OF COMMERCE AND INDUSTRY OF INDIA

WBA : WIRELESS BROADBAND ALLIANCE

USO : UNIVERSAL SERVICES OBLIGATION

NIXI : NATIONAL INTERNET EXCHANGE OF INDIA

DSL : DIGITAL SUBSCRIBERS LINES

FDI : FOREIGN DIRECT INVESTMENT

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PMRTS : PUBLIC MOBILE RADIO TRUNKED SERVICES

GMPCS : GLOBAL MOBILE PERSONAL COMMUNICATIONS SERVICES

FIIs : FOREIGN INSTITUTIONAL INVESTORS

NRIs : NON-RESIDENT INDIANS

FCCBs : FOREIGN CURRENCY CONVERTIBLE BONDS

ADRs : AMERICAN DEPOSITORY RECEIPTS

GDRs : GLOBAL DEPOSITORY RECEIPTS

FIPB : FOREIGN INVESTMENT PROMOTION BOARD

MCIT : MINISTRY OF COMMUNICATIONS AND INFORMATION TECHNOLOGY