Sunitha.S Assistant Professor, School of Management Studies National Institute of Technology Calicut

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

Pre 2007 period Indian telecom market lacked competition earlier. Pre 2007, there were four to five major players in each circle. Bharti Airtel & Vodafone Essar were national GSM players Rcom used CDMA technology across most of India and GSM services in the North East. TTSL had CDMA operations nationwide Idea Cellular, by the Aditya Birla Group provided in most states using GSM.

Pre 2007 period Strong regional players-Aircel, JT Mobile and Spice Govt owned telecom companies- MTNL, in Delhi and Mumbai and BSNL which covered the rest of India. Price Wars not a new phenomenon. It happened when Reliance made its debut in 2005.It offered pre paid customers a lifetime valid connection for a one time payment. Everyone was forced to follow with similar schemes.

Pre 2007 period Between 2005 & 2007,things have started settling down. Hutch Essar (now Vodafone Essar) picked up Modi Telstra, Bharti Airtel snapped up Hexacom and JT mobile Idea acquired Spice. Hierarchy was well formed by the end of 2007 State owned players’ profits shrunk owing to politically biased forces.

2008 Govt decides to issue fresh set of licenses to a no: of new applicants, included known and unknown faces- Swan Telecom ;S-Tel,a joint venture between Sterling & InfoTech & Bahrain Telecommunications; Loop Mobile, a new subsidiary of BPL mobile & Datacom,a partnership between HFCL and Videocon. License issue was meant for rural coverage

Norway based Telenor picked up a 74% stake in the telecom company promoted by property developer Unitech and firm renamed as Unitech wireless. Tatas who were only in CDMA space entered the GSM space through a joint venture with Japanese telecom major NTT DoCoMo. Aircel which was earlier there only in Chennai expanded to North Eats and other 22 circles.

Rural coverage is very poor in India Earlier players did not cover those areas bcos Arpu (Average Revenue per user)in rural area(Rs50) is much low compared to that of in urban areas(Rs 175)

The Battle Begins! New entrants had some advantages Cost of entry had come down dramatically Cost of equipment had dropped sharply because of markets growth and operating model had changed. The early players had built their own networks, infrastructure, towers etc, thus causing high capital expenditure.

Outsourcing is in vogue! Outsourcing model lead to various ways Nokia would handle the networks IBM/other technology company looks after would handle things such as maintenance and customer service Thus leaving telecom provider to focus on building brands and subscriber base. The outsourcing model has brought down cost of entry as ewell as break even period For eg: Unitech Wireless has outsourced its network to Nokia Siemens Network and entire capability is built & maintained by Wipro.

PRICE WAR An unexpected war has broken put for control of an attractive market The Govt issues fresh licenses in 2008 Spectrum policy divides players into haves & have -nots Outsourcing lowers cost of entry. Hence break even point have come down.It was 5-7 years for old players and is only 4-5 years for new players.

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

The Battle Field Two fronts to the war: lower tariff and more spectrum Price War: initated when Tata DoCoMo introduced per second billing instead of minute based billing. Almost all operators followed. CompanyLaunchOn net(Own Network)Off Net(other network) Tata DoCoMo29 Sep1p/sec on local,STD,ISD1p/sec SISTEMA8 Oct0.5/sec on local,STD0.5/sec AIRTEL30 Oct1p/sec on local,STD1.2/sec VODAFONE30 Oct1p/sec on local,STD1p/sec AIRCEL31 Oct1p/sec on local,STD1p/sec IDEA31 Oct1p/sec on local,STD1p/sec RELIANCE COMM. 3 Nov1p/sec on local,STD1p/sec

The Casualty Falling revenues : while the number of subscribers has grown, the Arpu (average revenue per user)has been falling steadily over the years Stock decline: As profit margins become thinner and thinner, market capitalization of the companies has fallen. Telecom industry is becoming an industry of diminishing returns. Thank You