CONTENTS

Global Scenario of Telecom Market.............................................................................................................................3

India in Global SCENARIO................................................................................................................................................4

Indian Telecom Sector Overview:................................................................................................................................5

Sub-Markets in India..........................................................................................................................................................5

Category A.....................................................................................................................................................................6

Category B.....................................................................................................................................................................6

Category C..................................................................................................................................................................... 6

Metro cities...................................................................................................................................................................6

Regulatory bodies............................................................................................................................................................... 6

Telecom Commission :.................................................................................................................................................6

Department of Telecommunications.....................................................................................................................6

Telecom Regulatory Authority of India (TRAI)................................................................................................7

Telecom Dispute Settlement and Appellate Tribunal (TDSAT).................................................................7

Value-Added Services Market........................................................................................................................................7

Policy Initiatives.................................................................................................................................................................. 8

MARKET SHARE AND REVENUES OF THE TELECOM COMPANIES;--.........................................................8

MARKET SHARE OF WIRELESS OPERATORS IN INDIA.....................................................................................9

MARKET SHARE OF TOP GSM OPERATORS IN INDIA........................................................................................9

Analysis of Current major players:...........................................................................................................................10

Bharti................................................................................................................................................................................ 10

Vodafone......................................................................................................................................................................... 11

Reliance........................................................................................................................................................................... 12

The Road Ahead................................................................................................................................................................ 13

Porter’s 5 forces model..................................................................................................................................................13

PEST ANALYSIS................................................................................................................................................................. 15

1. Political factor.................................................................................................................................................15

2. Economical factor:........................................................................................................................................15

3. Social factors:..................................................................................................................................................16

SWOT Analysis of Telecom Sector in India...........................................................................................................16

Corporate Analysis of Reliance Communications.......................................................................................16

RELIANCE COMMUNICATIONS...........................................................................................................................17

S.W.O.T analysis of Reliance Communications:..............................................................................................23

STRENGTHS:............................................................................................................................................................. 23

WEAKNESS:...............................................................................................................................................................24

OPPORTUNITY:........................................................................................................................................................24

THREATS:................................................................................................................................................................... 24

Marketing Strategies..................................................................................................................................................24

Strategies: Past and Present...............................................................................................................................25

Analysis using Porters five forces........................................................................................................................26

Bargaining Power of Suppliers.........................................................................................................................26

Bargaining Power of Customers.......................................................................................................................26

Threat of Substitutes.............................................................................................................................................26

Threat of New Entry..............................................................................................................................................27

Future recommendations FOR RELIANCE TELECOM.................................................................................27

Entry strategy for the new player.............................................................................................................................29

Trends & Outlook........................................................................................................................................................30

Legal & Regulatory Framework............................................................................................................................31

Foreign Direct Investment..................................................................................................................................31

Unified Access Licensing Regime (UALR)....................................................................................................31

Universal Service Obligation (USO)................................................................................................................31

Mobile Number Portability.................................................................................................................................31

Spectrum Policy.......................................................................................................................................................32

Opportunities................................................................................................................................................................32

Modes of Entry............................................................................................................................................................. 33

Corporate Strategy......................................................................................................................................................35

Business Strategy........................................................................................................................................................36

References...................................................................................................................................................................... 38

GLOBAL SCENARIO OF TELECOM MARKET

The changes in the world telecom market can be described as follows:

PRIVATE: The traditional state ownership of telecom is replaced by private ownership. Privatization has influenced the telecom operators in every part of the globe. The developed countries have already privatized their telecom operators and most of the developing countries too are moving in a similardirection, for example, India, China and many countries in the African continent. Whereas, twenty years ago only a handful of countries had private public telecom operators, today these form the majority. By 2002, more than half of the countries in the world had partially or fully privatized their telecom operators. Europe, South Asia and the Pacific have party or fully privatized telecom operators. India and China are notable holdouts in Asia, where privatization exists in bits and pieces. India’s incumbent internet service operator, VSNL2, and the fixed line operator in the metrocities of Delhi and Mumbai, MTNL3, and the nationwide fixed line operator and cellular provider in some regions of India, BSNL4, are already privatized. Africa, the least privatized continent, has also accelerated its pace of privatization in the recent years. It has 10 countries, which have partly privatized incumbent telecom operators, and yet more are on the way for example, Burundi, Cameroon, Kenya and Malawi. Privatization has brought a new relationship between government and telecom operators and at the same time has created a lot of competition, which had led to further increase in the number of players.

COMPETITION: If there are several players, all seeking to maximize profits, an increase in competition is inevitable. A majority of countries allow competition in the mobile and internet segment (though the majority of countries still retain monopoly in fixed line services such as local and long distance). However, the competition is quite uneven. On the other hand, the growth in competition can itself result in an increase in the number of operators. For instance, competition in fixed and mobile services in India has attracted a number of private operators.

MOBILE: Telecom services are now becoming highly mobile and are delivered by the medium of radio waves. Whereas, until some 50 years ago majority of international calls were through short wave radio. This is because with a handheld device anyone can be reached anytime and anywhere unlike the fixed device. Handheld devices are capable of receiving updates from website and real time video streams from multiple sources around the globe. This makes the handheld device much more practical and convenient to get the latest information. So now radio is increasingly used to provide access networks, while wired networks provide the long distance component. However, research shows that constant usage of handheld radio wave devices could increase the possibility of healthhazards due to radio waves. If the health consequence is adverse then it may even retard the usage of handheld devices in the long run.

VOICE TO DATA: During the early years of the invention of telecommunication most of the information was transferred as data through telegraph. Later, telephony took over, shifting the focus from data to voice. Now, once again, the focus shifts from voice to data with the use of radio waves. Most of theinformation can be received in the form of data in mobile phones as well as through wired network via internet. The shift from voice to data makes telecom services highly mobile and assists globalization.

GLOBAL: Globalization has made a great impact on telecom industry and its three main effects are as follows. First, many telecom operators from major developed countries have holdings in operators in other nations, with consequent rationalization, specialization and the rise of strategic investors from developing countries. A second indicator of telecommunication globali-zation is the rising influence of regional and multilateral organizations such as the World Trade Organization (WTO) in lowering the barrier for traditional goods. A third indicator of globalization is new global services, such as mobile cellular roaming, that allow customers to continue to use a service away from their home country.

DIGITAL DIVIDE: Digital divide refers to the unequal availability of Information and Communications Technology (ICTs) to different socioeconomic groups within the world and within individual countries. The digital divide exists between countries at different levels of development, and within a country, separating urban from rural areas, the rich from the poor, educated from uneducated, men from women, and the young from the elderly. An example of a country with a big digital divide is India. However, within certain groups and countries, the digital divide isn’t too wide, making it hard to generalize as a problem. Example, Thailand, where women make up almost 50 per cent of all internet users or the USA, where women make up over 50 per cent of all internet users.10

CHANGING BALANCE OF POWER : At the outset of the telecom revolution, the regions of Americas and Europe had many more subscribers for telecom services than Africa and Asia-Pacific. But now the Americas and Europe are nearly saturated whereas subscribers in Asia-Pacific region are increasing faster. It is predicted that, ten years from now, Asia-Pacific will be the region with the largest number of subscribers in the world.

SHIFT FROM ENGINEERING TO FINANCE : Gone are the days when interest intelecom was confined only to engineers. With privatization, a new psychology has been created; there has been a shift in attention from engineering to finance. Today telecom operators are private companies publicly traded on stock exchanges.

To summarize, the recent trends in the world telecom market are: increase in private ownership, competition, data based mobile and global communication, trade and finance oriented operators, and rapid increase in subscribers from the developing nations. Several of these trends (such as increase in privatization, competition, mobile communication, digital divide) also exist in the Indian submarket.

INDIA IN GLOBAL SCENARIO

The Indian telecom market has been displaying sustained high growth rates. Riding on expectations of overall high economic growth and consequent rising income levels, it offers an unprecedented opportunity for foreign investment. A combination of factors is driving growth in the telecom market, promising rich returns on investments.

India is the fourth largest telecom market in Asia after China, Japan and South Korea.

The Indian telecom network is the eighth largest in the world and the second largest among emerging economies.

The Indian telecom market size of over US $ 8 billion is expected to increase three fold by 2012. The expansion of the telecom industry in India has been fuelled by a massive growth in mobile phone users, which has reached a level of 10 million users in December 2002, an increase of nearly 100 per cent in 2002.

This exponential growth of mobile telephony can be attributed to the introduction of digital cellular technology and decrease in tariffs due to competitive pressures. For the first time in India, the growth of cellular subscriber base has exceeded the fixed line subscriber base. However, cellular penetration is still 1 per cent as compared to world average of around 16 per cent.

INDIAN TELECOM SECTOR OVERVIEW:

The Indian telecommunications industry is one of the fastest growing in the world and India is projected to become the second largest telecom market globally.

According to the Telecom Regulatory Authority of India (TRAI), the number of telecom subscribers in the country increased to 562.21 million in December 2009, an increase of 3.5 per cent from 543.20 million in November 2009. With this the overall teledensity (telephones per 100 people) has touched 47.89.

According to Business Monitor International, India is currently adding 8-10 million mobile subscribers every month. It is estimated that by mid 2012, around half the country's population will own a mobile phone. This would translate into 612 million mobile subscribers, accounting for a teledensity of around 51 per cent by 2012. Moreover, according to a study conducted by Nokia, the communications sector is expected to emerge as the single largest component of the country's GDP with 15.4 per cent by 2014.

With the availability of the 3G spectrum, about 275 million Indian subscribers will use 3G-enabled services, and the number of 3G-enabled handsets will reach close to 395 million by 2013-end, estimates the latest report by Evalueserve. According to a Frost & Sullivan industry analyst, by 2012, fixed line revenues are expected to touch US$ 12.2 billion while mobile revenues will reach US$ 39.8 billion in India.

State-run telecom operator BSNL has rolled out 3G services in 318 cities with 856,000 subscribers. BSNL has plans to cross 760 cities by September 2010. And even as debate on 3G continues, TRAI has started consultation on the next level of telecom services. Fourth generation or 4G offers download at faster speeds.

Telecommunication industry is mainly classified into two sub headings – voice and data. Voice service can be provided through either wire-less or wire-line. Wire-less segment is booming nowadays after investment of foreign companies. The major players in this field are Bharti, Vodafone, Reliance, BSNL etc.

SUB-MARKETS IN INDIA

CATEGORY A

The heaviest volume areas such as Andhra Pradesh, Gujarat, Karnataka, Maharashtra (except New Mumbai & Kalyan), Tamil Nadu (including MEPZ, Minjur & Mahabalipuram)

CATEGORY B

comparatively lesser volume such Haryana (except Faridabad & Gurgaon), Kerala, Madya Pradesh(including Chhattisgarh), Punjab, Rajasthan, Uttar Pradesh (East), Uttar Pradesh (West)- (including Uttaranchal but excluding Ghaziabad & NOIDA), West Bengal (except Kolkatta)

CATEGORY C

includes the hilly regions of India such as Andaman & Nicobar, Assam, Bihar (including Jharkhand), Himachal Pradesh, Jammu & Kashmir, North East, Orissa

METRO CITIES Includes Chennai (including MEPZ, Minjur & Mahabalipuram), Delhi (including Faridabad, Gurgaon, NOIDA & Ghaziabad), Kolkatta, Mumbai (including New Mumbai & Kalyan)

REGULATORY BODIES

The regulatory bodies in the Indian telecom market are Telecom Commission, Department of Telecommunication, Telecom Regulatory Authority of India (TRAI) and Telecom Dispute Settlement and Appellate Tribunal (TDSAT). They are described below one by one. Telecom Commission was set up by the Government of India and has the administrative and financial powers of the government to deal with various aspects of telecommunications. The strategies followed by the Telecom Commission have not only transformed the very structure of this market but also have motivated all partners to contribute in accelerating the growth of the market.

TELECOM COMMISSION : The functions of the Telecom Commission includes:

• Policy formulation,• Licensing,• Wireless spectrum management,• Administrative monitoring of public sector units (PSUs),• Research and development,• Standardization and validation of equipment

DEPARTMENT OF TELECOMMUNICATIONS has the following functions:

• Policy formulation, licensing and coordination of matters related to telegraphs, telephones, wireless, data, facsimile and telematic services and other like forms of communications • Granting licenses to operators for providing fixed and value added services in various cities in accordance with the policy of government• Implementing treaties and agreements with other countries• International relations in matters connected with telecommunications including matters relating to all international bodies dealing with tele-communications such as International Telecommunication Union, International Telecommunication Satellite Organization, International Mobile Satellite Organization and Asia Pacific Telecommunication• Promotion of standardization, and research and development in telecommunications• Promotion of private investment in telecommunications• Financial assistance for research and study in telecommunications technology to adequately train manpower• Administration of laws with respect to The Indian Telegraph Act 1885, The Indian Wireless Telegraphy Act, 1933 and The Telecom Regulatory Authority of India Act, 1997

TELECOM REGULATORY AUTHORITY OF INDIA (TRAI) is empowered to provide recommendations on various aspects related to the functioning of telecom service providers and to enforce the following regulatory functions:• Monitor the quality of services provided by the service providers• Protect consumer’s interest• Recommend the provision of Universal Service Obligation (USO)• Fix tariffs for various telecom services• Advise the government on- need and timing for introduction of new service providers- terms and conditions of the license

TELECOM DISPUTE SETTLEMENT AND APPELLATE TRIBUNAL (TDSAT) is empowered with the following authorities:• Adjudicate on disputes- between licensor and licensee- between two or more service providers- between service provider and group of consumers• Acts as the appellate authority in respect of any directions, decisions or orders of TRAI; any appeal beyond TDSAT is only to the Supreme court

To summarize, India has set up separate bodies to deal with clearly demarcated areas of responsibility. The telecom commission has administrative and financial powers from the Government of India. The Department of Telecommunication is responsible for international activities and for the grant of licenses to telecom operators in accordance with the policy of the government. The Telecom Regulatory Authority of India is responsible for fixing tariffs for various telecom services and for protecting the interests of consumers as well as that of the suppliers. The Telecom Dispute Settlement and Appellate Tribunal is responsible for adjudication of disputes between the players in the market. By the operation of these bodies, both there is a sound framework and a relatively rigorous implementation of policies, which have been responsible for and continue todrive the liberalization and growth of a competitive, flourishing and growing market in India.

VALUE-ADDED SERVICES MARKET

Currently mobile value-added services (MVAS) in India accounts for 10 per cent of the operator's revenue, which is expected to reach 18 per cent by 2010. According to a study by Stanford University and consulting firm BDA, the Indian MVAS is poised to touch US$ 2.74 billion by 2010. We can couple our wireless broadband services with different value added schemes to make the product more attractive to the user.

Major Investments The booming domestic telecom market has been attracting huge amounts of investment which is likely to accelerate with the entry of new players and launch of new services.

The government has approved the foreign direct investment proposal of the Federal Agency for State Property Management of the Russian Federation to buy 20 per cent stake in telecom service provider Sistema-Shyam for US$ 660.1 million.

Reliance Infratel, the tower subsidiary of Reliance Communications (RCom), will build 56,596 telecom towers by financial year 2010, increasing the total number of towers to 100,000.

BSNL, India's leading telecom company in revenue terms, will put in about US$ 1.16 billion in its WiMax project.

Vodafone Essar will invest US$ 6 billion over the next three years in a bid to increase its mobile subscriber base from 40 million at present to over 100 million.

Norway-based telecom operator Telenor has bought a further 7 per cent in Unitech Wireless for a little over US$ 430.70 million. Telenor now holds 67.25 per cent. Last year, it had bought a 60 per cent stake for US$ 1.23 billion.

POLICY INITIATIVES

The government has taken many proactive initiatives to facilitate the rapid growth of the Indian telecom industry.

100 per cent foreign direct investment (FDI) is permitted through the automatic route in telecom equipment manufacturing.

FDI ceiling in telecom services has been raised to 74 per cent.

Introduction of a unified access licensing regime for telecom services on a pan-India basis.

Introduction of mobile number portability in a phased manner, starting in the fourth quarter of 2008.

The government is implementing a program of connecting 66,822 uncovered villages under the Bharat Nirman programme.

MARKET SHARE AND REVENUES OF THE TELECOM COMPANIES;--

A total of 391.76 wireless subscribers were split between top wireless telecom operators. Bharti Airtel lead the way with 93.92 million followed by Reliance (GSM + CDMA).2

S. No.Wireless Group

Subscriber base in millions

Market share (%)

Revenues Million Revenue % of total market revenue

1 Bharti 93.92 23.97 36962 342 Reliance 72.67 18.56 12501 11.53 Vodafone 68.77 17.55 21742 20.74 BSNL 52.15 13.31 10873 10.25 Tata 38.89 9.93 96752 8.96 IDEA 35.12 8.96 97616 97 Aircel 18.48 4.73 3804 3.58 Miscellaneous 11.7 2.99 2717 2.5

MARKET SHARE OF WIRELESS OPERATORS IN INDIA

Airtel24%

RIM19%

Vodafone18%

BSNL13%

Tata10%

IDEA9%

Aircel5%

Misc3%

Market Share

MARKET SHARE OF TOP GSM OPERATORS IN INDIA

Airtel32%

RIM7%

Vodafone23%

BSNL16%

IDEA13%

Aircel6%

Misc3%

Market Share for GSM

ANALYSIS OF CURRENT MAJOR PLAYERS:

BHARTI

Bharti Airtel is one of Asia‟s leading providers of telecommunication services with presence in all the 22 licensed jurisdictions (also known as Telecom Circles) in India, and in Srilanka. They served an aggregate of 105,195,762 customers as of June 30, 2009; of whom 102,367,881 subscribe to their GSM services and 2,827,881 use Telemedia Services either for voice and/or broadband access delivered through DSL.

They also offer an integrated suite of telecom solutions to their enterprise customers, in addition to providing long distance connectivity both nationally and internationally. They have launched DTH and IPTV Services also. All these services are rendered under a unified brand “Airtel”.

The company also deploys, owns and manages passive infrastructure pertaining to telecom operations under its subsidiary Bharti Infratel Limited. Bharti Infratel owns 42% of Indus Towers Limited.

Bharti Infratel and Indus Towers are the two top providers of passive infrastructure services in India.

GENERIC STRATEGY ANALYIS IN THE CONTEXT OF AIRTEL:

STRATEGIC TARGET:--TARGET ENTIRE INDUSTRY

STRATEGIC ADVANTAGE:--UNIQUENESS PERCEIVED BY THE CONSUMERS

GENERIC STRATEGY:--DIFFERENTIATION STRATEGY

ILLUSTRATIONS:-

The responses of the Airtel officials and the consumers reveal that Airtel attempts to achieve a competitive advantage by creating a service that is perceived as unique.

The study shows it clearly that the elite people, entrepreneur, people belongs to upper-upper, upper middle and to those people for whom money is not an issue and they just want to get best service, have an Airtel connection. so this study shows that Airtel is more focused on the elite group people.

Study clearly shows that Airtel is a status symbol because of the brand image in the mind of public due to their willingness to provide the best service.

Higher class people are not concentrated on price because 500-1000 or more is not a big deal for them. They concentrate on the quality of service, and some special services:--

A person, having Airtel mobile connection, and don‟t have time to go the insurance company to take/renew car insurance so what he/she can do: - he/she can go for car insurance by Airtel mobile.

Other example:-electricity bill payment; mobile to mobile top up, fund transfer, payment and purchase of airline as well as train reservation ticket.

Airtel provided the customers with mobile phone communication requirements like better network coverage, network reliability, and charging customers for only what they use, instead of features like free phone calls, which even have a higher cost for provider.

Therefore, a customer-focused “differentiation strategy” when implemented with a clear vision benefits the company in many ways including price premium, brand loyalty and sometimes even reduced costs.

The branch manager of Airtel told that In order to effectively maintain a differentiation strategy, the firm have a very strong kills in R&D, product engineering, change management, marketing, advertising, and HRM.

VODAFONE

GENERIC STRATEGY ANALYIS IN THE CONTEXT OF VODAFONE:

STRATEGIC TARGET:--TARGET ENTIRE INDUSTRY

STRATEGIC ADVANTAGE :-- UNIQUENESS PERCEIVED BY THE CONSUMERS

GENERIC STRATEGY:-- DIFFERENTIATION STRATEGY

ILLUSTRATIONS:-

The responses of the consumers reveal that Vodafone is also attempts to achieve a competitive advantage by creating a service that is perceived as unique.

The study shows it clearly that Vodafone have a huge market share due to its better service and good network. But the thing that differentiate it from the competitors that it provide the more and more number of the value added services.

Latest advertisement of Vodafone: Zoozoos” is very attracting and it increases the sales of the Vodafone , the marketing manager of Vodafone reveals that statement.

Study clearly shows that Vodafone is a has a brand image in the mind of public due to their willingness to provide the best service.

RELIANCE

GENERIC STRATEGY ANALYIS IN THE CONTEXT OF RELIANCE:

STRATEGIC TARGET:--TARGET ENTIRE INDUSTRY

STRATEGIC ADVANTAGE:-ARRIVED AT LOW COST POSITION

GENERIC STRATEGY:--OVERALL LOW COST LEADERSHIP STRATEGY

ILLUSTRATIONS:-

Reliance is providing the better quality in the lowest cost in the market. The study clearly shows that reliance has the approx 18% of the total consumer base while enjoys only 10% of the total telecom market revenue. So this study clearly indicates that reliance is meant to provide the better quality at the lowest possible price.

“MANSOON HUNGAMA OFFER” of reliance made a tremendous history in the field of telecom. In that plan reliance provide a mobile handset along with connection(CDMA) in just 500/- Rs. Which was almost unbelievable in market? So in

another words we can say that reliance bring the mobile revolution in India at the lowest possible cost.

Besides that the GSM launch of the reliance creates a history that with in 6 months it takes 7.2% of the GSM mobile segment in India due to the low price. In that plan reliance give 900/- free talk time in just 25/-.

OVERALL ANALYSIS OF TELECOM MARKET IN CONTEXT WITH GENERIC STRATEGIES

Cost leadership strategy is not the most desirable strategy in this event, as competitors may put intense price pressures, such that all companies would end up reducing their prices drastically.

Differentiation would be a viable strategy in this case as there is a likelihood that the loyal customers would stay with the company. It would also be hard for competitors to cope with the specialised needs of customers who are part of a niche segment in the market.

High customer loyalty towards a company's brands, which is true for the differentiation strategy, can play a vital role in discouraging potential entrants.

Threat of substitutes is reduced in case of the differentiation strategy due to customer loyalty to the unique aspects of a particular product or service, which no substitute product can offer in the customer's mind.

Buyers in case of differentiation strategy would have less power as there are few alternatives available to them.

THE ROAD AHEAD

According to the Vision 2020 document of the Planning Commission of India, the country will witness continued urbanization. The urban population is expected to rise from 28 per cent to 40 per cent of total population by 2020.

Future growth is likely to be concentrated in and around 60 to 70 large cities having a population of one million or more. This profile of concentrated urban population will facilitate customized telecom offerings from operators.

The target for the 11th Plan period (2007-12) is 600 million phone connections with an investment of US$ 73 billion. Apart from the basic telephone service, there is an enormous potential for various value-added services. According to the CII Ernst & Young report titled 'India 2012: Telecom growth continues', revenue from India's telecom services industry is projected to reach US$ 54 billion in 2012, as against US$ 31 billion in 2008.

PORTER’S 5 FORCES MODEL (FOR TELECOM INDUSTRY)

THREAT OF NEW ENTRANTS (MODERATE):

It comes as no surprise that in the capital-intensive telecom industry the biggest barrier to entry is access to finance. To cover high fixed costs, serious contenders typically require a lot of cash. In addition, it is important to remember that solid operating skills and management experience is fairly scarce, making entry even more difficult. But still Threat of new entrants is always there for any company.

POWER OF SUPPLIERS (LOW):

At first glance, it might look like telecom equipment suppliers have considerable bargaining power over telecom operators. Indeed, without high-tech broadband switching equipment, fiber-optic cables, and mobile handsets and billing software, telecom operators would not be able to do the job of transmitting voice and data from place to place. But there are actually a number of large equipment makers around. There are enough vendors, arguably, to dilute bargaining power. A company will have a variety of suppliers to choose from, because most of the suppliers would be eying to get the contract to be the supplier of the company.

POWER OF BUYERS (HIGH):

Lack of differentiation amongst the service providers has led to sort of commoditization of the product. A company provides the same service as others provide, this lack of differentiation gives customer an edge to bargain with service providers, they can switch to any other provider any time they want. Fierce competition among the competitors also offers a great deal to bargain. As the switching cost is also very low, all these situations are creating problems in the growth of many companies

AVAILABILITY OF SUBSTITUTES (HIGH):

Products and services from non-traditional telecom industries pose serious substitution threats. Cable TV and satellite operators now compete for buyers. The cable guys, with their own direct lines into homes, offer broadband internet services, and satellite links can substitute for high-speed business networking needs. The threat of the substitutes for any company is very high in Indian market as the already existent players have a huge market share and better brand perception among the consumers, making it tough for a comapny to win the trust of its customer and increase its market share. .

COMPETITIVE RIVALRY (HIGH):

Competition is "cut throat". The wave of industry deregulation together with the receptive capital markets paved the way for a rush of new entrants. New technology is prompting a raft of substitute services. Nearly everybody already pays for phone services, so all competitors now must lure customers with lower prices and more exciting services. This tends to drive industry profitability down. In addition to low profits, the telecom industry suffers from high exit barriers, mainly due to its specialized equipment. A new company will face a cut throat competition from its well established competitors

PEST ANALYSIS

It is a systematic examination of all 4 levels of the environment with at least three purposes:

Detecting important economic, social, cultural, environmental, health, technological, and political trends, situations, and events.

Identifying the potential opportunities and threats for the institution implied by these trends, situations, and events.

Gaining an accurate understanding of your organization‘s strength and limitations.

A PEST analysis of the macro environment indicates that economic (a phone call being a cheaper way to stay in touch than outstation travel for example) and social factors (working outside the home town) have forced the pace of utilization of technology (Public Call Offices, mobile phones, networked companies). Increasing customer awareness has raised expectations and vocal demands are being articulated for consumer rights; such political factors have in turn impacted the competitive environment by way of entry of private players, independent regulation, and a policy framework tilted towards a ―level playing field‖ for new entrants.

1. POLITICAL FACTOR

High entry fees in 3G market

In India legal obligations are there regarding 3G auction and bidding which limits it to the existing players and not available to the new entrants this political factor forbids the entry of new companies in to 3G services.

Reduction in tariff plan

Earlier the tariff rates were higher due to high taxes, but now it has become lowest in the world by tax reforms.

Extension of license period

Government has replaced the license fees with revenue sharing scheme and extended the license period from 10 year to 20 years. A company can merge with another operator only after 3 years of receiving license. This rule can be eased to help new comapnies merge with established players.

2. ECONOMICAL FACTOR:

India is one of the most vibrant and fastest growing telecom market in the world enjoys the steady growth rate of 10 million mobile users every month .India has a moderate but still a healthy growth rate which will provide a good base for new as well as existing companies to grow with growing economy.

3. SOCIAL FACTORS:

Perception of new entrant in the market

A new brand in the Indian market it will be facing problems regarding the perception of a new entrant, this image will adversely affect the buying capacity of customers, they will think about the network, and the kind of service they will get after sale.

Social status

Anything customers buy that reflects their social status, people will be conscious about their social status this will affect a new company‘s growth adversely.

4. Technological factor:

The business in a country is greatly influenced by the technological development. The technology adopted by the industries determines the type and quality of goods and services to be produced and the type and quality of plant and equipment to be used. A company should be aiming to come up with something new that is not been available to its competitors.

CORPORATE ANALYSIS OF RELIANCE COMMUNICATIONS

The Indian telecom sector is characterized by stiff competition among 10 national level players and two government owned firms. In spite of a difficult pricing environment, Indian telecom sector is attractive. The key reason is vast population of India of over 1 Billion which makes it as one of the biggest telecom market in the world. After USA and China, India is third biggest telecom market in the world.

Fig: Market share of Telecom Companies in India.

Fig: Market share of Telecom Companies in India based on Urban and Rural Subscribers(June 2009 Data (Source: TRAI))

RELIANCE COMMUNICATIONS

Company Profile

Type: Public (BSE: RCOM) Headquarters: Mumbai Key people: Anil Ambani, Chairman Industry: Telecommunication Product: GSM, CDMA, broadband services Revenue: US $ 4billion Employees: 33000

The Late Dhirubhai Ambani dreamt of a digital India — an India where the common man would have access to affordable means of information and communication. Dhirubhai, who single-handedly built India’s largest private sector company virtually from scratch, had stated as early as 1999: “Make the tools of information and communication available to people at an affordable cost. They will overcome the handicaps of illiteracy and lack of mobility.”

It was with this belief in mind that Reliance Communications (formerly Reliance Infocomm) started laying 60,000 route kilometres of a pan-India fibre optic backbone. Reliance Communications is the flagship company of the Anil Dhirubhai Ambani Group (ADAG) of companies. Listed on the National Stock Exchange and the Bombay Stock Exchange, it is India’s leading integrated telecommunication company with over 80 million customers. Its business encompasses a complete range of telecom services covering mobile and fixed line telephony. It includes broadband, national and international long distance services and data services along with an exhaustive range of value-added services and applications.

Reliance Communications has a reliable, high-capacity, integrated (both wireless and wireline) and convergent (voice, data and video) digital network. It is capable of delivering a range of services spanning the entire infocomm (information and communication) value chain, including infrastructure and services — for enterprises as well as individuals, applications, and consulting.

Reliance Communications is one of India’s largest information and communications services provider with over 20 million subscribers, and offers the full range of integrated telecom services—at prices that are, by far, the lowest anywhere in the world. Today, Reliance Communications is revolutionizing the way India communicates and networks, truly bringing about a new way of life, relationship and help to develop these concepts. Together, these ideas can be converted into products and services that have great market potential.

History of the company

1999:

The Dream: "Make a phone call cheaper than a postcard and you will usher in a revolutionary

transformation in the lives of millions of Indians" - Dhirubhai Ambani The Reality, November 15 - Reliance Infocomm begins Project Planning

2000:

Optical fiber laying process commences in Gujarat, Andhra Pradesh & Maharashtra

2001:

First Media Convergence Node made "Ready for Electronics" at Jaipur

2002:

First Base Transceiver Station (BTS) made "Ready for Electronics" Obtains International Long Distance License from Govt. of India Commissions 1st Optic Fiber Backbone ring Establishes 1st Point of Interconnect (POI) in New Delhi Hon'ble Prime Minister of India Shri. Atal Behari Vajpayee e-inaugurates Reliance

Infocomm

2003:

Introduces Dhirubhai Ambani Pioneer Offer for Reliance India Mobile service Launches Reliance Web World in top 16 cities, and International Long Distance Services Commissions all backbone rings Introduces colour handsets Launches Reliance India Mobile Service commercially in top 92 cities Launches India's first wireless Point of Sale (POS) Introduces "Monsoon Hungama" Offer: Instant multimedia mobile phone and connection

for just Rs 501. Sets world record - acquires one million customers in 10 days Launches R Connect Internet connection cable Introduces Reliance India Phone Fixed Wireless Phone and Terminal "Navratri" a data service in R-World posts a world record of 10 million downloads on the

first day of the launch. R World clocks a phenomenal 1 billion hits in 1 month Launches integrated broadband centre at Reliance WebWorld, Bangalore Deploys pilot of Home Netway in Mumbai Reliance becomes India's largest mobile service provider within 7 months of commercial

launch Customer base touches 5 million Migrates to Unified License Regime Launches National Roaming Launches International SMS to 159 countries launched Adds 4500th Contact Centre Executive: Contact Centre becomes the largest such facility

deployed by any single Indian Service Provider

2004:

International wholesale telecommunications service provider, FLAG Telecom amalgamates with Reliance Gateway, a wholly owned subsidiary of Reliance Infocomm.

Launches RIM Prepaid with attractive offer - For Rs 3500 get a Motorola C131 mobile phone and Rs 3240 worth of re- charge vouchers instantly and stay connected for 1 year

Reliance subsidiary Flag Telecom announces FALCON Project - a major new Middle East Loop Terabits Submarine Cable System with links to Egypt and Hong Kong via India

Reliance Infocomm launches multi-player gaming on RIM handsets - a first in India Reliance India Mobile introduces International Roaming facility to 172 countries, 300

networks Reliance Infocomm introduces first ever auction facility on Mobile phones through R

World. Reliance Infocomm receives the Most Promising Service Provider of the Year 2003 (Asia

Pacific) award at the Asia Pacific Technology Awards instituted by Frost & Sullivan. Reliance Infocomm introduces World Card - a Prepaid International calling card for

affordable and convenient ISD calls from India. Announces India's First MPLS Global VPN Solution in partnership with MCI Launches the first regional Customer Contact Centre in Chennai Introduces Railway Ticket booking from R World data applications suite of Reliance

India Mobile Mukesh Ambani voted the world’s most influential telecom person by UK-based

publication Total Telecom.

2005:

Reliance introduces first e-recharge facility in CDMA in India. Reliance India Mobile announces mega rural plan to cover 4 lakh villages and 65 crore

Indians by December 2005. Anil Ambani appointed Chairman of Reliance Infocomm Air Deccan and Reliance WebWorld join hands to offer air ticket booking facility at

Reliance WebWorld XLRI's Post-Graduate Certificate program in Logistics Supply Chain Management

(PGCLSCM) launched on Reliance WebWorld's virtual classroom platform. first of its kind e-learning program in India.

Reliance Infocomm rolls out international roaming facility across several countries to become the first Indian CDMA operator to offer its customers such a service.

Reliance Infocomm tied-up with the Bombay Stock Exchange to make available live stock quotes on its mobile phones.

Reliance Communications, UK launched Reliance IndiaCall service in England and Wales enabling callers to make high-quality calls to India from any landline or mobile phone at economical rates.

Apollo Hospital and Reliance Infocomm join hands to provide top class healthcare service to millions of Indians in over a hundred Indian cities.

Reliance WebWorld wins Frost & Sullivan Market Leadership Award for Video Conferencing services.

Reliance Infocomm hosts the 4th global CDMA Operators Summit. Reliance Infocomm joins hands with Indian Airlines to offer India's first mobile booking

of domestic airline ticket. Reliance Infocomm introduces MOREbile, redefines customer rewarding with 33 % more

talk time on prepaid recharges of Rs 315 denomination and above and much more.

Reliance Infocomm and China Telecom sign agreement for telecom services to provide direct telecommunication service, including a global hubbing service, to subscribers in the two countries.

2006:

Reliance Infocomm launches "One Nation, One Tariff" to enable Reliance India Mobile prepaid users to call anywhere in India at Re one per minute.

Reliance Demerger adds record Rs.55, 000 Crore to shareholder wealth TIMES NOW launched on Reliance Mobile Phones, making it the world’s first TV

channel to be launched on a mobile phone. Reliance Communications Ventures Ltd. (RCVL), India's leading integrated

telecommunications company, a member of the Reliance - Anil Dhirubhai Ambani group, lists on the Bombay Stock Exchange and National Stock Exchange.

Reliance Infocomm introduces R World in Hindi to become the world's first operator to offer mobile data services in more than one language on the same handset. This will make it possible for millions of Indians to access the popular R World with hundreds of every-day-use applications in the national language.

Reliance-Anil Dhirubhai Ambani Group signs up Indian cricket's whiz kid and heartthrob of millions Mahendra Singh Dhoni as the brand ambassador for Reliance Communications Ventures Ltd.

Reliance Infocomm becomes India’s first telecom operator to launch seamless inter-standard international roaming service - 1World.1Number, with single number on international CDMA and GSM networks.

Reliance Communications launches India’s first Talking Message Service (TMS) enabling its mobile users to send voice messages to not only other mobiles but also fixed wireless phones (FWP) and landlines.

Reliance Communications ties up with Disney to offer on Reliance Mobile World India's first 3D animation on mobile.

Reliance Communications launches 'Hello Capital Plan' to enable its subscribers in 19 state capitals to call each other at the local call rate of 40 paise per minute.

Reliance Communications slashes ILD rates by up to 66% T-Com signs contract with FLAG Telecom for Europe-US bandwidth Reliance Communications launches Free Group Term Life Cover for its CDMA

subscribers

2007:

Reliance Communications adds a record 1.4 million subscribers in December ‘06 Reliance Communications promotes Roger Waters Music Concert Reliance joins Lenovo and Intel for "Internet on the Move" Search Jobs & Classified Ads from Reliance Mobile World - Reliance Communications

ties up with Naukri.com Reliance Communications ushers in ‘Virtual Global Conference Network’ Reliance Communications unleashes the power of mobile advertising Reliance Communications acquires 1.2 million subscribers in March 2007. Sunny Days And Nights For Reliance Mobile Subscribers as Reliance Communications ties up with SUN TV to offer video streaming of all SUN TV

programs online 24x7

Reliance World launches summer e camp for school kids RCOM first listed Indian telecom company to reward shareholders A Classic Bonanza – Reliance Communications unveils handsets @ Rs 777 RCOM bags West Bengal E-Governance Project Reliance Communications slashes rate to US and Canada. Reliance Communications launches Classic Colour Bonanza - Colour handsets @ Rs

1234 RCOM kick starts world's fastest and largest rural infrastructure rollout on World

Telecom Day. Reliance Communications Launches Lifetime Validity Recharge @ Just Rs.499. RCOM slashes roaming rates by as much as 70 percent Reliance Communications launches unlimited calling Reliance Communications adds 1.4 million new mobile subscribers in May2007 Reliance Classic' Makes Music - FM Radio Phones Launched at just Rs.1888 Reliance World, BIMTECH & Philadelphia University unveil Executive Program in

Retail Management (EPRM) Reliance Communications ties up with Cisco to launch Business Internet Services for

SMEs in Pune Bengali movie ‘Anuranan’ on Reliance Mobile World RCOM and QUALCOMM Collaborate on CDMA2000 Expansion Reliance Communications awards Alcatel-Lucent a Next-Gen network expansion contract Reliance Communications awards Huawei all IP Next-Gen network expansion contract RCOM announces sale of equity stake in its Tower Company-Reliance Telecom

Infrastructure Limited Reliance Communications launches Passport Calling Solutions RCOM join hands with Yatra.com for air and hotel bookings RCOM offers 'Live Mandi Prices' on Reliance Mobile World Reliance Communications , the official global partner for the first edition of ICC Twenty

20 World Cup Championship 2007 in South Africa unveils the coveted Trophy in Mumbai and announces Dhoni - Dhanadan Pack

Reliance Communications launches Money Transfer on Reliance Mobile Phones RCOM launches BlackBerry 8830 World Edition Vodafone phone 'Bloomberg Professional' now on Reliance Mobile Reliance Communications ties up with Sulekha.com to offer local search on Reliance

Mobile World Strategic partnership with Vanco Reliance Communications announces Classic Celebrations- Classic Handset sales top 10

million- Colour Handset @ Rs.999 Reliance Communications to launch nationwide GSM Services under existing Unified

Access Service Licenses Reliance Communications brings 'Durgotsav Live' Videocast on mobile Reliance Communications completes Yipes’ acquisition

2008:

Reliance Communications receives Start-up GSM Spectrum Yahoo partners with Reliance Communications to provide Yahoo One Search for its

CDMA and GSM customers.

RCOM's Q 3 Net Profit increases by 48.5% and Revenues Up by 29.8 %. Remains the most profitable Telecom Company in India.

Reliance Mobile strengthens its religious content portfolio on Mobile by tie-up with Sadhana TV

RCOM in partnership with CanvasM, launches Mulitplayer Mobile Games HDFC Bank ties up with RCOM, turns every Reliance Mobile into a credit card Reliance Communications consolidates Global Telecom Business under “Business

Globalcom” Reliance Communications forays into International Mobile Market with GSM License in

Uganda. Reliance Communications and HTC forge Strategic Alliance Corporation Bank Launches Banking Services on Reliance Mobile World Reliance Communications forays into IT space, launches Reliance Technology Services

Company RCOM launches Educational Portal on Reliance Mobile Phones Reliance Globalcom unit Reliance Infocom BV, Netherlands acquires Global WiMAX

Operator eWave World Reliance Globalcom Launches Passport Global SIM Reliance Communications and Alcatel form Joint Venture to offer Managed Network

Services to telcos across the globe Reliance Globalcom acquires UK based VANCO Group Limited Reliance Globalcom, Stealth Communications forge Strategic Alliance to extend VOIP

Network across 50 countries

2009:

Rcom launches GSM services in Delhi Reliance GSM service in J&K R-Globalcom bags work orders from 3 global retailers Rcom launches voice-based mobile navigation service. Rcom has entered into joint venture with Kribhco(krishak Bharti cooperative ltd.) Rcom adds record 11 m subscribers Rcom unveils new wireless net service Rcom launches a new format of Reliance mobile store Rcom post-paid services for in U.P & Uttarakhand. Rcom signs Hrithik Roshan as brand ambassador Rcom bags a 125 cr. WAN contract from global consultancy major Mott Macdonald. Rcom to offer BlackBerry services for Rs. 299 Reliance mobile in deal with EA mobile

S.W.O.T ANALYSIS OF RELIANCE COMMUNICATIONS:

STRENGTHS:

CDMA Technology is the best in the telecom sector. Reliance communications has its own optic fibre network and eventually cover 116,000

km, with the ability to seamlessly connect every individual, home, and office in all 640,000 villages and 2,500 towns and cities of India.

Reliance communications offers revolutionary, data, video and value-added services at a cost affordable by all.

Reliance’s brand name. Second largest data centre in Asia.

WEAKNESS:

Late entrant in the telecom sector. Lack of awareness about Reliance’s products in the market. Reliance’s process time is high.

OPPORTUNITY:

3G technology is a new area which is to be captured and Reliance has a good scope over there.

China is the biggest market in Asia Pacific with a subscriber base of 48% of the total subscribers in Asia Pacific. Compared to that 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 penetration offers huge scope for growth.

India‘s mobile phone subscriber base is growing at a rate of 82%. The Internet Access Market in India is all set to grow twice the existing value what with

the increase in literacy level, increasing consumer awareness, PC penetration etc.

THREATS:

Competition from local players such as Sify and Spectra net. Reliance communication is mostly based on CDMA technology. Therefore there is threat

from GSM technology as most of the population currently use GSM technology. Price war among different service providers

MARKETING STRATEGIES

Financial restructuring of Reliance communications Reliance is to spend Rs 16,000 crore to expand and strengthen network coverage

After expansion, Reliance Communications will have the single largest wireless network in the world

Launched the lowest-cost classic brand handset at Rs 777

STRATEGIES: PAST AND PRESENT

A study of the history, SWOT analysis, Marketing strategies mentioned above reveals that Reliance implemented the following broad strategies that led to it being the second biggest market share holder in the telecom industry

Deal Making and Negotiation: It is seen to be adept at soliciting alliances and structuring contracts.

First Mover advantage and Image building: It has been the first to launch new telecom services, and the first to start or join with other companies in new business initiatives, thus making its presence known

Spotting acquisitions: It expanded through acquisitions thus establishing nationwide presence

Growth oriented organization: It invested in new technologies thus keeping up with the dynamic changes in the telecom sector as well as the needs of customers, thus it is able to stay ahead of competition.

Customer orientation: Customer satisfaction and service was being given the utmost importance. It is seen to be sensitive to customer needs and is thus in tune with customer likes and dislikes by introducing products and services that cater to the needs, such as banking solutions, bill payments etc

Outsourcing of operations that can be performed effectively by other companies, thereby allowing Reliance to concentrate on its core competencies

Wide scale operations: Coverage of customer base, services, and products are seen to be done very quickly in a very short period of time. Efficiency is seen to be achieved due to large scale operations.

Service Expansion: Expands its mobile services by including services that substitute others products such as television, thereby gaining popularity as a multipurpose product

Partners of various events and programs: CSR activities independently and with other companies, help Reliance in building a positive image with the public

ANALYSIS USING PORTERS FIVE FORCES FOR RELIANCE TELECOM

BARGAINING POWER OF SUPPLIERS

Supplier concentration: Availability of suppliers for the IT infrastructure is very few and the suppliers and they have a integrated network who follow a set of pricing policy for quoting high rate which makes Reliance Mobile pay high by supplier’s concentration.

Differentiation of inputs: The infrastructure supplies or the product available from the different suppliers varies to an extent for which without supervision very difficult to proceed.

Switching cost of firms in the industry: As the company has now started penetrating into the GSM technology from the CDMA switching cost of technology to the company in the industry is very high. Presence of substitute input: As the availability of input is getting updated every day and emerging technology, it is very difficult for the reliance mobile to stick on to one kind of technology or supplier in long run.

BARGAINING POWER OF CUSTOMERS

Bargaining leverage: As very high competition exists in the industry with nearly 8-10 players buyers have very high bargaining leverage to the Reliance mobile as its concentration is highly towards CDMA technology.

Buyer Volume: Though there are huge but common buyers for the all the service provider in market this company has to compete with the same volume of buyers in the available market segment to acquire their pie in the market

Buyer’s information: As buyers see all the players in the market and are well equipped with information on the best suited plan for their use and its provider. It is hard for the company to convenience the buyers with high cost.

Brand identity: As Reliance is a well established company in India and across the globe their brand identity is helping the business of Reliance Mobile to grow in greater pace.

Price sensitivity: Reliance cell phones have their market concentration high in the rural market which is mainly because of their low cost / price sensitive.

THREAT OF SUBSTITUTES

Switching cost: As switching cost of the cell phone service providers in India is very low it becomes easy for the customer to shift their network provider and which ultimately affects the company. But as Reliance’s concentration on CDMA technology is high it reduces the risk of switching over of the service providers.

Buyers inclination to substitute like Smart Phones and Internet Calling: Buyer’s inclination towards the emerging technology like smart phones and internet calling or online computer to computer calling is one of the major threats faced by Reliance Mobile.

Price performance trade-off of substitute: Where in the price of the Smart Phones are slashed drastically now it has become a big threat for Reliance Mobile as the customers have high inclination towards the new technology to make their job easy.

THREAT OF NEW ENTRY

In telecommunication industry the threat of new entrants is slightly low as it requires very huge capital investments and an established brand identity. Apart from that the company must also have to adhere for the Government Policies which are becoming very strict in the recent times related to the global warming and other security purposes. As this industry requires high access on distribution on the service generated by spreading wide across, requires great networking

Exit Barriers: In this industry it is very difficult for the new entrant to enter or for the exciting player to exit from the market as it involves very high sunk costs, which is spent on the infrastructure and it also involves a very huge fixed costs which are spent on maintenance of the infrastructure, technology and the highly skilled human resource.

Industry Growth: Telecom industry India has a very high growth rate which inclines the new entrants to enter into the industry although it is hard.

Switching Costs: As in India a telephone subscriber has a wide open door to switch over to any service providers if they are not happy with the current one, Reliance can lose its customers for reasons such as poor service or unfavourable plan with respect to the other service providers.

FUTURE RECOMMENDATIONS FOR RELIANCE TELECOM

In the current scenario, as the Indian telecom market attracts huge funds of several global telecom giants, Reliance’s higher profitability and strong liquidity position serves as a twin- edged weapon to expand the market & combat the growing competition. But in the non-wireless segment, the Company should look for new growth opportunities like it has done before

Companies like Vodafone have gathered advantage by using the creative and innovative ‘ZooZoo’ advertisements and so Reliance needs to come up with such creative advertisements to stay in the telecom battle and win.

While low spending power of end customers has adverse impact on adoption and ARPU, limited electrification, a lack of backhaul and the poor state of road connectivity make deploying and operating a wireless network in rural areas expensive. Therefore, mobile business case in much of rural India is very challenging. To overcome these challenges, Reliance must shift their primary focus from increasing ARPU and penetration to maximising total revenue and profit from the servable rural subscribers. This can be achieved by adopting a comprehensive rural strategy comprising service & product innovation and operational excellence; partnering with the government, non-government organisations and non-telecoms players; and employing local entrepreneurs.

And thus we can conclude by saying that in a service business you can't have high imagery and low delivery. Effective branding has to be built on a bedrock of fundamentals of service - great network, customer service and great billing systems.

ENTRY STRATEGY FOR THE NEW PLAYER

The juggernaut that the Indian Telecom sector has become continues to roll-on unstopped by

the global economic recession which also managed to reach the Indian shores. Over the last

year, the performance of wireless telephony market has been stellar, adding almost 16 million

subscribers every month. The total subscriber base for wireless telephony now stands at 635

million and the total subscribers at 672 million making India the second largest telecom

market in the world.

The Indian telecom market along with this tremendous growth has become highly

competitive with one of the lowest call charges in the world squeezing the mobile service

providers. The Average Revenue per User (ARPU), used by the industry to measure the

revenue stream has been falling steadily for some time now and continues to do so. On the

other hand the service levels expected by the customers have kept increasing putting a lot of

pressure on the margins of the mobile operators.

The fierce competition and low revenues should not be misunderstood for low potential of the

markets. The sector with a tele-density of just 54 per 100 does not compare to some of the

European countries or even few high growth Asian economies. The explosion so far has been

occurring only in the urban areas whereas the bulk of the rural hinterland where ‘India lives’

is still left untapped. Also one should not overlook the possibilities of more than one

connection per user which is very prevalent in developed economies. This trend has started

showing up in the country as well which have been driving the additions witnessed recently.

This and also the possibilities of increased revenue through non-voice value added services in

both urban and rural markets also hold promise.

Leaving out the broadband wireless and internet services market in the scope of discussion

will also lead to poor understanding of the potential of the sector. The internet penetration in

the country is abysmally low at only 5% leaving a lot of scope to reach a lot of customers and

huge growth. But this market is contingent on sales of devices capable of using internet,

which still has to be addressed. All this makes Indian Telecom sector the place to be to

experience high growth in revenues.

TRENDS & OUTLOOK

The wireless segment is much larger than the wireline segment with a market share of

94.6% as on June 2010 and continues to grow. The wireline segment is essentially

dominated by two state-owned companies Bharat Sanchar Nigam Limted (BSNL) and

Mahanagar Telecom Nigam Limited (MTNL).

Emergence of rural markets as the next key growth area given the increase in

disposable incomes and various employment and livelihood schemes targeting the

rural population. The tele-density grew significantly in 2008-2009 in rural areas and

stood at 16.61% (June 2009).

India expected to be among the top 10 broadband markets by 2013. DSL (Digital

Subscriber Line) is the most preferred technology used by the service providers to

provide broadband services and constitutes 86.66 per cent of total broadband

subscribers.

Operators are reducing operating costs and hiving off infrastructure elements such as

towers into separate entities inviting significant investments.

The industry has been moving towards passive infrastructure sharing, benefitting the

operator by lowering both the cost burden and speedy roll-out of services.

Service providers are looking beyond the basic voice services by offering a composite

bouquet of bundled offerings. Nearly all the leading operators, including incumbents,

are in the testing phase to launch commercial IPTV services. Indian operators are at a

nascent stage in terms of offering “quad-play” using the existing network

infrastructure for data, voice, video and basic communication services.

3G/BWA spectrum payments and additional capex requirement to roll out these

services would strain the service providers exerting further pressure on the margins

along with rising subscriber acquisition costs and network costs.

Addition of lower-end customers and multi-SIM users, driving the growth in

subscriber base.

Recent developments like m-commerce, mobile TV, local language content and

localization have started driving the growth in Value Added Services (VAS) segment

which is expected to be around $4.0 billion by 2015.

LEGAL & REGULATORY FRAMEWORK

FOREIGN DIRECT INVESTMENT

Up to 74 percent for Basic and 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 telecom services. 49percent of this is permitted under the automatic

route.

Up to 74 percent (49percent under the automatic route) for ISP gateways, radio-pagin

and end-to-end bandwidth.

Up to 100 percent (49percent under the automatic route) for ISPs without gateways;

electronic and voice mail and IP category 1.

Up to 100 percent for manufacture of telecom equipments under automatic route.

UNIFIED ACCESS LICENSING REGIME (UALR)

UALR, in force since 2003, eliminates the need for separate licences for different services.

This regime allowed players to offer both mobile and fixed-line services under a single

licence after paying an additional entry fee. The regime does not take into account the

national and international long distance services and Internet access services

UNIVERSAL SERVICE OBLIGATION (USO)

The USO policy was implemented along with the National Telephone Policy (NTP) in1999

to widen the reach of telephony services in rural India. All telecom operators are bound to

contribute 5 per cent of their revenues to this fund. This system was put in place to bridge the

gap between urban and rural tele-density.

MOBILE NUMBER PORTABILITY

Mobile Number Portability (MNP) will enable subscribers to change their operators while

retaining their number. The DOT issued guidelines for MNP service license on August 1,

2008. The DoT has envisaged guidelines for geographical division of the country into two

Number Portability Zones (zone 1 and zone 2), each consisting of 11 licensed service areas.

According to these guidelines, the MNP will be initially implemented in all metros and

category A service areas within 6 months of award of MNP license. Subsequently, the

operation of MNP will be expanded to the rest of the service areas in a time-bound manner.

MNP is planned to be implemented from end of October 2010.

SPECTRUM POLICY

With the trend in the telecommunication sector moving towards mobility, the government has

recognised and has implemented automated spectrum management system in January 2005.

This system will address bottlenecks in spectrum availability as radio frequency spectrum is

one of the necessary ingredients of mobility. Electromagnetic spectrum is considered as a

scarce natural resource and needs to be properly utilised to introduce new radio

communication technologies.

Further, during November 2007, the government constituted a committee to recommend

revised subscriber-based spectrum allocation criteria. The committee in its report has

recommended allocation of additional spectrum in steps of 1 MHz. The criteria for spectrum

allotment will be based on the active subscribers, peak traffic of the operator’s network and

demographic features of the service area. These criteria will be reviewed from time to time

wherein relevant factors and technological developments will be taken into account.

OPPORTUNITIES

Wireless mobile telephony – especially the rural markets whose teledensity is

expected to rise to about 40% by 2012.

Internet Services – low penetration with huge growth potential. India expected to be

among the top 10 markets by 2013.

Telecom Equipment Market – Another region that has seen a huge growth. The

expansion of wireless networks and growth in subscriber base, both in urban and rural

areas, has led to a boost in the sale of mobile handsets across India. Many new players

have started sourcing instruments from China and branding them. This has drawn the

attention of the Minister for Telecom and IT who has called for a ban on such imports

and increase in local production.

WiMAX - one of the most significant developments in wireless communication in the

recent past. WiMax is expected to attract about 8 to10 million subscribers and account

for about US$1 - 1.5 billion by 2012 assuming that low cost devices and data cards

are available and services are affordable. But roll out of WiMax will require

considerable resources and technology.

Telecom infrastructure - Includes towers and the optical fibre network; demand for

telecom towers is expected to continue to rise due to increasing penetration in rural

areas, upcoming 3G service, expanding internet market and an increase in number of

operators with pan-India operations. This space has seen a lot of consolidation and lot

of investments over the past few months with the mobile operators divesting their

tower operations.

Though there are several opportunities it would be prudent for AVG Group to enter one or

two segments at the beginning and to expand. We would recommend AVG to consider

entering the mobile telephony market and internet services markets as these are segments

require lesser investments compared to infrastructure business or WiMAX.

The infrastructure business already has two big players in Indus Towers and GTL Infratel,

who between them own 200,000 towers more than two-thirds of the installed capacity with

further consolidation expected.

Telecom equipment market is also best untouched now as it would require a lot of resources

in terms of marketing activities in the much cluttered market. Also the policy regarding

import of Chinese manufactures mobiles and local manufacturing is also very unclear. It is

best to let it be and enter when the time seems appropriates, if required.

MODES OF ENTRY

The country has been divided into 23 territorial service areas called circles for the purposes of

telecom operations and to operate in each of this circle, the operator has to obtain a licence.

The licence is the biggest asset for a telecom operator.

The licence for operations in the circles has already been issued twice which involves

allocation of spectrum for the companies to operate. Since spectrum is a very scarce ‘national

resource’, the possibility of re-issue is also very slim given that further spectrum was allotted

only recently for 3G operations.

Entry into the telecom sector at this stage is possible only through the following means

i. Purchase of license from an existing license holder

ii. Entering into a joint-venture with a license holder or mobile operator

iii. Purchase of an existing mobile services operator

Purchase of License

Almost all license holders have started their operation with the exception of few of the new

entrants such as Etisalat DB and some old players such as RPG Cellular, Escotel whose

rollout has stopped or is very low. Under such circumstances it is very difficult to lay hands

on any of these. Etisalat itself being a telecom company with global ambitions might not be

willing to part away its precious license.

Joint-Ventures

The sector has a lot of new entrants such as Videocon, Sistema, Uninor, Loop and STel who

have commenced their operations and have rolled out in few of the circles. These companies

are already being probed and face fines for delayed roll-out of services which under the

current laws should be provided in atleast 10% of the district headquarters by the end of first

year.

Most of the players in the market are either big enough to hold their self or are already in

joint-ventures. Unless some partner wishes to exit the business or wishes to sell some of his

equity, this mode does not offer any promise. If AVG group has expertise and distinct

advantages in marketing, it could be promote itself as suitable partner by these companies.

Purchase of Existing Operators

Many of the new entrants have not been able to attract new customer. Few like Uninor and

Videocon showed initial surge but have not been able to sustain it. These companies are

under tremendous pressures and could be a potential target for joint-ventures as they require

fund infusion to take the battle to their competition across the circles. Companies such as

Uninor and Sistema have backing of giants such as Telenor and hence might withstand the

onslaught for more time. Also companies such as Sistema have started focussing on other

activities as well.

This scenario has led to the situation of shake-up in the industry with consolidations expected

in the near future. Some player, given the right valuation might be willing to exit the business

selling their stakes to AVG.

Also TRAI is considering issuing fresh guidelines regarding M&A which is believed to

remove restrictions of mergers within three-years of operation. This also shows the intention

of TRAI to reduce the number of operators in the market to make it healthier. This could

trigger a number of exits and mergers.

Companies such as Uninor, Videocon or Sistema, if are available during this wave of

consolidation, would be very good targets as they have licenses across many circle in the

country.

CORPORATE STRATEGY

Indian telecom market is only suited for telecom operators with long-term investment

perspective, and patience and perseverance. It is not a market for telecom operators with

short-term investment perspective and quick profit making goals.

The company’s vision should be to be an integrated universal communication solutions

provider.

Integration - developing new pipelines and customer touch points. The company should

strive to provide comprehensive integrated service portfolio for all customers’

communication needs, through both fixed-line and wireless access creating a seamless user

experience.

Innovation – the company should strive to differentiate itself from the competition by a

innovative mix of product, solutions and technology.

Universality – the company should strive to be a universal communication provider. It means

presence in all spheres of communications be it telephony, paging, internet services, next-

generation networks, e-mails, other media like video-conferencing etc. The company should

strive to be the end-to-end communication solutions provider.

If the company’s name and businesses are sufficiently popular, the company could use a

strategy of endorsed brand with the parent brand acting as a driver in the markets. If the

company’s business activities and brand equity are affected by its use in telecom markets, it

is best to go for a different identity.

Since the mode of entry is most probably through acquisition of some companies, the same

brand identity can be used unless the brand has gained considerable leverage with some

particular segment of the market.

BUSINESS STRATEGY

Business strategy is the foundation of successful business. The strategy for AVG group

should be contingent on increasing the market share at economical prices. The company

should try to achieve high operational efficiency and low-cost of operations. The group

should compete on the basis of a hybrid strategy of low-cost leadership and focus.

Target Customers

The company’s immediate objective should be to penetrate and gain considerable foothold in

B and C circle regions which would form the semi-urban and rural areas. Since these regions

have lower ARPUs, the objective is to increase the number of users. Sufficiently large

number of subscriber base could offset the loss in ARPU. This market can be targeted only

by low-cost leadership atleast initially. Since these markets are not serviced adequately now,

and also mobile number portability will aid in disillusioned customer to switch operators,

AVG Group should try to convert as many subscriber as possible.

The company should also try to appeal to the small and medium businesses by show casing

the low cost of operating our mobile services and the huge cost savings. Since the business

also operates in internet and broadband services, the company could position itself as the

cheaper, high quality communications services provider for SMEs.

Operational Strategy

Since the operations in the initial years will be small, the company will have better quality

services because of lower call-drop rates and high availability.

The company should ensure the high network availability by leasing out towers with tower

infrastructure providers in the key markets. It should go for other alliances to ensure

connectivity in circle where we currently do not have operations. Signal strength, quality and

high availability are important parameters considered by the customers. Costs could be

minimized by outsourcing non-core activities to specialist service providers and rigid checks

should be enforced to check the customer satisfaction levels.

The business office and customer service locations and other such infrastructure can be

located in tier II and tier III cities to save on costs on such infrastructure. The emergence of

Rural BPO will also give a fillip to the customer services as these can be had in multiple

locations at much lower cost compared to BPO services providers in tier I cities. These BPOs

will also be able to connect with our target group who are essentially from semi-urban and

rural populace.

Marketing

The marketing activities should focus differently on the rural and semi-urban population and

the small and medium businesses. The communications should focus on the common man

and on the presence of network across the country and should try to leverage on the group’s

equity. The marketing strategy can leverage on the parent group’s experience on

Excellence in distribution

Customer lifecycle management

Targeted offerings

Culture

Growth Strategy

Initial offering to B and C circle regions and offering business and corporate services

to small and medium enterprises.

Initial focus will also be on corporate and household internet broad band services

Economic growth by leasing out tower infrastructure, outsourcing of network

operations, IT requirements and customer services.

Acquiring a huge number of point-of-presence across semi-urban and rural India.

Securing inter-circle roaming agreements with multiple partners to ensure high

network availability

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