Political The Indian telecom sector is one of the most competitive sectors in the world and consolidation due

e to license cancellation should offer some respite to the operators who are struggling due to declining call rates. However, India Ratings does not expect any significant reduction in competition from here in the short term, as most of the operators are either large pan-India operators or small regional players In 2012, the telecom sector in India came under intense scrutiny due to a number of reasons ranging from cancellation of 2G licenses, ambiguity in implementation of key policy measures and dip in wireless subscriber net additions. Topping them all was the spectrum auction debacle. In February 2012, the Supreme Court of India cancelled 122 telecom licenses issued in 2008. The cancellation of telecom licenses and muted response to their re-auction has resulted in consolidation in the telecom industry Government has approved National telecom policy (NTP) 2012. The policy discussed about new initiatives to be taken or already taken by government. Such as, free roaming, unrestricted internet telephony and new unified licensing regime for operators. It also talked about increasing penetration of broadband and local manufacturing of telecom equipment. TRAI is also trying to achieve the aim of carbon reduction under which operators are directed to achieve carbon reduction to the extent of 5% by 2013, 12% by 2016-17 Economy According to IMF, the economy of world grew by 3% in 2012, mainly contributed by 5.5% growth by developing economies. Global growth in 2012-13 has been projected lower than previous year due to slowdown in European market. GDP growth in the emerging economies is also projected to be lower than previous year at around 5%. Indias GDP grew by 4.8% year-on-year in Q1 this year. This was slightly stronger than expected, but then growth forecasts was lowered for 2013 and 2014 due to more cautious view about the pace of the recovery in global trade. GDP is now forecast to increase by 5.1% this year and 6.4% in 2014, down from our previous projections of 5.2% and 7.2% respectively. The IMF has projected India's GDP growth will be around 5.7% in 2013 because of continuous higher interest rates and lower demand. Policy uncertainty, supply bottlenecks and sluggish infrastructure growth are playing a role, until these factors are tackled with serious commitment India's potential growth would not improve. Sub-Saharan African countries are expected to sustain growth at 5.3%, helped by accommodative policy stances and high commodity prices. As the emerging nations are maturing the financial power, consumption and market dynamics are increasingly shifting from the developed world to the developing nations. These economies started as being the world's back office then moved to centre of new activity. In China and India alone, around two billion new middle income consumers are expected to join the consumer base in the next 20 years. Over a longer term horizon, Africa and developing Asia have been forecasted to be the fastest growing regions with 7.0% and 5.4% annual real GDP growth rates respectively between 2010 and 2050. The economic growth prospects in these geographies clearly compliment the Company's strategy of offering telecom services in 20 countries across South Asia and Africa.
Social

Fast changing lifestyles are forcing telecom companies to enlarge the breadth and depth of their services. Joint ventures in the entertainment sector to add more services. E.g. Airtel now offers Airtel money, Airtel videos etc. which are more socially engaging to the customers. In India, the mobile tele-density varies significantly with different circles. As of December 2011, the latest quarter for which data on circle-wise tele-density is available, Delhi has the highest teledensity followed by Himachal Pradesh while Bihar and Assam circles have the lowest tele-density. Broadly, the relative tele-density in different circles corresponds to the per capita gross domestic product (GDP) in the circle. Higher per capita GDP states have a higher penetration and vice versa. Trend in Tele-density Tele-density in the country increased from 5.11% in 2003 to 52.74 % in March 2010. In rural area tele-density increased from 1.49% in Mar 2003 to 24.31% in March 2010 and in the urban areas it is increased from 14.32% in Mar 2003 to119.45% in March 2010.This indicates a rising trend of Indian telecom subscribers. Technological The telecom sector has shown robust growth during the past few years. It has also undergone a substantial change in terms of mobile versus fixed phones and public versus private participation. The entire country has been divided into twenty-one telecom circles and the privately owned companies in each circle have to compete with state owned BSNL and MTNL. The following table shows the growth trend of telecom sector from last five years: The number of telephones has increased from 54.63 million as on 31.03.2003 to 621.28 million as on 31.03.2010. Wireless subscribers increased from 13.3 million as on 31.03.2003 to 584.32 million as on 31.03.2010. Whereas, the fixed line subscribers decreased from 41.33 million in 31.03.2003 to 36.95 million in 31.03.2010. The broadband subscribers grew from a meager 0.18 million to 8.76 million as on 31.03.2010.

3G & Broadband Wireless Services The government decided to auction 3G & BWA spectrum. The 3G will allow telecom companies to offer additional value added services such as high resolution video and multimedia services in addition to voice, fax and conventional data services with high data rate transmission capabilities. BWA will become a predominant platform for broadband roll out services. EnvironmentalEnvironmental issues have started to get more focus from telecom industry. Effective from September 1, 2012, the department of telecommunications (DoT) has lowered the permissible radiation limits for tower companies to 0.45 watts per sq metre - one-tenth of the ICNIRP guidelines - for Indian tower operators. There are disputes over removing the cell tower from school and hospitals on health ground.

Legal India, like many other countries of the world, have adopted a gradual approach to telecom sector reform through selective privatization and managed competition in different segments of the telecom market. To begin with, India introduced private competition in value-added services in 1992 followed by opening up of cellular and basic services for local area to private competition. The Telecom Regulatory Authority of India (TRAI) was constituted in 1997 as an independent regulator in this sector. Competition was also introduced in national long distance (NLD) and international long distance (ILD) telephony at the start of the current decade. Two state-owned public sector incumbents with a large existing subscriber base dominate the fixed line service. As on December 31, 2001, the two Public Sector Enterprises (PSEs), BSNL and MTNL owned 34.73 million Direct Exchange Lines (DELs) against 0.45 million privately owned DELs. Their cellular subscriber base is tiny compared to the private operators. Out of 7.3 million cellular subscribers in the country in June 2002, they had only 0.2 million subscribers. Despite asymmetry in initial market endowments between public sector incumbents and private operators, the act of opening up of the market unleashed dynamism that was hitherto latent in the sector. This is evident from a number of performance indicators. In terms of overall size of main telephone lines in operation, India ranked 14th in the world in 1995. The rank improved to 7th position in 2001. Indian telecommunication sector has undergone a major process of transformation through significant policy reforms, particularly beginning with the announcement of NTP 1994 and was subsequently re-emphasized and carried forward under NTP 1999. Driven by various policy initiatives, the Indian telecom sector witnessed a complete transformation in the last decade. It has achieved a phenomenal growth during the last few years and is poised to take a big leap in the future also. Status of Telecom Sector The Indian Telecommunications network with 621 million connections (as on March 2010) is the third largest in the world. The sector is growing at a speed of 45% during the recent years. This rapid growth is possible due to various proactive and positive decisions of the Government and contribution of both by the public and the private sectors. The rapid strides in the telecom sector have been facilitated by liberal policies of the Government that provided easy market access for telecom equipment and a fair regulatory framework for offering telecom services to the Indian consumers at affordable prices. Presently, all the telecom services have been opened for private participation. National Telecom Policy 1994 In 1994, the Government announced the National Telecom Policy which defined certain important objectives, including availability of telephone on demand, provision of world class services at reasonable prices, improving India's competitiveness in global market and promoting exports, attractive FDI and stimulating domestic investment, ensuring India's emergence as major manufacturing/export base of telecom equipment and universal availability of basic telecom services to all villages.
Following resulted as outcome of NTP 1994

National long distance services opened to private operators.

International Long Distance Services opened to private sectors. Private telecom operators licensed on a revenue sharing basis, plus a one-time entry fee. Resolution of problems of existing operators envisaged. Direct interconnectivity and sharing of network with other telecom operators within the service area was permitted. Spectrum Management made transparent and more efficient.