ASSIGNMENT

OF
BUSINESS
ENVIRONMENT
 TELECOM SECTOR

Introduction:
In the year 1984, one of the members of parliament stood up and said to the erstwhile telecom
minister about the pathetic state of affairs regarding the telecom ser-vices in our country. To
the question posed, the minister replied that telephone is a luxury and not a necessity and if the
hon’ble MP is not happy with the service then he can return the connection as there were a lot
of MPs waiting to get one. Getting a telephone connection was even more difficult than
acquiring Maybach (one of the costliest cars in the world). The father of telecom revolution in
our country was the erstwhile PM Shri Rajiv Gandhi, wherein he called Mr. Sam Pitroda who
initiated the Digital telephony revolution in our country. Advances in technology coupled with
reforms of 1991 and the fundamental, structural and institutional changes brought about in that
period were instrumental in setting up the tone for future growth and development.
Today, India is one of the fastest growing telecom markets in the world with current sub-
scriber base nearing 490 mil-lion and looking positive to touch 500 million subscribers by
2010. India, the fastest growing telecom market in world, registered a CAGR of around 34%
over the last decade and has left analysts around the world totally in awe. Among the various
segments, cellular or mobile segment has been the key contributor and specially prepaid
services, with its wide offerings of services, has been leading the growth wave. With the
upcoming 3G allotment, the sector is likely to grow at a good rate riding on better and possibly
a whole new range of services. Today, India is one of the fastest growing telecom markets in
the world with current subscriber base nearing 490 million and looking positive to touch 500
million subscribers by 2010.
The Indian mobile services market is more or less equally divided between GSM and CDMA
customers with the former capturing around 53% of the subscriber base. Currently there are 11
players who are fighting tooth and nail to increase even one single percentage point in their
market share. While Bharti Airtel dominates the GSM arena, Anil Ambani led ADAG‘s
Reliance communications has been leading the CDMA services space in mobile telephony but
the good sign for the sector is that revenues of all the incumbents have increased leading to an
increase in their revenues. In GSM, Bharti Airtel is given a tough competition by Vodafone
and Tata Teleservices which operates Tata Indicom and in CDMA, it is considerably behind
Reliance communications in terms of market share. With Mobile number portability coming
into the scene, the war will be fiercer in this space and there will be a huge swapping of
subscribers among the existing players.
Growth Prospects: Telecom in India
Indian telecom industry has set an example by penetrating the market to an extent of around
43% in a span of 10 years when analysts and experts were extremely skeptical about India as a
market. The growth has not been restricted only to the higher section of the society, now it is
driven primarily by the rural market as well and the acceptance has been in-creasing
considerably over the years. On an average approximately 8 million users are added per month
to the kitty thereby making India the world‘s fastest growing telecom market and thus happens
to be the country offering highest ROI for the telecom companies. To support the growing
telecom market, the government is supporting telecom manufacturing by providing tax sops as
well as setting up Special economic zones (SEZ) for the sector.

Subscriber Market Share

It is not a mystery that Bharti Airtel , the largest telecom operator in the country, has the largest
subscriber base in the country. As on 30th June, 2010, it had a subscriber market share of
almost 22%, followed by RCOM (17.6%), Vodafone (17.3%), Tata Tele (11.5%) and Idea
Cellular (11%).
Overview to the Indian Telecoms Sectors

Total Consumer base = 510 Million

Estimated revenue (FY 2009-2010-) = $43Billion
Estimated contribution in GDP = 15 % by 2014
Growing at a Compounded Annual Growth Rate (CAGR) of 21%

Total Telecom Sector density is 44.87

PESTLE Analysis:

It is the technique of environment scanning of any industry on the basis of the factory or it is a
strategic planning technique that provides a useful framework for analysing the environmental
pressures on a team or an organization, like political factors, economical factors, Social factors,
Technological factors Environment factors and Legislative factors.

Political Factors:

This telecom boom in India can be attributed to policies of liberalisation, globalisation, certain
reforms by the government and most importantly competition. The liberal policies of the
government thus provide easy market access for telecom equipment and also a regulatory
framework that is fair and just and offers telecom services to the Indian consumer at
astonishingly affordable prices .India also provides a safe ,secured and transparent market for
the telecom companies and moreover the investment policies and other lucrative incentives
have made foreign collaborations possible and India one of the fastest growing markets. But
the one factor that has perhaps made the maximum impact is competition.

Countries often differed in pattern of sequencing and the speed of liberalization. Competition
has been controlled within limit by state policy through licensing of limited number of market
players in certain segments granting thereby a period of exclusivity to the operators.
Heterogeneity of routes to sectoral reforms, as seen from the examples of some of the Asian
countries, classified into different combination of policies and approaches to telecom reform,
are presented below :

1. Competition in the fixed line segment with state owned incumbents: China, India and
Korea.

2. Privatization of state owned incumbents but deferred competition through exclusivity

granted to private investors: Hong Kong, Indonesia, Malaysia, Pakistan and Singapore.
 3. Simultaneous introduction of privatization and competition: Japan and Sri Lanka.

4. Opening up of local market to competition first: Hong Kong, India and Singapore.

5. Opening up of competition in the international services first: Korea, Malaysia and the
Philippines.

6. Introduction of second domestic long distance carrier first: China

7. The sector ministry exercises regulatory functions: China, Indonesia, Japan, Korea,
Malaysia, Taiwan and Thailand.

8. Separate regulator with the responsibility for interconnection lying with the dominant
operator while regulator is responsible for arbitration of disputes: Hong Kong, Pakistan
and Philippines.

In most countries, restricting the number of licensees or imposing geographic limitations has
limited competition. In India, for instance, competition in cellular telephony was allowed in a
duopoly mode. This was gradually increased to licensing of four operators in each of the four
metros and thirteen circles. Basic service in India is still limited to one private operator
competing with state owned incumbents in the circles. Though private sector has been licensed
and they are laying infrastructure, metros are still in the grip of public sector monopoly and it
will take a while before private competition takes place. Differences in modes of privatization
have been observed in other countries. In Thailand, private entry was allowed through Build
Operate and Transfer (BOT) mode while the network was controlled by the state. In Vietnam,
network was publicly managed with foreign operators participating in provision of training,
equipment and supervision through Business Cooperation Contracts (BCCs). China did not
allow private entry in the telecom sector and limited competition between state-owned entities
of the ministries. Many countries in Asia restricted foreign equity participation. For example,
China, India, Indonesia, Korea, Malaysia, the Philippines and Thailand limited foreign equity
below fifty per cent
ECONOMICAL Factor:

The telecom sector in India has witnessed unparalleled growth especially over the last decade
as compared to global standards. In the case of wireless telephony, India has grown from
having a zero subscriber base a decade ago to becoming the second largest market in the world
after China in 2009 with around 359 million subscribers and another 10 million adding every
month. The last couple of years have witnessed investments of a whooping 8.5 billion dollars
in this sector with 550 million dollars being in the form Foreign Direct Investment, more
commonly known as FDI. Even though the telecom sector has witnessed a rapid rise only in
the last few years, efforts were on by the government ever since 1994 when the first National
Telecom Policy was announced and in the August of 1995 when Kolkata became the first
Indian city to have cellular networking. The Telecom Regulatory Authority of India (TRAI)
was setup in 1997 and the second National Telecom Policy came into effect in mid 1999. In
January 2001, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) started
functioning and a policy was announced for additional licenses especially in the area of basic
and mobile services. In November 2003, the Unified Access (Basic & Cellular) Service
License (USAL) was introduced as a first step towards a Unified License Regime Technology
and allows provisioning any kind of service.

And very recently the introduction of the additional 2G spectrum has helped in the entry of
several new players who are now partnering with various international operators thereby
commencing the globalisation of the Indian Telecom Industry. The impending auction of the
3G spectrum is sure to provide another huge leap to the telecom industry in India. In such a
situation concerted efforts must be made by both the government and industry to have
organised and systematic growth so that the entire potential of the sector can be harnessed.

More and more companies are entering the telecom sector and with increased competition, new
schemes are being introduced making it more and more economical for the consumers. Let us
understand the effect of competition by considering the case of mobile telephone connections.
Tata Dokomo recently introduced a 1Paise/second scheme on call rates and to maintain their
consumer base competitors like Vodafone, Airtel, Idea had to follow suit. The lucrative SMS
schemes are also a great hit especially with the youth. Roaming charges are also on an all time
low. Just a couple of years back calling a friend in USA would surely burn a huge hole in your
pocket but thanks to increasing competition and reducing call rates, you can talk to a friend in
New York or Washington D.C for as less as 5 rupees per minute. Just Imagine!! Mobile phone
manufacturers like Nokia, Samsung, Motorola are also slashing rates and now phones that
were once available for a whooping INR 30,000, the base models are now available for as less
INR 1,200. Truly Unbelievable!! Thus, in spite of the whole global meltdown, the Indian
telecom industry has just kept on growing. Moreover, with more and more services being
offered like internet, MMS, 3G and loads of stuff, it is an even bigger incentive for the people.

Well all this is the face of modern India. It has immensely helped in the development of both
industry and economy. The economy has flourished with more foreign players entering the
market, more foreign Direct Investment to mention a few aspects. The people also have
undoubtedly benefitted from all this and mobile phones which were considered as only for the
rich a couple of years ago are now spread all over. With rates being slashed, almost anyone and
everyone can afford a mobile especially in urban areas.

So, is that all? Has the telecom sector reached its peak, its saturation point? Will we see a
downward trend from here on in? Well absolutely not. I personally feel that there are still loads
of potential in the Indian market and the growth rate of the telecom sector is going to be pretty
encouraging for many years to come. The growth in rural markets is going to take centre stage
with the urban markets almost stagnating. Operators will have to pay more emphasis on active
and passive sharing. However, an adequate spectrum must be provided by the government if
further growth is needed. The wireless subscriber base is also expected to grow and the fixed
line base is to increase only on account of broadband growth. Mergers and acquisitions are also
expected to happen and by 2012 there would be only a couple of major players. The mobile is
also going to emerge as the principal means for internet access. More than 50% of the new
connections will emerge from rural areas. In all this one thing is for sure, whether the world is
in recession or not, whether there is a boom or not, the Indian Telecom industry is sure to
boom!
Social Factors:

Lifestyle Changes
Career expectation: With telecom sector booming, career in the industry is very lucrative.
The career path to the leading companies goes via telecom engineering. The telecom sector
offers a variety of career options.
With the coming of more and more projects, the telecom industry is going for high scale
recruitments. There is a huge demand for software engineers, mobile analysts, and hardware
engineers for mobile handsets. Besides, there are ample opportunities for marketing people
whose services are required to capture more and more customer base.
Now the government has issued 120 new licenses, telecom industry officials fear a talent
crunch that could push salaries in core operations by up to 30% in the next few quarter. With
rolling of 3G and WiMax, existing players will need another 50,000 people. Currently, the
sectors directly employs about 1,50,000 people, while providing jobs to another 1.5 million
with retail outlets, prepared cared sellers and tower constructors.
SOCIAL NETWORKING
The cat is out of the bag and the BUZZ is enormous Google has joined the social networking
band-wagon with “Buzz” and looks like they are in for a real game this time. There is a lot of
discussion going around as to how it will compare against the formidable competition from
Facebook and Twitter.
STUDENTS SPEAK|SOCIAL NETWORKING

Buzz Facebook Twitter

About New Kid of a mighty A spoilt child of a Is it a stream, river,

parent (Google). brave parent (it’s river-let? Difficult to
CEO). choose what to
follow.
Statistics Estimated to sit on a Boasting over 400mn Although difficult to
user base of over users in just a few track, estimates
100mn active Gmail years, they have indicate 75mn active
users, they have saturated Gen Y in users, but doubts are
access to the most US, and have had emerging about
popular webpage in global expansion at reduced rate of
the world, record rates. growth. Usage by
google.com. tech savvy, media,
and celebs.
Strengths Talented bunch of Rapid US and Extensive adoption
people, supported by international growth by the influential
intelligent over the last few years business & media
researchers, to bodes well. people and
develop it further. Hugely popular celebrities.
Integration with among the youth Very simple and easy
Gmail. Rich set of third party to use.
Existing user base of developers which
Gmail in inheritance. make stay on FB more
exciting.
Weaknesses A bit too late to the Struggles with the Biggest weakness is
party. People might conundrum of having its simplicity. People,
not be looking for yet promised users a brands, organizations
another social- closed experience are still trying to
networking tool. whereas to be understand how to
Google had series of successful requires use it effectively.
failure with its social them to be open Infrastructure has also
media strategy. Wave Historically poor track shown strain at times
and Orkut are such record in meeting of peak load.
examples. privacy expectations
of customers, and
overall it is considered
 to have a complex
interface.

Opportunity One word for this is By integrating Establish a formal

“IMMENSE”. Facebook Connect medium to interact
The more people use everywhere, the and make it clear to
it, the more number service becomes people on how to use
of # tags they create, ubiquitous, and it for their
the more information therefore the default business/personal
they share, the more identity and de-fault advantage.
opportunities it address book for Some more features
creates for Google to consumer behavior. might come in handy
monetize. in the light of
increasing
competition esp.
BUZZ
Threats Facebook has Increasing noise to They don’t have an
intentions to develop signal ratio is the established business
an email web client biggest concern for model as yet. Many
under the code name Facebook. Users are ways to make money
of “Project Titan”. If becoming increasingly are being
that attracts traction irritated with all the experimented. This
from users, Gmail’s noise (Farmville, brings Twitter to a
popularity might take Mafia Wars, etc.) that Catch -22 situation.
a severe hit. turns up on their walls. The more successful
. they become in-terms
of popularity, the
more strain it puts on
their infrastructure.
Future State BUZZ will generate A communications Like gas, water, or
heavy interest after plat-form for power, Twitter is
fixing some security consumers and brands. likely to fade into the
issues that were Expect Facebook background and
raised. experience to be in become a utility that
It would be slow many public is integrated into
starter and steady experiences and everything someday;
adopter. mobile devices. even your fridge will
It is inherently the Tweet.
best way to interact
socially with its
integration with
Gmail.
Plan of Integrate with other Get open now. Develop a vision to
Action tools like Search and Reward users to share be-come the
Chrome. Aggregate more information in dominant pro-tool
public content from public places like over SMS. Target to
Twitter and restaurants or in media improve the
Facebook, reviews in exchange infrastructure and
intermediate and for other values. allow the developers
monetize their Concentrate heavily to create utilities
content. on getting Project around Twitter.
Titan email feature
right and near perfect.

Facebook has no immediate threat from Buzz but Twitter has really got something to worry
about. Buzz will gain momentum and will benefit heavily from its integration with Gmail. It
gets Gmail‘s millions of user in gift which places Buzz quite a few steps ahead in terms of a
new service when it comes to number of users. Buzz should leverage that opportunity to create
a better platform and deliver lower noise to signal ratio to its end users.
Buzz is Twitter for people with long attention spans. No limit of 140 characters. With inherent
features of easy filtering and discovering of new and better suited people for your taste of
information, the quality of conversation in Buzz will increase for an individual.

Mobile Number Portability

Introduction

India, the 8th nation in Asia to launch Mobile Number Portability (MNP) which for a typical
mobile user will mean that one can switch telecom service providers while continuing with the
same mobile number. MNP is generally more effective only in those markets which are highly
competitive and is beneficial for both the operator as well as the subscribers. India being a
highly competitive market with more than 11 incumbents trying their level best to increase
their sub-scriber base and revenues, analysts and experts feel that mobile number portability
will surely make it difficult for them to achieve their goals amidst highly competitive
environment. On the positive side, MNP offers flexibility to the customer wherein he can
change his opera-tor, but the negative side is that it fuels a lot of competition among the
players. Thus in a highly competitivemarket like India, the real beneficiaries will be the
subscribers. Charles Darwin‘s theory will become more apt for the competitive scenario in
India and thus it will be Survival of the fittest.
As per the Frost and Sullivan report on MNP, there has been mix and match of successes and
failures in Asian telecom market. In markets like South Korea and Hong Kong it has been
proved successful, whereas it has been ineffective in Taiwan, Japan and Singapore. Indian
Telecom sector is focusing more on rural penetration now and the sector will drive the next
phase of growth. This strategy will surely reduce ARPU with in-creased competition once the
MNP is introduced.
MNP in India
The major problem which the telecom sector in India is facing is of different revenue circles wherein
the country is divided into four major circles depending upon the amount of revenue they generate for
the operator. Quite naturally the highest revenue comes from the Metros, but owing to the satu-ration
of this circle, more focused efforts are being put in to increase penetration in rural markets. Thus all the
operators are experiencing a fall in their ARPUs. The growth initiatives are being taken up in rural
markets but at the same time the metro circles will be brought in focus once MNP is implemented as it
will provide the operators with maximum number of subscriber using the service. The new players will
have to slog out to attract as much customers as possible as it will be a golden opportunity to attract
customers from their major competitors. As per the ACNielson survey being conducted on the
satisfaction levels of subscribers with their existing operators, around 43% of the subscribers gave a
negative reply i.e. they are the ones who are not satisfied with any one of the all component of service
delivery by their operator. The major players like Bharti Airtel and Vodafone will have to defend their
leadership position from the existing operators like Idea and the new entrants like TATA Docomo. The
need of the hour is to invest in improving the quality of existing service as well as to strengthen the
brand so that the migration is less and thus can be sustained in long term. With MNP in place, the India

Technological Factors:

Technological Factors:
1. Global system for mobile communication (GSM): GSM simplifies data transmission
to allow laptop and palmtop computers to be connected to GSM phones. It provides
integrated voice mail, high-speed data, fax, paging and short message services (SMS)
 capabilities, as well as secure communication. It offers the best voice quality of any
current digital wireless standard.
2. General packet radio service (GPRS): GPRS is a packet oriented mobile data service
to users of the 2G cellular communication systems global systems for mobile
communication (GSM), as well as in the 3G system. In the 2G systems, GPRS provides
data rates of 56-114 kbit/s.
3. Enhanced data rates for GSM evolution (EDGE): ENGE is implemented as a bolt on
enhancement for 2G GSM and GPRS network, making it easier for existing GSM
carriers to upgrade3 to it. Edge is a superset to GPRS and can function on any network
with GPRS deployed on it, provide the carrier implements the necessary upgrade.
4. Code division multiple access (CDMA): CDMA is a channel access method utilized
by various radio communication technology. Which use CDMA as an underlying
channel access method, one of the basic concepts in data communication is the idea of
allowing several transmitters to send information transmitted to send information
simultaneously over a single communication channel.
5. High-speed downlink packet access (HSDPA): HSDPA is a 3G (third generation)
mobile telephony communications protocol in the high-speed packet access family,
which allows networks based on universal mobile telecommunication system to have
higher data transfer speeds and capacity.
6. Wireless local loop (WLL): WLL, is a term for the use of a wireless communication
link as the last mile/first mile connection for delivering plain old telephone service and
broadband internet to telecommunication customers. It is useful for those subscribers
who are located in pockets where immediate telephone connections cannot be provided
due to lack of underground cable network but radio coverage is available.
7. Worldwide interoperability for microwave access (WiMax): WiMax is a technology
designed to give people high speed access to the net over relatively long distances. This
technology already deployed in some urban centers like Chennai (Madras) and Mumbai
would overcome the need to lay expensive cables or fiber optics to village.
8. 3G technologies: 3G or third generation technology is coverage of various second
generation telecommunication systems. The technology is intended is intended for
 Smartphone, multimedia cell phones. Video broadcasting and other e-commerce
services such as, stock transaction and e-learning will now be made possible much
faster.
9. 4G technology: 4G also known as beyond 3G, an abbreviation for fourth-generation, is
a term used to describe the next complete evolution in wireless communication. A 4G
system will be able to provide a comprehensive IP solution where voice, data and
streamed multimedia can be given to users on an anytime and anywhere basis, and at
higher data rates than previous generations.

Environmental factors:
1. The Indian Telecommunications network with 621 million connections is the third
largest in the world.

2. 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.

3. The rapid strides in the telecom sector have been facilitated by liberal policies of the

Government that provides easy market access for telecom equipment and a fair
regulatory framework for offering telecom services to the Indian consumers at
affordable prices.

4. All the telecom services have been opened for private participation. The Government

has taken following main initiatives for the growth of the Telecom Sector.

5. India has become the third largest telecommunication network in the world.

6. Indian telecom market is the most liberalized market in the world.

Legal Factors:

1. LEGAL advice pertaining to the licensing and regulatory requirements concerning the
various telecommunication services.
 2. Prohibits any person from possessing wireless telegraphy apparatus except under and in

accordance with a license issued under this Act.

3. LEGAL assistance in drafting and approval of license agreements for different telecom

services.

4. HANDLING matters concerning foreign investments in telecom sectors and

compliance to the statutory requirements.

5. SERVICES regarding the corporate restructuring and consolidation procedures and

requirements in telecom sectors particularly guiding on merger of licenses.

6. ADVISING on the changes and modifications in the existing telecom regime and

emerging issues like infrastructure sharing, new telecom technologies.

7. The entry of private service providers brought with it the inevitable need for
independent regulation.

8. Need and timing for introduction of new services provider.

9. Technological improvements in the services provided by the service providers.

10. An independent regulatory authority called, Telecom Regulatory Authority of India

(TRAI), was set up in 1997.

11. Power to the Central Government regarding establishing, maintaining and working

telegraphs.

Opportunities & Threats for Telecom Industry:

Opportunity:
Opportunity to the telecom Industry is given below:
1. Population: The population of India is rally an opportunity of telecom service
providers, as the number of population without telecom service is also very high. The
industry has to target has to target India’s huge population to grow.
 2. Changing population psychograph: Population psychograph is also changing
previously telecom service was thought as an emergency service, now it has become as
essential part of life in our country.
3. Increasing penetrations level: All the organization of the industry are trying to
increase their penetration level, in other word to increase the Tele-density of the
country. The urban Indian population gives a real growth prospect to the industry.
4. FDI: The foreign direct investment in telecom has been hiked up from 49% to 74%.
This move is positive for the sector, as it requires investments of Rs700-900 million
over the next 5 years.
Threats
The threats to the industry are the following:
1. Government Policies: Government may provide licenses to many foreign operators,
which may already have pose a threat for the existing players in the industry.
2. New technology can change the market dynamics: A lot of technologies are coming.
Then even have the potential of changing the entire industry dynamics or even create
substitute of the telecom services existing.
Some of the examples are as follows:
• VOIP (Skype, message etc.)
• Online chat.
• Email.
• Satellite phones.
How Threats can be converted into opportunity.
1. Failure of the new company due to more competition in the market. For example:
Uninor. This company couldn’t create his brand value and couldn’t make the public
relation. His plans were very confusing to the consumer that what their actual discount
were given to the consumer or how consumer could get discount while talking or by
using their number.
As we know that, any FDI in India can’t escape from the Indian market as according to
the law of government policy or industrial license, that the company has to run at least
for two year.
 2. Technology: As we know that first pay per second plan was introduced by Tata. That
the company had bring out a technology Docomo from Japan. After the emerging of
new technology that is pay per second plan, every consumer was attracted by their plan.
When Tata Docomo introduced this plan, they made huge profit in the India. By seeing
this, every company started this plan that is pay per second.
So now we can see that threats come out to be opportunity to the other company also.
Conclusion:
Today, India is one of the fastest growing telecom markets in the world with current subscriber
base nearing 490 million and looking positive to touch 500 million subscribers by 2010. Indian
telecom sector growing with the rapid rate that in 2012, it is going to be No:1 sector in all over
world. It will provide more and more employment opportunity, generate revenue, development
of the economy, growth in GDP, invitation to the FII etc.