CHAPTER 1

INTRODUCTION
TELECOMMUNICATION
The word telecommunication was adapted from the French word telecommunication. It
is a compound of the Greek prefix tele-, meaning 'far off', and the Latin communicates,
meaning 'to share'. Telecommunication is the transmission of signals over a distance for
the purpose of communication. In modern times, this process almost always involves
the sending of electromagnetic waves by electronic transmitters but in earlier years it
may have involved the use of smoke signals, drums or semaphore. Today,
telecommunication is widespread and devices that assist the process, such as the
television, radio and telephone, are common in many parts of the world. There is also a
vast array of networks that connect these devices, including computer networks, public
telephone networks, radio networks and television networks. Computer communication
across the Internet, such as e-mail and instant messaging, is just one of many examples
of telecommunication.
The basic elements of a telecommunication system are:

a transmitter that takes information and converts it to a signal for transmission

a transmission medium over which the signal is transmitted

a receiver that receives and converts the signal back into usable information

Often telecommunication systems are two-way and devices act as both a transmitter
and receiver or transceiver. For example, a mobile phone is a transceiver.
Telecommunication over a phone line is called point-to-point communication because it
is between one transmitter and one receiver, telecommunication through radio
broadcasts is called broadcast communication because it is between one powerful
transmitter and numerous receivers.
A collection of transmitters, receivers or transceivers that communicate with each other
is known as a network. Digital networks may consist of one or more routers that route
data to the correct user. An analogue network may consist of one or more switches that
1

establish a connection between two or more users. For both types of network, a repeater
may be necessary to amplify or recreate the signal when it is being transmitted over
long distances. This is to combat attenuation that can render the signal indistinguishable
from noise.
The shaping of a signal to convey information is known as modulation. Modulation is a
key concept in telecommunications and is frequently used to impose the information of
one signal on another. Modulation is used to represent a digital message as an analogue
waveform. This is known as keying and several keying techniques exist these
include phase-shift keying, frequency-shift keying, amplitude-shift keying and
minimum-shift keying. Bluetooth, for example, uses phase-shift keying for exchanges
between devices.

HISTORY OF GSM
The Group Special Mobile (GSM) was created in 1982 by European Conference of
postal and Telecommunications Administrations (CEPT) with the objective of
developing a standard for a mobile telephone system that could be used across Europe.
In 1989, GSM responsibility was transferred to the European Telecommunications
Standards Institute (ETSI).The phase I of the GSM specifications were published in
1990. The first GSM network was launched in 1991 by Radiolinja in Finland. By the
end of 1993, over a million subscribers were using GSM phone networks The growth of
cellular telephone systems started in the early 1980s, particularly in being operated by
70 carriers across 48 countries.

The Global System for Mobile communications (GSM: originally from Group Special
Mobile) is the most popular standard for mobile phones in the world. GSM service is
used by over 2 billion people across more than 212 countries and territories. The
ubiquity of the GSM standard makes international roaming very common between
mobile phone operators, enabling subscribers to use their phones in many parts of the
world.
From the point of view of the consumers, the key advantage of GSM systems has been
higher digital voice quality and low cost alternatives to making calls such as the Short
Message Service (SMS).

The advantage for network operators has been the ability to deploy equipment from
different vendors because the open standard allows easy inter-operability. Like other
cellular standards GSM allows network operators to offer roaming services which mean
subscribers can use their phones all over the world.

GSM is a cellular network, which means that mobile phones connect to it by searching
for cells in the immediate vicinity. GSM networks operate in four different frequency
ranges. Most GSM networks operate in the 900 MHz or 1800 MHz bands. Some
countries in the Americas (including the United States and Canada) use the 850 MHz
and 1900 MHz bands because the 900 and 1800 MHz frequency bands were already
allocated.

The GSM logo is used to identify compatible handsets and

equipment.
There are four different cell sizes in a GSM network

macro
Micro
Pico
Umbrella cells.

The coverage area of each cell varies according to the implementation environment.
Macro cells can be regarded as cells where the base station antenna is installed on a
mast or a building above average roof top level. Micro cells are cells whose antenna
height is under average roof top level; they are typically used in urban areas. Pico cells
are small cells whose diameter is a few dozen meters; they are mainly used indoors.
Umbrella cells are used to cover shadowed regions of smaller cells and fill in gaps in
coverage between those cells.
The network behind the GSM system seen by the customer is large and complicated in
order to provide all of the services which are required. It is divided into a number of
sections and these are each covered in separate articles.

The Base Station Subsystem (the base stations and their controllers).

The Network and Switching Subsystem (the part of the network most similar to
a fixed network). This is sometimes also just called the core network.

The GPRS Core Network (the optional part which allows packet based Internet
connections).

All of the elements in the system combine to produce many GSM services such as
voice calls and SMS.

Subscriber identity module (SIM)

One of the key features of GSM is the Subscriber Identity Module (SIM), commonly
known as a SIM card. The SIM is a detachable smart card containing the user's
subscription information and phonebook. This allows the user to retain his or her
information after switching handsets. Alternatively, the user can also change operators
while retaining the handset simply by changing the SIM. Some operators will block this
by allowing the phone to use only a single SIM, or only a SIM issued by them; this
practice is known as SIM locking, and is illegal in some countries.
In the United States, Canada, Europe and Australia, many operators lock the mobiles
they sell. This is done because the price of the mobile phone is typically subsidised with
revenue from subscriptions and operators want to try to avoid subsidising competitor's
mobiles. A subscriber can usually contact the provider to remove the lock for a fee,
utilize private services to remove the lock, or make use of ample software and websites
available on the Internet to unlock the handset themselves
Some providers will unlock the phone for free if the customer has held an account for a
certain period. Third party unlocking services exist that are often quicker and lower cost
than that of the operator. In most countries removing the lock is legal. In countries like
India, Pakistan, Indonesia, Belgium, etc., all phones are sold unlocked. However, in
Belgium, it is unlawful for operators there to offer any form of subsidy on the phone's
price. This was also the case in Finland until April 1, 2006, when selling subsidized
combinations of handsets and accounts became legal though operators have to unlock
phone free of charge after a certain period (at most 24 months).

CHANGES WITH THE CHANGING TECHNOLOGY

Technological changes in telecommunications and computers have radically changed
the business scenario. In turn, the new demands of business have spurred many
telecom-based technological innovations. In order to exploit these innovations for
competing in global markets, the business community the world over has been putting
pressure on governments to revise the policy, regulation, and structure of the telecom
sector. Several
Countries across the world have responded by restructuring the state-controlled telecom
service provider, increasing private participation, and deregulating service provision.
The emergent organizations have attempted to be more responsive to the business needs
and have evolved mechanisms to remain competitive even under tremendous pressures.
Over the past several years, developing countries have also recognized the important
role a responsive, business-oriented, and technologically advanced telecom sector plays
in the growth of the economy. Many developing countries now see the constraints of
estate monopoly in telecom as standing in the way of a response to the twin challenges
of spurring internal growth and competing in an increasingly global economy.
Past experience of reform across many countries suggests that the fundamental issue
that must be addressed in telecom reform is effective separation of the basic functions
of policy making, operational management, and regulation (ITU Report 1989). The
Second level of consideration is access to capital and human resources. The third level
of concern is the introduction of competition for efficiency. Competitions perhaps more
important than right ownership, if ever there was anything like it, in bringing about
efficiency.
The Indian telecom sector was wholly under government ownership until 1984, and
was characterized by underinvestment, outdated equipment, and growth well below the
potential of the market. In the mid-1980s, telecom was included by the government as a
part of the so-called .Technology Missions a set of dedicated, welfare-oriented, and
well focused programmes then implemented at national level.

The DOT and the Precursor to Reform

In one of the earliest steps towards reforms and boosting indigenization efforts, the
government set up the Centre for Development of Telematics (C-DOT) in 1984 with the
objective of initiating and managing research in the switching and transmission
segments. Subsequently, the government separated the Department of Post and
Telegraph in 1985 by setting up the Department of Post and the Department of
Telecommunications.
In 1986 two new public sector corporations. The Mahanagar Telephone Nigam Limited
(MTNL) and the Videsh Sanchar Nigam
Limited (VSNL).were set up under the Department of Telecommunications (DOT).
The MTNL, which was carved out of the DOT, took over the operation, maintenance,
and development of telecom services in Bombay and New Delhi. The VSNL was set up
to plan, operate, develop, and accelerate international telecom services in India. The
government created the corporate organizations in orderto allows decision making
autonomy and flexibility and facilitates public borrowings that would not have been
possible under a government framework. However, policy formulation, regulation, and
several key decision areas remained with the DOT.
A new organization, the Telecom Commission, was created in 1989 with a wide range
of executive, administrative, and financial powers to formulate and regulate policy and
prepare the budget for the DOT. The Telecom Commission had four full-time members
managing technology, production, services, and finance and four part-time members
representing the Planning Commission, Department of Finance, Department of
Industry, and Department of Electronics. The creation of the MTNL, its subsequent
operations, and the relationship of the personnel employed in the MTNL to their
counterparts in the DOT raised questions about the organizational structure most suited
7

for this sector. Therefore, in 1991, upon government initiative, the high-powered
Athreya Committee submitted a report on the appropriate organizational structures for
this sector.
The report recommended:
Placing both policy and regulatory mechanisms under the Telecom Commission.
Breaking up of the DOT into zonal corporations under the government.
Setting up of a corporation, initially in the public sector, to handle the longdistance network.
Allowing value-added services (VASs) to be provided by the private sector.
Indicating general liberalization in production of equipment giving autonomy to
R&D and training institutions.
Subsequently, other studies for reforms had been commissioned, but in the
absence of public debate, and employee and union concerns regarding the
consequences of implementation.
The government did not formally adopt any report... Since 1997, there were
several statements in the media by key decision makers and the
Communications Minister calling for corporatization of the DOT. However,
there was very little public information or debate regarding the sequence of
decisions leading to corporatization or the form of corporate structure.
Since 1995, there was increasing pressure from international organizations such
as the WTO to review the monopoly status of the VSNL and the DOTs
monopoly in international long-distance communication respectively. Review
the monopoly status of the VSNL in 2004 and the possibility of opening of long
distance in 1999.
The VSNL continued to have a monopoly over international telecom and
broadcast transmission. It had planned to enter the long-distance market but the
DoT hampered its plans. In 1999, the government created the Department of
Telecom Services (DTS), whos Secretary was appointed from the Indian
Telecom Services (ITS) cadre, and the DOT from the erstwhile the DOT, whos
Secretary was appointed from the Indian Administrative Services (IAS). This
was done ostensibly to separate the service provision component (DTS) from
that of policy making (DoT). In reality this was to accommodate the conflict
caused by the governments decision to appoint a Secretary to the department
from the IAS, as DOT employees wanted the Secretary to be from the ITS.
8

When the DTS Secretary retired, the government appointed an IAS officer in his
place, which again led to agitation and further bifurcation of the DTS into the
Department of Telecom Operations (DTO) and DTS. The DTS was to be headed
by an IAS officer responsible for the MTNL, VSNL, Telecommunications
Corporation of India Limited (TCIL), Indian Telephone Industries Ltd. (ITI),
and Hindustan Teleprinters Limited (HTL) as well as for formulating the
strategy for corporatization. The DTO was responsible for managing the
telecom network.
The governments view has been that a person from outside the ITS cadre would
be better able to oversee the corporatization of
the DOT since in the past senior management of the erstwhile DOT, mostly
from the ITS, had resisted any kind of change
Although an outsider Secretary was ostensibly to facilitate corporatization, it is
not clear how, without the requisite mandate from the employees and especially
the senior managers, he/she would be able to lead such a major task. This is not
to say that the ITS cadre was better equipped to handle this task. What were
missing were an overall strategy and an indication of the direction of change to
inform the administrative changes. The government seemed to view
corporatization as an administrative decision rather than a process.
The Athreya Committee report as well as subsequent reports on restructuring
may be viewed as the initiation of a process of
Examining organizational options. The reports, however, did not accord due
attention to the need for autonomy in financial and
Operational decision making. Management incentives that would have allowed
these organizations to increase profitability and raise capital from markets had
been only very sketchily outlined thus access to capital would have been a
problem.
Besides the limitations, the suggested changes were superficial since most
.restructured. Organizations showed too much of a
Control and rule orientation and continued to work in much the same manner as
before.
Inability of top management and political executives to address the need to
make the DOT more competitive could be cited as a failure. Given the large
base of employees who had been entrenched in a typical bureaucratic mode of
functioning providing

 Customer orientation and a commercial approach were, and continue to be, the
most difficult tasks. The DOT had no specific training policy in this regard.
Though there were several training centers, these were not equipped to provide
management training. The restructuring was far more concerned with form than
content.
Areas like identifying the mechanisms for acquiring new core
Capabilities, developing appropriate incentives, and nurturing a climate in
which change could take place were lacking.

Telecommunications Regulatory Authority of India (TRAI)

10

The Telecommunications Regulatory Authority of India or TRAI (established in

1997) is the independent regulator established by the Government of India to regulate
the telecommunications business in India. Notwithstanding anything contained in the
Indian Telegraph Act, 1885, the functions of the Authority shall be to(a) Make recommendations, on a request from the licensor, on the following matters,
namely:
(i) Need and timing for introduction of new service provider;
(ii) Terms and conditions of license to a service provider;
(iii) Revocation of license for non-compliance of terms and conditions of license:
(iv) Measures to facilitate competition and promote efficiency in the operation of
telecommunication services so as to facilitate growth in such services.
(v) Technological improvements in the services provided by the service providers.
(vi) Type of equipment to be used by the service providers after inspection of
equipment used in the network.
(vii) Measures for the development of telecommunication technology and any other
matter relatable to telecommunication industry in general;
(b) Discharge the following functions, namely:(i) ensure compliance of terms and conditions of license;
(ii) notwithstanding anything contained in the terms and conditions of the license
granted before the commencement of the Telecom Regulatory Authority
(Amendment) Ordinance,2000, fix the terms and conditions of inter-connectivity
between the service providers;
(iii) Ensure technical compatibility and effective inter-connection between different
service providers.

11

(iv) regulate arrangement amongst service providers of sharing their revenue

derived from providing telecommunication services;
(v) lay down the standards of quality of service to be provided by the service
providers and ensure the quality of service and conduct the periodical survey of
such service provided by the service providers so as to protect interest of the
consumers of telecommunication services;
(vi) lay down and ensure the time period for providing local and long distance
circuits of telecommunication between different service providers;
(vii) maintain register of interconnect agreements and of all such other matters as
may be provided in the regulations;
(viii) keep register maintained under clause (viii) open for inspection to any
member of public on payment of such fee and compliance of such other
requirement as may be provided in the regulations;
(ix) ensure effective compliance of universal service obligations:
(c) Levy fees and other charges at such rates and in respect of such services as may be
determined by regulations.
(d) Perform such other functions including such administrative and financial functions
as may be entrusted to it by the Central Government or as may be necessary to carry out
the provisions of this act.
Provided that the recommendations of the Authority specified in the clause (a) of this
sub-section shall not be binding upon the Central Government: Provided further that the
Central Government shall seek the recommendations of the Authority in respect of
matters specified in sub-clauses (i) and (ii) of clause (a) of this sub-section in respect of
new license to be issued to a service provider and the Authority shall forward its
recommendations within a period of sixty days from the date on which that
Government sought the recommendations: Provided also that the Authority may request
the Central Government to furnish such information or documents as may be necessary
for the purpose of making recommendations under sub-clauses (i) and (ii) of clause (a)
12

of this sub-section and that Government shall supply such information within a period
of seven days from receipt of such request:
Provided also that the Central Government may issue a license to a service provider if
no recommendations are received from the Authority within the period of specified in
the second provision or within such period as may be mutually agreed upon between
the Central Government and the Authority.
Provided also that if the Central Government has considered that recommendation of
the Authority comes to a prima facie conclusion that such recommendation cannot be
accepted or needs modifications, it shall, refer the recommendations back to the
Authority for its reconsideration.

Milestones in Telecom Reforms

1984 Manufacturing of subscriber terminal equipment opened to private sector.

1985 Telecom was constituted into a separate department with a separate board.
1986 MTNL and VSNL created as corporations.
1988 Government introduces in-dialing scheme. PABX services only within a

building, or in adjoining buildings.

1989 Telecom Commission formed.

13

 1991 Telecom equipment manufacturing opened to private sector. Major

international players like Alcatel, AT&T,

Ericsson, Fujitsu, and Siemens entered equipment manufacturing market.
1992 VAS sector opened for private competition.
1993 Private networks allowed in industrial areas.
1994 Licenses for radio paging (27 cities) issued.
May 1994 New Telecom Policy announced.
September 1994 Broad guidelines for private operator entry into basic services

announced.
November 1994 Licenses for cellular mobiles for four metros issued.
December 1994 Tenders floated for bids in cellular mobile services in 19
circles, excluding the four metros, on a duopoly basis.
January 1995 Tenders floated for second operator in basic services on a circle
basis.
July 1995 Cellular tender bid opened.
August 1995 Basic service tender bid opened; the bids caused lot of
controversy. A majority of bids were considered low.
December 1995 LOIs issued to some operators for cellular mobile operations in
circles.
January 1996 Rebidding takes place for basic services in thirteen circles. Poor

response.
The Telecom Regulatory Authority of India (TRAI) formed by ordinance.
October 1996 LOIs being issued for basic services.
March 1997 The TRAI Act passed in Parliament.
June 1998 Several VASs available through private operators. The first private

basic service becomes operational.

March 1999 Announcement of National Telecom Policy.
January 2000 Amendment to the TRAI Act.
August 2000 Announcement of Domestic Long Distance Competition Policy.
October 2000 Planned Corporatization of DOT.

14

BASIC STRUCTURE OF INDIAN TELECOM

15

EVOLUTION OF THE INDIAN TELECOM MARKET

1. Penetration and growth

16

The Indian cell phone market essentially started in 1992 with the sale of licenses,
which enabled the private sector to participate in the industry (COAI, 2006). In 1994,
cellular service licenses were granted for the major metropolitan areas. This then
expanded to 15 circles in the following year. Services were rolled out in 1995 with
Kolkata becoming the first city to get a cellular network in August 1995. However, in
December 2000 5 years after launch of cellular licenses penetration was still quite
low. In fact, there were only about 3.2 million subscribers, primarily in the major cities
and large towns.
The major driver for change was the Telecom Regulatory Authority of India
(TRAI).TRAI was instituted in 1997, and soon started building policies and regulations
to push prices downward and spur competition. By December 2004, there were about
93mn phones in the country, of which 48mn subscribers were cellular (TRAI, Dec.
2005). The number of cellular phone users increased to about 76mn in December 2005
and about 89mn phones in March 2006 (Financial Express, Apr 2006)
This trend indicates a CAGR of over 30%. Jorma Ollila, Chairman and CEO of Nokia,
recently commented that India is amongst the top 5 telecom markets in the world
(Light reading 2006) when he visited the country to reiterate his firms commitment to
the market. Indeed, no other country in the world has added 4-5mn mobile phones per
month. Exhibit 1 shows the growth of the postpaid and prepaid market in India,
including prediction for 2010.

The Indian wireless market has both CDMA and GSM network operators. CDMA
operators entered the picture and grew rapidly Reliance, which owns about 70% of
the CDMA market currently with ~ 20.44 mn subscriptions, grew at over 114% year-on
year in 2002-03 one of the most explosive phone launches ever ( TRAI Jun 2003,
Financial Express, Apr 2006). The overall CDMA subscriber base, though, is still about
17

22.2% of the market with Tata Teleservices taking up most of the remaining CDMA
share.
The GSM players account for the remaining ~78% - with a market that is less
dominated by one player. Bharti, state-owned BSNL, and Hutch control the largest
parts of this market and have been adding subscribers at an impressive pace. As of
April 2006, Bharti was the largest player by far, with 30.37 mn subscribers. BSNL had
a subscriber base of 20.44mn, followed closely by Hutch with 22% of the GSM market
and an overall share of 15.02%.
The Telecom Regulatory Authority of India overseas the evolution of this market. Since
its establishment in 1997, this agency has made many key judgments including
statements on tariffs, quality of service, next generation networks, etc. TRAI also
releases quarterly reports on the state of the telecom industry with special emphasis
on tariffs, interoperability between networks, and usage (TRAI).
Since Indian regulation makes it difficult for network operators to also sell phones (due
to revenue share agreements), there is a completely parallel market for users to buy
phones. In the GSM space, users go to handset providers to buy phones and then to
network operators to get network services. Most global handset manufacturers are
present in India with Nokia leading the pack by far. In 2005, more than 31mn
handsets were sold. Of this, Nokia captured about 60% share over 18mn phones in
one year. Motorola, which has a smaller share, is seeing growth with the introduction of
more advanced phones including its Razr platform. Samsung, LG and Sony Ericcson
all have reasonable market share as well with LG catering almost exclusively to the
CDMA space through a tie-up with Reliance.

THE INDIAN MARKET BASIC DEMAND TRENDS

Demand for cellular services is interesting for a variety of reasons. Before catering to
this market, service providers must consider unmet needs, price sensitivity, diversity in
consumer profiles, and the skew in urban-rural markets.
18

1. Unmet needs
Current Indian teledensity is 11.43 (i.e. only 11.43 phones both cellular and fixed line
exist per 100 people) While that points to a staggering ~ 125mn phones already in the
market, it also points to a large unmet demand. Specifically, peer countries have much
higher teledensity. China has a mobile teledensity of 28.3 while in Malaysia, that
number is 77. If India is to attain Chinas teledensity in 5 years up from its current
penetration of ~ 7%, this implies an almost 4x increase in the number of phones. This
would lead to demand for about 210mn additional phones in that time.
2. Young, growing, consuming market
More than 95% of Indias population is under the age of 65.70% of the countrys
citizens are below the age of 36, and half of those are under 18. (Bharadwaj etal, 2005;
Wikipedia; Census Maps; Answers.com). Further, the standard of living has been
increasing: only 26% of the population is below the poverty line now, compared to over
50% in the mid-70s. (Sinha, Jayant, 2005) Thus, the young, mobile segment of the
population is quite large and more connected than any previous generation. In addition,
it earns more and is more willing to spend on convenience products than previous
generations. In fact, in some instances, consumer products like cell phones now have
are a symbol of status. Young consumers are willing to buy new phones and are
constantly looking for good deals and the opportunity to trade up to better products.
3. Value sensitivity
The Indian consumer is also very pricing sensitive. Product managers have found that
consumers in India will not buy products unless there is a clear value proposition at
the lowest possible price. For instance, Nokia successfully introduced a customized
version of their 1100 phone with features uniquely tailored to India dust-resistant
body and a built-in flashlight making it very popular among truck drivers (Bharadwaj
et al, 2006). The phone itself retails for about $40. Indians also expect a high quality of
services at the lowest possible tariff rate. Thus, tariffs in India for voice services are
among the lowest in the world. While average American carrier charges about 30-40
cents per minute, the corresponding rate for an Indian carrier is only about 2 cents per
minute. (Cingular, T- Mobile, TRAI Dec 2006).
19

4. Pre-paid rules
Indian consumers choose plans and tariff structures that minimize monthly expenditure.
Further, they also choose tariff plans that let them switch easily especially since they
shop on price. Thus pre-paid SIM cards are the dominant method of revenue
generation. With this scheme, consumers buy a SIM card to use in their phones with a
set amount of money on it (say ~$10).
In addition, since receiving calls in India is free, very often consumers will only receive
calls on their phones. And almost every cellular company has also introduced free
incoming plans for 1-2years & lifetime free incoming plans. Thus, revenues per user
are low, with pre-paid users contributing ~$5.6 per month. While the average post-paid
user spends much more contributing ~$19 per month this is a small segment of the
market in India. In 2006, for example, over 95% of new phone additions were pre-paid
plans. (TRAI Dec 2006) (See Exhibit 1 for potential growth of pre-paid vs. post-paid in
India).
5. Rural vs. Urban Market
While growth in India is significant, there is a large difference between urban and rural
markets. Teledensity varies wildly. For example, cities like Mumbai, Delhi, Chennai,
and Kolkata have a teledensity around 49% while Circles B and C (which include farless urban states) see a penetration of 2.6% (See Exhibit 7 for market penetration in
India varied by geographical areas). Aslo, service providers pay Access Deficit charges
to subsidize the (mainly government run) players that serve the unprofitable rural
markets. However, as network operators run into an increasingly saturated market in
cities, they are slowly turning to rural areas to grow. To enter these markets, carriers
will have to make large capital investments, create low introductory pricing, and only
offer a basic level of services. Although growth in rural markets will be slower and
require a larger investment per customer, with no guarantee of the same amount of
revenue, the thirst for communication and poor landline infrastructure makes rural India
a unique opportunity for growth.

20

Consequently, operators are dropping prices to ensure they get their hands on the
expanding customer pie and the large untapped market means that revenues from the
voice market will drive the growth for the next few years.
6. Demographics
The expected growth in the Indian GDP, 6-7 percent annually from 2005 to 2007, is a
good indicator of the increased purchasing power of the population (Asian
Development Bank 2005). A greater percentage of the Indian population has higher
levels of disposable income with which to purchase products and services. Along with
lower connectivity costs and cheaper handsets, the mobile market in India is seeing a
huge influx of subscribers who can now afford basic coverage.India is also
experiencing changing demographics that have contributed to the explosion in the
mobile market. Approximately 70 percent of Indias 1.1 billion population is between
the ages of 15 and 40 (U.S Census Bureau-International Database, 2003). As a result,
telecom players are looking at a young population with increased pay scales and more
job opportunities. Furthermore, a high percentage of these Indians are still living at
home and saving their salaries. Thus, this generation is able to spend a large percentage
of their income on the purchase of entertainment and consumer electronics, including
cell phones.
7. Role of Government
The Indian government has played a significant role in setting the stage for growth in
mobile telecommunications. Through the oversight of the Telecom Regulatory
Authority of India (TRAI), the government has made many changes to regulations and
policies to remove hurdles and spark growth. First, the Indian government introduced
the Unified Licensing Regime in 2003. This regime allows operators to offer any
service through the technology of their choice, in any area in which they currently
operate. Thus, all telecom services (including voice, data, cable TV, and radio
broadcasting) can now be delivered through a single medium and are covered by a
single license. Unified licensing shifted operator behavior and caused operators to start
focusing on converged services and networks for cost efficiency which, in turn,
allows them to offer pricing conducive to rapid growth. In addition, the Indian
21

government has raised the maximum foreign direct investment (FDI) limit from 49
percent to 74 percent in Telecom Sector. The government also enacted the Access
Deficit Charge (ADC) policy, which requires that a share of call revenue be paid to the
government to assist in funding network expansion into rural areas.
As of early 2005, several regulations were imminent. First, the launch of an All India
license would give operators the right to provide all forms of service throughout India
with one license. This structure would initiate the next phase of market consolidation,
with the result likely being five to six main players. The players would have greater
scale which would lead to higher cost efficiency and, ultimately, more flexibility, and
allow even fixed line users to switch to mobile services seamlessly possibly
increasing competition in the market. Finally, the government needed to decide how to
increase spectrum capacity; since 2G networks are nearing full capacity (2G stands
for second generation cellular technologies, which are circuit-based, voice technologies
deployed in the 1990s. This standard is being replaced around the world with 3G
networks that are faster.

GROWTH OF TELECOM NETWORK (2008)

22

With a strong population of over 1.1 Billion, India has become one of the most dynamic
and promising Telecom markets of the world. In recent times, the country has emerged
as one of the fastest growing telecom markets in the world. It has third largest telecom
network and the second largest wireless network in the world.

NETWORK EXPANSION

The total number of telephones has reached 4297.25 lakh as on March 31,
2009 as compared to3004.92 lakh as on March 31, 2008.

23

 While 1292.33 lakh connections were added during the twelve months of 2008-09,
about 108 lakh connections were added every month during the current fiscal year.
The tele density, as given in the following graph, has shown a sustained increase
during last few years.
It increased from 26.22% in March 2008 to 36.98% in March 2009.

Tele density graph

Cellular Service Providers

As on Apr 2007 India has 167 million mobile phone subscribers. Out of this 125
million are GSM users and 41 million CDMA users.

24

BSNL, Bharti Airtel, Hutch, Idea, Aircel, Spice and MTL are the main GSM providers
in India. Reliance Communications and Tata Indicom are the main CDMA providers in
India.
Bharti Airtel
Airtel is providing cellular services in Delhi, Mumbai, Kolkata, Chennai, Andhra
Pradesh, Gujarat, Haryana, Himachal Pradesh, Jammu and Kashmir, Karnataka, Kerala,
Madhya Pradesh, Maharashtra, Goa, Orissa, Punjab, Rajasthan, Tamil Nadu, UP and
West Bengal. Airtel is the No.1 cellular service provider in India using GSM
technology. Airtel has 23% market share in India with a total subscriber base of 38
million.
Reliance Communications
Reliance has both CDMA and GSM networks and total subscriber base of 29 million or
17% market share. It has GSM network in Assam, Bihar, Himachal Pradesh, Kolkata,
North East, Madhya Pradesh, Orissa and West Bengal. Reliance has CDMA networks
in other states and cities.
Bharat Sanchar Nigam Limited (BSNL)
BSNL is a state owned telecom company which has GSM presence in almost every
cities and towns. BSNL has 27 million subscribers with a market share of 16%.
Tata Indicom
Tata Indicom is a main CDMA provider in India with 16 million subscribers all over
India. Tata Indicom has presence in almost every state and cities in India
Airtel has more than 100 million subscribers and BSNL has half as much. But,
BSNLs revenues were more than Airtels until now. For the first time Airtel has
surpassed BSNL to become countrys number one telecom operator in terms of
subscribers and revenues.
There is a drop of 0.4% in BSNLs revenues when compared with the previous fiscal
year. Airtel has increased its revenues by 39.8% - a very impressive growth.
25

BSNL did not face the heat until now as the revenues werent dipping. That doesnt
hold good any more and it has to buck up or revamp before it turns into an Air India.
BSNL doesnt have the same kind of excuses of Air India as it operates in a lucrative
telecom market.
The other operator which has seen a drop in revenues is MTNL. This is in spite of the
entire 3G spectrum and the leg-up both BSNL and MTNL got from the government.
Giving subsidies and special treatment doesnt work after all.
Reliance saw a decent growth of 23.1% and its revenues are 22341 crores. It is 3rd in
line. The best growth in revenues was by IDEA Cellular at 50.7%.
Airtel and Reliance are the 2 India based operators to feature in the top 20 telecom
operators by subscribers.

Top 10 telecom service providers by revenues:

26

Operator
Rank

Revenues

Revenues

Revenues

2006-07

2007-08

2008-09

Growth %

Bharti Airtel

17888

26436

36962

39.8

BSNL

40135

35296

35167

-0.4

Reliance

14468

18638

22341

23.1

Vodafone

10565

15477

22224

43.6

IDEA Cellular

4413

6720

10125

50.7

Tata Comm

8857

8263

9963

20.6

TTSL

5178

5993

6739

12.4

MTNL

4923

4729

4487

-5.1

Aircel

1507

2528

3425

35.5

10

TTML

1422

1730

1323

7.8

MARKET STRUCTURE OF TELECOM INDIA

27

Telecom in DELHI
In our state developmental challenges are many and almost every sector needs a special
attention and package to grow. Since unprecedented progress in technology has made
telecom sector one of the engines of growth, we want to see this sector progress to
28

register increasing momentum in the growth of economy on all fronts. Every one
percent growth in tele-density is accompanied by 3% growth in Gross Domestic
Product and sometimes this growth has been reported above 5% in some surveys
conducted in developing nations. The tele-density - the number of phones per 100 of
population - in fact is the very important indicator adopted for measuring the
performance of this sector and in Delhi it has risen from a mere 2.08 in 2001-2002 to
7.76 in 2005-06. We have to bear in mind that development of the telecom
infrastructure holds out a considerable promise for the development of Delhi because of
the economic benefits it will bring to state. As far as telecommunication facilities in
Delhi state are concerned, there are over 16000 STD booths/PCOs, 366 telephone
exchanges and 9 telegraph offices (CTOs/DTOs) regulating the services. The number of
telephone connections has gone beyond 9 lakhs including phones of mobile segment.
When this is compared with the phone level of 2001-02, it is interesting to note that
there has been an addition of almost 7 lakh connections between 2001-02 and 2005-06.
The mobile phones have contributed 67% to this growth. With mobile services
launched only in August 2003, Delhi state has been a late entrant into the telecom
sector. Nonetheless, the teledensity of Delhi at the end of June 2006 was reported at 11,
marginally short of the national average of 13.7. we cannot ignore the fact that telecom
penetration has been uneven across the urban and rural segments. While the urban teledensity of Delhi at 39.86 compares favourably with the national average of 42.65, rural
tele-density at 0.84 is much below the national average of 1.85. However it is
interesting to note that the average revenue per user (ARPU) for Delhi at Rs.440.56 is
much higher than the national average of Rs.339.49. This means that growth of telecom
sector in Delhi State is not likely to be hampered by demand side constraints. Falling
cost of handsets and accessories coupled with innovative tariff plans has made initial
entry cost affordable and this factor is largely contributing to the growing demand of
phone connections. Take the case of mobile phone. This segment of phones is vital in a
state like ours. These are the primary form of telecommunication in most emerging
economies as on date. In other words, mobile phones have the capacity to revolutionize
even small and tiny businesses and the people associated with these businesses can
improve their earnings at a faster rate. Its efficient use can save time and money and
provide quicker access to information. Its no longer just something that only the rich
can afford. Now, its a basic means of communication. If such type of telecom facilities
is made cost effective, it can help in fuelling rapid growth all round in the State. The
29

main constraint to growth of telecom in the state stems from the supply side (service
providers). These have resulted in the limitation on the expansion of services into
unreached areas of the state. Even there has been no quality improvement of existing
services. The lack of proper coordination between the three mobile service providers in
the state, BSNL, Airtel, and Aircel, is creating difficulties for subscribers as far as
smooth connectivity is concerned. Calls between services, within services, and to
landline phones are difficult to get through. It is notable that Reliance, which has a
large presence in the rest of country, has yet to start its operations in the state despite
having a license to do so now for the past two years. There is need to encourage
competitive pressures through multi-operator scenario in J&K. As per the existing
TRAI guidelines operators are obliged to provide connectivity to other operators at
points of interconnect (POI) on their respective networks. AIRTEL has reported that
BSNL which owns the largest network in J&K has not been able to comply with this
obligation. There is urgent need that authorities who matter in telecom department take
cognizance of this and sort out the impasse. Let them bear in mind that
interconnectivity is vital for healthy competition among service providers as it will
improve the quality of service and cut down the cost. High capital and operating costs
of telecom services in the state are put as major hindrances in the smooth development
of the sector. The service providers also point out mountainous terrain that hinders the
telecom signal thereby limiting the reach of each telecom tower.

CHAPTER 2
COMPANY PROFILE
AIRCEL
30

Maxis expansion into Indonesia and India is another milestone in our aspiration to be
the regional communications leader of choice. The acquisition of a 51% stake in PT
Natrindo Telepon Seluler (NTS), Indonesia and a 74% equity interest in Aircel, India
provides new growth opportunities for Maxis. These acquisitions give Maxis a strong
foothold in two of the worlds most attractive high-growth, low-penetration markets.

This marks the beginning of the new world of Maxis a world beyond voice, and
beyond borders

31

Maxis in INDONESIA
On 29th April 2005, Maxis acquired 51% of PT Natrindo Telepon Seluler. Maxis is
currently in the middle of rolling out a Java wide network to establish the company as a
national operator. Th initial launch phase encompasses 1,300 BTS, providing both 2G and
3G services. NTS expects to have up to 480 employees by launch date and to increase
significantly upon launching. Maxis in India Maxis completed the acquisition of a 74%
stake in Aircel on March 21, 2006. Currently, Aircel has operations in 9 of the 23-telecom
circles of India - Chennai, Tamil Nadu, West Bengal, Orissa, Assam, North East, Jammu
and Kashmir, Himachal Pradesh and Bihar. Aircel launched its services in Bihar and
Himachal Pradesh in December 2006 and also recently received the licenses to operate in
the remaining 14-telecom circles of India giving it the ability to become a pan-India player.
Maxis expansion into Indonesia and India is another milestone in our aspiration to be the
regional communications leader of choice. The acquisition of a 51% stake in PT Natrindo
Telepon Seluler (NTS), Indonesia and a 74% equity interest in Aircel, India provides new
growth opportunities for Maxis. These acquisitions give Maxis a strong foothold in two of
the worlds most attractive high-growth, low-penetration markets. This marks the
beginning of the new world of Maxis a world beyond voice, and beyond borders. MAP
Maxis in Indonesia On 29th April 2005, Maxis acquired 51% of PT Natrindo Telepon
Seluler. Maxis is currently in the middle of rolling out a Java wide network to establish the
company as a national operator. The initial launch phase encompasses 1,300 BTS,
providing both 2G and 3G services. NTS expects to have up to 480 employees by launch
date and to increase significantly upon launching. Maxis in India Maxis completed the
acquisition of a 74% stake in Aircel on March 21, 2006. Currently, Aircel has operations in
9 of the 23 telecom circles of India - Chennai, Tamil Nadu, West Bengal, Orissa, Assam,
North East, Jammu and Kashmir, Himachal Pradesh and Bihar. Aircel launched its services
in Bihar and Himachal Pradesh in December 2006 and also recently received the licenses to
operate in the remaining 14 telecom circles of India giving it the ability to become a panIndia player. Aircel expects to aggressively grow its subscriber base in India and is
developing a broad range of new propositions for its customers - from branding, to
increased network coverage, to innovative product and service offerings, to refreshing
32

customer experience. As of 31st December 2006, Aircel serves more than 4.5 million
subscribers with a network comprising of almost 4,000 BTS. Aircel continues to be the
market leader in Tamil Nadu and Chennai circle. Aircels network provides 2G and GPRS
services, and is EDGE capable. Aircel is also currently in the process of conducting 3G
Trials across different cities in India. In addition, Aircel is the first cellular operator in India
to launch wireless Internet services using WiMAX technology. It aims to immediately
extend its WiMax coverage to over 20 cities to serve enterprise broadband customers. Over
the next few quarters, India is expected to add new subscribers at the rate of 5 to 6 million
per month. India offers huge opportunities for Aircel given the current low mobile
penetrations levels as well as challenges in terms of its geographic spread and low ARPU
levels.
Aircel expects to aggressively grow its subscriber base in India and is developing a broad
range of new propositions for its customers - from branding, to increased network
coverage, to innovative product and service offerings, to refreshing customer experience.
As of 31st December 2006, Aircel serves more than 4.5 million subscribers with a network
comprising of almost 4,000 BTS. Aircel continues to be the market leader in Tamil Nadu
and Chennai circle.
Aircels network provides 2G and GPRS services, and is EDGE capable. Aircel is also
currently in the process of conducting 3G Trials across different cities in India. In addition,
Aircel is the first cellular operator in India to launch wireless Internet services using
WiMAX technology. It aims to immediately extend its WiMax coverage to over 20 cities to
serve enterprise broadband customers.
Over the next few quarters, India is expected to add new subscribers at the rate of 5 to 6
million per month. India offers huge opportunities for Aircel given the current low mobile
penetrations levels as well as challenges in terms of its geographic spread and low ARPU
levels

Aircels current and proposed footprint is illustrated below.

33

MISSION STATEMENT

We are conditionally committed to exceeding our customers

expectations. we will provide network and services that are
innovative and reliable, allowing our customers any time anywhere
communications. we will attract, develop and retain an exceptional
team of people. We are committed to enhancing the quality of real
life in the community in which we operate. Wewill meet the financial
expectation of our shareholders.

OUR GOALS AND VALUES

CUSTOMERS: our customers are our most valued assets. we will strive to
exceed their expectations at all time by providing them with superior services
that embody value, innovation, quality and care.
34

PEOPLE: our people are our greatest resources. we will attract, train and
retain the best. We will challenge them to develop their full potential in the
context of our company goals.
INTEGRITY: We will maintain and strive for the highest levels of personal
and professional integrity and honesty in all ours dealings. We will keep our
promises.
RESPECT: We will treat with respect & dignity all people we deal with.
EXCELLENCE: We are committed to excellence in all what we do. There will
be no place for mediocrity.
WORK: We will promote a work environment that embraces creativity,
promotes empowerment, and encourages team work, innovation, prudent risk
taking, honest and open communication and respectful iconoclasm
QUALITY: the hallmark of our internal and external outputs and processes
will be quality. This will pervade every aspect of our functioning.

AIRCEL IN DELHI
AIRCEL 92.9%are targeting the unsaturated market where no other operator is
present. An Aircel official admitted that they have been targeting the interior locations
where the mobile connectivity has not been available. However, they denied that they
have not been targeting the urban market. We are targeting the urban market, but our
focus is more on connecting the rural market, the official said.

35

In Delhi the post paid services of Aircel was launched in November-05 whereas prepaid
services were launched in January-06
In Delhi the post paid services of Aircel was launched in July-06 whereas prepaid
services were launched in January-07.
Product Offerings (keeps on changing from time to time) :

New Subscribers: New Subscribers will need to buy a starter pack of Rs.49 and
recharge with Rs.248 to avail lifetime.

Existing Aircel Subscribers: Existing Aircel Prepaid Subscribers can recharge

with Rs.199 and get lifetime validity. However existing Aircel lifetime
subscribers will get the tariff benefit automatically.

Tariff highlights (keeps on changing from time to time) :

Local calls Re1/minute

STD Calls Rs 2.74/minute.

Aircel gives services to its customers in 4 forms:

Validity Recharge

Top ups

Value Vouchers

Packs

The Organization chart of Delhi circle is shown below:

36

Circle
Circle Head
Head
(Mr.
(Mr. Gurmeet
Gurmeet Singh
Singh Makkad)
Makkad)

Marketing
Marketing &
&
Sales
Sales
(Mr.
(Mr.
B.K..Kaul)
B.K..Kaul)

Customer
Customer
Service
Service
Dept
Dept
(Mr.
Rajesh
(Mr. Rajesh
Choudhary)
Choudhary)

HR
HR
(Mr.
(Mr.
Surander
Surander
Kataria)
Kataria)

Finance
Finance
(Mr.
(Mr. Madan
Madan
K
Jha)
K Jha)

Technical
Technical
(Mr
(Mr
.Narendra
.Narendra
Sharma)
Sharma)
Commercial
Commercial
(( Mr.
Mr. Satish
Satish
Kumar
Kumar
Gaur)
Gaur)

Revenue
Revenue
Assurance
Assurance
(Mr.
Salil
(Mr. Salil
Sharma)
Sharma)

The various depts. and their functions in Jammu circle are as

Sales and Marketing Department
Customer Service Department
Technical/networking Department
Commercial Department
Finance Department
Revenue Assurance Department
Human Resources Department
Administration Department
Vigilance Department

Value Added Services

When a network operators offers services using:
37

Vigilance
Vigilance
(Mr.
(Mr.
V.K.Ghai)
V.K.Ghai)
Adminisatri
Adminisatri
on
on
(Mr.
(Mr.
Raghubir
Raghubir
Manhas)
Manhas)

existing customer base

existing infrastructure

They add more value to the relationship between consumer and operator.
Hence, these services are known as Value Added Services.

Broad Classification of VAS offerings:

Messaging short codes, MMS, email etc.

38

Music mono tones, true tones, poly tones, mp3 tones, full songs, CRBT etc.

Imagery wallpapers, animations, screensavers, videos etc.

Games Branded, Unbranded

Text based stock quotes, news etc.

Doctor on call

Voice station

Caller ringtones

39

RESEARCH METHODOLOGY

The research process methodology consists of six steps and these steps are as follows:
1. Problem definition.
2. Development of an approach to the problem.
3. Research design formulation.
4. Field work or data collection.
5. Data preparation and analysis.
6. Report preparation and presentation.

PROBLEM DEFINATION
The first step in any marketing research is to define the problem. In defining the
problem, the researcher should take into account the purpose of study, the relevant
background information and the information needed

OBJECTIVE OF THE STUDY

To study the attitude, preference and response of AIRCEL customers towards
DIALER TUNE.
40

 To study how frequently the users of dialer tune change their dialer tune
To identify the factors which are keeping AIRCEL customers away from
dialer tune service.
To study the satisfaction level of dialer tune services.

RESEARCH DESIGN

41

A research design is a framework for conducting the marketing research project. It

details the procedure necessary for obtaining the required information, and its purpose
is to design a study that will test the hypothesis of interest, determine possible answers
to research questions and provide the information needed for decision making.
Formulating the research design involves the following steps:-

(a) TYPE OF RESEARCH DESIGN: Descriptive Research.

We are using the descriptive research as we know the problem and by using this type of
research we are able to get information regarding the attitude of Aircel customers
towards dialer tune.
These 6 Ws will help us to know the attitude of Aircel customers towards dialer tune:
Q1. Who are the people that are using or not using dialer tune?
Q2.What is the satisfaction level of Aircel customers towards the dialer tune service?
Q3 Why Aircel customers are away from dialer tune?
Q4 When and how frequently customers change dialer tune?
Q5 Where the respondents should be contacted to obtain the required information?
Q6 In what way are we going to obtain information from the customers?

(b) METHOD OF COLLECTING QUANTITATIVE DATA:The research instrument which we are using in our research paper is a questionnaire.
Our questionnaire consists of 8 close ended questions and 5 open ended questions. This
42

questionnaire translates the information needed into a set of specific questions that the
respondents have to answer.

(c) SCALING TECHNIQUES:

METHOD OF SCALING: The scaling method which we are using in our

questionnaire is
NOMINAL SCALE.
RANK ORDER SCALE

(d) SAMPLING TECHNIQUES:1. TARGET POPULATION: All Aircel customers of J&K .

2. SAMPLING FRAME: All customers of Kathua region.
3. SAMPLING SIZE: Our sample size will consist of 500 respondents.
4. SAMPLING TECHNIQUE: We are using SIMPLE RANDOM sampling
technique.

(e) FIELD WORK: - Our field force consists of 1 MEMBER only and our field
Kathua district.

DATA ANALYSIS

PLAN OF DATA ANALYSIS:

43

is

The main objective of our study is to analyze the factors. The course of the test is as
follows:
For this we calculated the frequency distribution of the various responses that were
given by the respondents. The response that got the highest frequency of occurrence
associated with it is considered as the main factor.

CHAPTE 4
ANALYSIS & INTERPRETATION

44

PERCANTAGE OF FEMALE AND MALE USERS

MALES

FEMALES
14%

86%

SPAN OF TIME SLOT OF PEOPLE USING AIRCEL:-

45

q
1

Percnt

4
0
3
0
2
0
1
0
01
.
02
.
03
.
04
.
0

q
1

1 month
23% of respondents are using Aircel from 2-6 months
36.8% of respondents are using Aircel from 6-12 months
36.6% of respondents are using Aircel < 1 year

NUMBER OF DIALLER TUNES USERS

46

In our survey
3.6%

of

respondents are
using Aircel >

USING

NOT USING

22%

78%

78% of Aircel customers are not using dialer tune service.

22%of Aircel customers are using dialer tune service.

300
250
200
150
100
50
0

14.5% of customers are not using due to NON AWARENESS.

63.85 of customers are not using due to HIGH PRICE.
7.7% of customers are not using due to POOR QUALITY OF SERVICE.
14.4% of customers are not using due to OTHER REASONS

NUMBER OF PEOPLE CHANGING SONGS FREEQUENTLY:-

47

NO.
1.00

Frequency

Percent

85

79.4

2.00

22

20.6

Total

107

100.0

FREEQUENCY OF CHANGE OF SONGS BY CUSTOMERS:-

WEEKLY

MONTHLY

QUATERLY

1%
41%
57%

57% of customers changes songs monthly.

42 % of customers changes songs weekly.
1%of customers changes songs quarterly.

DO CUSTOMERS RECOMMEND THIS SERVICE TO OTHERS

48

RECOMMEND

NOT

4%

96%

RATING GIVEN BY PEOPLE TO THIS SERVICE

Frequency

Percent

1.00

21

19.6

2.00

54

50.5

3.00

22

20.6

4.00

7.5

5.00

1.9

107

100.0

Total

19.6% customer rates this service as EXCELLENT.

50.5 % customer rates this service as VERY GOOD.
20.6 % customer rates this service as FAIRLY GOOD.
7.5 % customer rates this service as AVERAGE.
1.9 % customer rates this service as POOR.

LIMITATIONS:
No study is free from the limitations, so does ours. There are many limitations
that we encountered during the course of our study and research process
Our study is restricted to KATHUA region only.
49

 Our study is restricted to AIRCEL CUSTOMERS only if the would have

included other customers also then the wider analysis could have been
done.
Some questions regarding the attitude of the customers also depends on
the mood of the respondent and at the time during which they were
interviewed

CHAPTER 5
RECOMMENDATIONS& SUGGESTIONS:

50

By going through all the study there are some recommendations that can make the
study more effective as well as can create a good results for AIRCEL dialer tune
service. These recommendations are as follows: The price of dialer tune should be less so that more customers can use it.
Some promotional strategies should be used in rural areas as very less
awareness of value added services in rural area.
Distribution of promotion material should be regular and noted.
Aircel should improve their visibility. During the survey period I found very
few shops and other, points where advertisement has been done.

51