CHAPTER 1

INTRODUCTION
The Information and Communication Technology (ICT) Industry in India has

perceived a tremendous growth in the past 1.5 decade. With the boom in

technology, the ICT Industry has experienced exciting possibilities, ranging from a

speedy expansion in size to gaining importance in the overall Indian economy. The

escalated effect of the ICT industry has led to the formation of a larger and more

significant constituent of the overall export market. It is aiding the improvement of

the local and global competitiveness of Indian companies across industries. The

fact that the Indian ICT market is one of the most rapidly growing ICT market in

the world for the third year stands as a secured testament to the increased leverage

of ICT by the domestic industry [2]. Talking about the Telecommunications sector,

which is a sub domain of the ICT industry, the sector is growing at a remarkable

pace and India is the second largest telecom market globally since 2010. In April

2008, India surpassed the US as the second largest wireless market and as an

indicator to the swelling global influence ofIndian telecom companies. Seven

Indians have featured inthe list of the world's 100 most prominent and influential

telecom leaders, compiled by Global Telecoms Business industry magazine [1].

Forthcoming services such as4G will further augment the growth rate. The worlds
leading telecom handsets manufacturers, such as Nokia, Samsung, Micromax have

their presence in India, along with leading global service companies and

infrastructure majors, such as AT&T, Ericsson, Alcatel, Singapore Telecom and

Siemens.India reached the target of having 300 million telephonesubscribers;

becoming the second largesttelecommunications network in the world after China

in June 2008. As per the report [3] India is having 800 million mobile subscribers

and it expected to reach 900 million by 2015. India is emerging as one of the

fastest growing telecom markets in the world. According to the report titled

'Mobile BRIC: Extreme Growth Ahead', BRIC (Brazil, Russia India and China)

India is the secondlargest mobile market in the BRIC nations, with 650 million

mobile users, since 2012 (after China with 800million users). Indian telecom

industry has had a long way and is expected to soar even higher and the growth

rate is expected to double with every passing year. To make full use of this

opportunity, a large number of players has entered into the telecom industry, the

major being Airtel,Vodafone, Idea, BSNL, Tata, Reliance.In todays era, with the

increase in telecom serviceproviders, it has become essential for the

variouscompanies to excel and have a competitive edge over the others. The firms

must innovate and come up with groundbreaking and novel services so as to stand

out in the globalmarket. It would be quite interesting to know about the

performance of the various telecom service providers and to do a comparative

analysis of them. This can disclose a number of facts about their stand in the

market and also what image do they carry among their customers. A range of

business matrices like year Total Expenses, net sales, Profit (%) after tax and

capitalization reflect the health and wealth of thecompanies and also affect the

subscriber base. At the same time it is essential to satisfy their customers in order

to expand their subscriber base. Customer satisfaction is significant to be cashed

upon for an accentuated growth. The companies can be compared on the basis of a

number of parameters. The most significant ones can be, total net sales profit after

tax reduction, market capitalization and level of satisfaction of the customers.

Firstly, net sales is an important index of measuring acompanys growth as it is the

amount of sales generated by a company after the deduction of returns, allowances

for damaged or missing goods and any discounts allowed. The sales number

reported on a company's financial statements is a net sales number, reflecting these

deductions. It gives a more accurate picture of the actual sales generated by the

company, or the money that it expects to receive. Secondly, profit after tax

reduction, is the bottom line that reflects the position of the company as it is the net

profits of a company after taxation. Thirdly, market capitalization, which is a

measurement of corporate or economic size equal to the share price times the

number of shares outstanding of a public company, is regarded as a valuable index

to appraise a firm. And finally, level of satisfaction is the key indicator of the
popularity of the service among the customers. Higher the level of satisfaction of

the customers, greater will be the net sales,profit after tax and market

capitalization. Thus, net sales, profit after tax, market capitalization and level of

satisfaction have been included in our factors to measure the performance of the

telecom service providers in India. As a matter of fact, not much literature is

available concerning our present study. Thus, we have come up with a novel

research which compares the telecom companies onthe basis of the important

business matrices as discussed above. In this paper, a comparative analysis of the

leading telecom service providers has been presented. Companieslike Bharti Airtel,

Vodafone Communication, Idea Cellular, RelianceCommunications and Tata

Communication in India have been chosenfor the analysis on the basis of

secondary data whichincludes last five year values of net sales, profit after

taxreduction, and market capitalization. The Level ofSatisfaction (LOS) of the

Indian telecommunicationscustomers has also been compared. The LOS has

beendetermined on the basis of various factors like networkcoverage; tariff rates,

plan, bill accountability, paymentconvenience, customer service etc. To achieve

thisobjective, an empirical study has been done andconclusions have been brought

out on the basis of the datacollected though an online field survey. Section

IIdiscusses the notable features of the leading telecomservice providers in the

Bhopal region ofIndia. It is then followed by Section III which illustratesthe

research methodology adopted for the present study.Section IV explains the data

analysis and findings. Thelast section presents conclusions, limitations and

recommendations.
 HISTORY

The history of telecommunication industry started with the first public

demonstration of Morses electric telegraph, Baltimore to Washington in 1844. In

1876 Alexander GrahamBell filed his patent application and the first telephone

patent was issued to him on 7th of March. In 1913, telegraph was popular way of

communication. AT&T commits to dispose itstelegraph stocks and agreed to

provide long distance connection to independence telephonesystem. In 1956, the

final judgment limited the Bell System to Common Carrier Communications and

Government projects but preserving the long-standing relationships between the

manufacturing, researches and operating arms of the Bell System. In this judgment

AT&T retained bell laboratories and Western Electric Company. This final

judgment brought to a close the justice departments seven year-old antitrust suit

againstAT&T and Western Electric which sought separation of the Bell Systems

Manufacturingfrom its operating and research functions. AT&T was still

controlling the telecommunicationindustry.In 1982 , AT&T was requested to

divestiture its stock ownership in Western Electric;termination of exclusive

relationship between AT&T and Western Electric; divestiture byWestern Electric

of its fifty percent interest in Bell Telephone Laboratories, AT&T

stelecommunication research and development facility, is a jointly owned

subsidiary in whichAT&T and Western Electric each own 50% of the stock;

separation of telephonemanufacturing from provision of telephone service and the

compulsory licensing of patentsowned by AT&T on a non-discriminatory basis. It

was telecommunication act of 1996 thattrue competition was allowed. The act of

1996 opened the market to all competitors. AT&T being the first

telecommunication company paved the road for the telecommunicationindustry as

well as set the policy and standards for others to follow.

1.1Beginning of telecommunication in India

The era of telecommunication in India started from the year of 1851 with the

initiative fromgovt. of India near the city of Calcutta now known as Kolkatta.

However the rapid growth intelecom industry came into picture after the year of

2002-03 onwards as the more number of service providers came into existence.

Since 2002-03 there is rapid change in the technologyand increase in numbers of

subscribers in the Indian telecom industry till now. The followingare the

milestones in the Indian telecom industry.

1851 First operational land lines were laid by the government near Calcutta.

1881 Telephone services introduced in India.

1883 Merger with postal system.

1923 Formation of Indian radio Telegraph Company.

 1932 Merger of ETC and IRT into Indian Radio and Cable Communication

Company.

1947 Nationalization of all foreign telecommunication companies to form

the posts,telephone and telegraph, a monopoly run by the governments

ministry of communications.

1985 Department of telecommunication established , an exclusive provider

of domestic and long-distance services that would be its own regulator.

1986 Conversion of dot into two wholly government owned companies the

VSNLfor international telecommunication and MTNL for services in

metropolitan areas.

1997 Telecom regulatory authority created.

Telecommunication is important not only because of its role in bringing the

benefits of communication to every corner of India but also in serving the new

policy objectives of improving the global competitiveness of the Indian

economy and stimulating and attractingforeign direct investment. Indian

Telecom industry is one of the fastest growing telecommarkets in the world. In

telecom industry, service providers are the main drivers; whereasequipment

manufacturers are witnessing growth and decline in successive quarters as sales

isdependent on order undertaken by the companies.Today the Indian

telecommunications network with over 375 Million subscribers is secondlargest

network in the world after China. India is also the fastest growing telecom

market inthe world with an addition of 9- 10 million monthly subscribers. The

teledensity of theCountry has increased from 18% in 2006 to 33% in December

2008, showing a stupendousannual growth of about 50%, one of the highest in

any sector of the Indian Economy. TheDepartment of Telecommunications has

been able to provide state of the art world-classinfrastructure at globally

competitive tariffs and reduce the digital divide by extendingconnectivity to the

unconnected areas.India has emerged as a major base for the telecom industry

worldwide. Thus Indian telecomsector has come a long way in achieving its

dream of providing affordable and effectivecommunication facilities to Indian

citizens. As a result common man today has access to thismost needed facility.

The reform measures coupled with the proactive policies of theDepartment of

Telecommunications have resulted in an unprecedented growth of the

telecomsector.There is a cut-throat competition in the Telecom industry as more

and more advancedtechnology is developed in very short time. Once the people

get addicted to 2G technology bythe time new players come up with latest

technology called 3G and EDGE. The thrust areas presently are:1. Building a

modern and efficient infrastructure ensuring greater competitive environment2.

With equal opportunities and level playing field for all stakeholders.3.

Strengthening research and development for manufacturing, value added

services.4. Efficient and transparent spectrum management5. To accelerate

broadband penetration6. Universal service to all uncovered areas including rural

areas.7. Enabling Indian telecom companies to become global players.Recent

things to watch in Indian telecom sector are:1. 3G and BWA auctions2.

MVNO3. Mobile Number Portability4. New Policy for Value Added Services5.

Market dynamics once the recently licensed new telecom operators start rolling

out6. Services.7. Increased thrust on telecom equipment manufacturing and

exports.8. Reduction in Mobile Termination Charges as the cost per line has

substantially reduced9. Due to technological advancement and increase in

traffic.India's telecom sector has shown massive upsurge in the recent years in

all respects of industrial growth. From the status of state monopoly with very

limited growth, it has grownin to the level of an industry. Telephone, whether

fixed landline or mobile, is an essentialnecessity for the people of India. This

changing phase was possible with the economicdevelopment that followed the

process of structuring the economy in the capitalistic pattern.Removal of

restrictions on foreign capital investment and industrial de-licensing resulted

infast growth of this sector. At present the country's telecom industry has

achieved a growthrate of 14 per cent. Till 2000, though cellular phone

companies were present, fixed landlineswere popular in most parts of the

country, with government of India setting up the TelecomRegulatory Authority

of India, and measures to allow new players country, the featured products in

the segment came in to prominence. Today the industry offers services such as

fixed landlines, WLL, GSM mobiles, CDMA and IP services to customers.

Increasing competition among players allowed the prices drastically down by

making the mobile facility accessible to the urban middle class population, and

to a great extend in the rural areas. Even for small shopkeepers and factory

workers a phone connection is not an unreachable luxury. Major players in the

sector are BSNL, MTNL,Reliance, Bharti Teleservices, Vodafone Essar, BPL,

Tata, Idea, etc. With the growth of telecom services, telecom equipment and

accessories manufacturing has also grown in a big way. Indian Telecom sector,

like any other industrial sector in the country, has gone through many phases of

growth and diversification. Starting from telegraphic and telephonic systems in

the19th century, the field of telephonic communication has now expanded to

make use of advanced technologies like GSM, CDMA, and WLL to the great

3G Technology in mobile phones. Day by day, both the Public Players and the

Private Players are putting in their resources and efforts to improve the

telecommunication technology so as to give themaximum to their customers

The wireless subscriber crossed the 261 million subscriber mark at the end of

the financial year in comparison to the subscriber base of 165.11 million at the
end of March, 2009. It added 95.9 million subscribers in the financial year

2008-09 registering an annual growth rate of about 58.12%. The total subscriber

base of wireless services has grown from 33.69 million in March, 05 to 261.07

million in March, 09