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					     International Institute Of Information
               Technology, Pune


                         A

                       Report

                        On




Guided by:                       Prepared by:
Mr. Srikanth Acharya             Ashutosh
                                 Mayank Sharma
                                 Mili Bakorey
                                 Modi Amitkumar
                                 Mohammad Nadim
                                 (MBA- June 05,”A”)




                                                  1
ACKNOWLEDGEMENT:

          We express our gratitude to Prof. Krishna M oorthy
(Director, I 2 IT) and Prof. Sunil Patil (Vice President) for
providing us such a great opportunity. We also thank Dr. Atan u
Rakshit (Dean Acade mics) for his co-ordination.

           We thank Mr. Srikanth G Acharya (Senior Lecturer)
for his guidance in study of Industry.

          We also thank to all those who have been an assistance
to us directly or indirectly. Lastly but not the least we would pa y
special regards to the almighty God who at every step, cares a lot
for us. It is with great humility that we offer this document at the
feet of this Supre me Being.




                                                                   2
                        Index

Chapter-1 Introduction……………………………….5
  Ø Examples of Telecommunication System………...5
  Ø Issue Analysis…………………………………….5
  Ø History of Telecommunication…………………..7
  Ø Telecommunication services in India…………….9

Chapter-2 General Environment…………………….11
  Ø Tele-density Growth – Pre-reform Past Performance
    and Targets………………………………………..11
  Ø Rural and urban telephony………………………..12
  Ø Mobile subscriber base……………………………13
  Ø Fixed line base…………………………………….14
  Ø PSU and private sector subscriber base…………...14
  Ø Mobile growth and ARPU………………………...16
  Ø High turnover despite declining ARPU…………...17
  Ø Levies compared with other countries…………….17
  Ø Teledensity comparison with other countries……..18
  Ø Mobile coverage compared with countries………..19
  Ø Call charges /min of use ARPU and termination rates
    /min for mobile service in different countries…….20
  Ø Number of cable connections and fixed line
    connections……………………………………......21
  Ø Mobile India - china comparison…………………22




                                                      3
Chapter-3 Microenvironment…………………………23
  Ø Porter's Five Forces Analysis………………………23
  Ø Comparisons………………………………………..25

Chapter-4 Future Growth……………………………..30
  Ø Future Technologies………………………………..30
  Ø Fututre Trends……………………………………...35

Chapter-5 Conclusion………………………………….41
References………………………………...…………….42




                                           4
                               Chapter-1
Introduction

Telecommunication is the technique of transmitting a message, from one
point or place to another with the typical additional attribute of being bi-
directional.

Telecommunications covers all forms of           distance communications,
including radio, telegraphy, television, telephony, data communication and
computer networking.

Examples of telecommunication system

   •   Telegraphy
   •   Radio
   •   Television
   •   Communications satellites
   •   Ethernet
   •   The internet

Issue Analysis
 India’s telecommunications products and services market is potentially
worth over $60 billion. However, because India chose not to accept all of the
principles set forth in the Reference Paper of the WTO Basic
Telecommunications Agreement (BTA), U.S. telecommunications firms still
encounter formidable difficulties in entering the Indian market. Current
challenges for U.S. telecommunication product and service providers in
India include changing political climates and an uncertain, evolving
regulatory environment. In addition, U.S. firms contend with:

   1. Discriminatory government procurement policies;
   2. India’s lack of a transparent regulatory regime;
   3. Corruption and bribery;


                                                                           5
   4. India’s lack of compliance with negotiated trade agreements;
   5. Non-tariff barriers such as burdensome licensing and approval
      procedures; and
   6. Standards and service-related obstacles.

This report begins with a background analysis of the current state of
telecommunications reform in India. It then identifies and analyzes
important commercial and policy arguments in order to demonstrate that the
introduction of competition to India’s telecommunications sector is vital to
the development and health of India’s economy. The report also identifies
important people and groups that will need to be mobilized in order to
ensure compliance with national and international obligations.

Legal History of Telecommunication
The telecommunications industry, as we know it today, originated in 1876
when Alexander Graham Bell developed the telephone in an attempt to
communicate with his mother and wife, who were both deaf. Bell filed his
patent for the telephone on February 14, 1876, just four hours before Elisha
Grey applied for the same patent. But for that timing, we might have had the
Grey Telephone System instead of the Bell Telephone System. Through
legal maneuvering Bell’s patent was upheld and the Bell Telephone
Company, which was formed in 1877, began to expand across the country
and emerged as a near monopoly supplier of telephone services. In 1880 the
company was renamed American Bell.




                                                                          6
By 1884 the American Bell Telephone System was deployed and connected
locally within in cities and towns throughout the United States. The
American Bell Telephone System was not connected across the country.
Because of this limitation American Bell customers could only make local
calls. This presented a problem for those customers who wanted to make
calls across the United States to another American Bell customer.

In 1885, a new American Bell subsidiary was chartered. American
Telephone & Telegraph (AT&T) was charged with the sole task of building
and operating long distance lines. The Bell/AT&T System gained a head
start over potential competitors until Bell’s original telephone patent expired
in 1893. After this, new telephone enterprises spread rapidly until by the
early 1900s over 9,000 independent (non-Bell) companies were in business.

This flurry of competition caused chaos, especially since AT&T refused to
allow interconnection of competing telephone companies to its network.

For much of its history, AT&T and its Bell System functioned as a legally
sanctioned, regulated monopoly. The fundamental principle, formulated by
AT&T president Theodore Vail in 1907, was that the telephone by the nature
of its technology would operate most efficiently as a monopoly providing
universal service. Vail wrote in that year's AT&T Annual Report that
government regulation, "provided it is independent, intelligent, considerate,
thorough and just," was an appropriate and acceptable substitute for the
competitive marketplace.

In 1913, telegraph was popular way of communication. AT&T commits to
dispose its telegraph stock. It also agreed to provide long distance
connection to Independent telephone systems and not to purchase any more
Independent telephone companies except as approved by the Interstate
Commerce Commission. However, AT&T was still the giant
telecommunication company.

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, research 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
Department's seven-year-old antitrust suit against AT&T and Western
Electric which sought separation of the Bell System's manufacturing from its


                                                                             7
operating and research functions. AT&T was still controlling the
telecommunication industry.

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 by Western Electric of its fifty percent interest in Bell
Telephone Laboratories, AT&T's telecommunications research and
development facility, is a jointly owned subsidiary in which AT&T and
Western Electric each own 50% of the stock; separation of telephone
manufacturing from provision of telephone service; and the compulsory
licensing of patents owned by AT&T on a non-discriminatory basis.

It was in the Telecommunication Act of 1996 that true 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
telecommunication industry as well as set the policy and standards for others
to follow.

In my view there is still time before we see true competition in the
telecommunication industry. AT&T is still the giant long-distance provider.
You only need to have 30 percent of the market share to be considered a
monopoly. The current news tells that AT&T and MediaOne merger puts
AT&T back at a monopoly side. Recently, AT&T won the final approval of
FCC. But in signing off on the deal, the FCC required that AT&T comply
with rules barring any company from owning more than 30 percent of the
nation's market for subscription-television services, including cable and
satellite. The FCC calculates that the new AT&T would reach roughly 42
percent of that market.

The conditions will force AT&T to either sell off its roughly 25 percent
stake in cable systems owned by Time Warner Inc. Even after the
divestitures, AT&T would be the nation's largest provider of long-distance
telephone service and cable TV

The History of Telecommunication Services in India
   • 1851-First operational land lines were laid by the government near
     Calcutta (seat of British power)
   • 1881-Telephone service introduced in India
   • 1883-Merger with the postal system


                                                                             8
• 1923-Formation of Indian Radio Telegraph Company (IRT)
• 1932-Merger of ETC and IRT into the Indian Radio and Cable
  Communication Company (IRCC)
• 1947-Nationalization of all foreign telecommunication companies
  Telegraph to form the Posts, Telephone and (PTT), a monopoly run
  by the government's Ministry of Communication
• 1985-Department of Telecommunications (DOT) established, an
  exclusive provider of domestic and long-distance service that would
  be its own regulator (separate from the postal system)
• 1986-Conversion of DOT into two wholly government-owned
  companies: the Videsh Sanchar Nigam Limited (VSNL) for
  international telecommunications and Mahanagar Telephone Nigam
  Limited (MTNL) for service in metropolitan areas.
• 1997-Telecom Regulatory Authority created.




                                                                        9
                             Chapter-2


Tele-density Growth – Pre-reform Past Performance
and Targets




  Ø In the pre-reform period, growth was primarily driven by public sector
    monopoly, showing very marginal growth.
  Ø Reform process started with NTP’94.
  Ø TRAI was set up in 1997.
  Ø First tariff order issued in 1998 – thus reforms effective from 1998.
  Ø NTP’99 pushed reforms further.




                                                                       10
Tele-density Growth – Post-reform – Different Phases




  Ø The growth in tele-density each year 2003-04 (~2%) & 2004-05
    (~2%) > 50 years growth 1948-1998 (~1.92%)
  Ø For phase III - each year growth must > 4.5 % in tele-density.
  Ø Growth started in phase I of reform 1998-2003.
  Ø Phase II 2003-05 – it picked up further.
  Ø Phase II growth was mobile driven and was consequent to certain
    decisions taken by Govt./ TRAI.




                                                                 11
Urban and Rural Tele-density




  Ø Urban Rural divide is increasing very fast primarily due to negligible
    mobile coverage in rural areas and policies must ensure rural tele-
    density increase.
  Ø Would only be possible when rural growth is mobile and competition
    driven, like in urban areas.
  Ø At present, there is negligible rural mobile coverage and the growth is
    PSU/ USO driven. Unless it is competition driven, growth will
    continue to be stagnant.




                                                                        12
Mobile Subscriber base




  Ø Phase II of growth was primarily mobile driven, like in other
    countries.
  Ø Higher growth required in phase III – additional subscribers should go
    up to > 4 million per month as against present trend of 1.5 – 2 million
    per month.




                                                                        13
Fixed Subscriber base




  Ø Fixed line growth, like in other countries, is marginal.

PSU’s Operators Subscriber base




                                                               14
  Ø Growth 1998-2005 = 34.28 million subscribers - Fixed 23.28 million
    ,Mobile 11.00 million.
  Ø PSU operators have shown remarkable growth in competitive
    environment.
  Ø Their growth in pre-reform non-competitive environment was very
    slow.

Private Operators Subscriber base




   Ø Growth 1998-2005 = 45.45 million subscribers - Fixed 5.09 million,
     Mobile 40.36 million.
   Ø Private operators have contributed very largely to post 1998 growth.
   Ø Private operators have contributed primarily in mobile growth due
     to lower costs.




                                                                      15
Mobile growth and ARPU




Ø TRAI facilitated huge reduction in forborne tariffs in 2003-05.
Ø Measures indicated in boxes – and by increasing competition.
Ø Also, by allowing handsets sales in instalments.
Ø Mobile growth stepped up significantly – once mobile and fixed line
  tariffs became equal.
Ø Mobile then became the telephone of the working class.
Ø Mobile growth in 2003-04 and 2004-05 > average mobile growth in
  earlier years X 12.




                                                                  16
ARPU




  Ø Turnover growth in 5 years ~ 9 times despite ARPU falling by more
    than 3 times.
  Ø Prior to 2003, all the mobile operators were incurring losses, leading
    to no fresh investment in the sector.
  Ø Growth induced profits & heavy investments in the sector after 2003.
  Ø Future strategies should primarily look at growth potential – and
     reducing costs/fee.

Government Levies




  Ø Telecom sector contributes about 30% of country’s service tax.


                                                                       17
SECTOR LEVIES




  Ø The Regulatory levies are not so high in other developing countries.
  Ø Reducing levies is essential to drop cost to customer and hence
    increase penetration in new markets.The ideal policy would be to
    charge license fee & spectrum charges only for USO and covering
    administrative costs.

Can India achieve 250 million by December, 2007




                                                                     18
MANY   OTHER   DEVELOPING   COUNTRIES
ALREADY HAVE MORE ADVANCED COVERAGE

Mobile coverage in selected countries, by region, 2002




    Ø If mobiles can cover high population % in other developing
      countries, in India also they can.
    Ø Once higher population coverage is achieved, growth will be further
      accelerated.




                                                                      19
Call charges per Minutes of Use, ARPU and
Termination Rates per minute for mobile service in
different countries




  Ø Has come down to 0.03 in 2005 – lowest in the world.
  Ø Since the tariffs are low – there is huge unmet mobile demand in rural
    areas only mobile towers have to reach.
  Ø Some low end ARPUs being offered by operators are $ 4 per month
     and entry cost (handset price) $35.
  Ø At these rates, huge market is waiting to be tapped.
  Ø Our lowest termination rates encourage aggressive competition at
     origination of calls.




                                                                       20
Number of cable homes and number of fixed line
telephone subscribers




  Ø There is no country other than India where cable TV connections
    exceed fixed line phones.
  Ø This indicates a huge demand in India for entertainment and multi-
    sourced news and information.




                                                                    21
Mobile - India - China Performance




  Ø So far, on any year to year basis, after late start of mobiles in India,
    we have done better than China
  Ø We must continue – but corrective measures required for phase III
    (2005-07)




                                                                         22
                                 Chapter-3

Porter's Five Forces Analysis




 Threat of New Entrants - No surprise, in the capital-intensive telecom
 industry the biggest barrier-to-entry is access to finance. To cover high
 fixed costs, serious contenders typically require a lot of cash. When capital
 markets are generous, the threat of competitive entrants escalates. When
 financing opportunities are less readily available, the pace of entry slows.
 Meanwhile, ownership of a telecom license can represent a huge barrier to
 entry. In India, for instance, fledgling telecom operators must still apply to
 the TRAI (Telecom Regulatory Authority of India) to receive regulatory
 approval and licensing. There is also a finite amount of "good" radio
 spectrum that lends itself to mobile voice and data applications. In
 addition, it is important to remember that solid operating skills and
 management experience is fairly scarce, making entry even more difficult.

 Power of Suppliers - At first glance, it might look like telecom
 equipment suppliers have considerable bargaining power over telecom
 operators. Indeed, without high-tech broadband switching equipment,

                                                                            23
fiber-optic cables, mobile handsets and billing software, telecom operators
would not be able to do the job of transmitting voice and data from place to
place. But there are actually a large number of large equipment makers
around. Nortel, Lucent, Cisco, Nokia, Alcatel, Ericsson, Tellabs are just a
few of the supplier names. There are enough vendors, arguably, to dilute
bargaining power. The limited pool of talented managers and engineers,
especially those well versed in the latest technologies, places companies in
a weak position in terms of hiring and salaries.

Power of Buyers - With increased choice of telecom products and
services, the bargaining power of buyers is rising. Let's face it; telephone
and data services do not much vary regardless of which companies are
selling them. For the most part, basic services are treated as a commodity.
This translates into customers seeking low prices from companies that
offer reliable service. At the same time, buyer power can vary somewhat
among market segments. Customers can be as small as individual
residential users like you or me, or be as big as an ISP like BSNL or a
large university. While switching costs are relatively low for residential
telecom customers, they can get higher for larger business customers,
especially those that rely more on customized products and services. The
total number of prepaid and post-paid plans (schemes) available to the
customers in India by various service providers is 50 ++. Plans are
customized according to the budget of customer ,variable rental schemes ,
requirements i.e. , students are interested in SMS ,long chats then they are
provided with a scheme having SMS and added scheme of night calling
costs low for a mere fee .


Availability of Substitutes - Products and services from non-
traditional telecom industries pose serious substitution threats. Cable TV
and satellite operators now compete for buyers. The cable guys, with their
own direct lines into homes, offer broadband Internet services, and satellite
links can substitute for high-speed business networking needs. Railways
and energy utility companies are laying miles of high-capacity telecom
network alongside their own track and pipeline assets. Just as worrying for
telecom operators is the Internet: it is becoming a viable vehicle for cut-
rate voice calls. Delivered by ISP- not telecom operators - "Internet
telephony" could take a big bite out of telecom companies' core voice



                                                                          24
 revenues. Some key service providers are Sify (Satyam Computers),
 Reliance, Yahoo Messenger etc .

  Competitive Rivalry - Competition is "cut throat". The wave of
 industry de-regulation together with the receptive capital markets of the
 late 1990s paved the way for a rush of new entrants. New technology is
 prompting a raft of substitute services. Nearly everybody already pays for
 phone services, so all competitors now must lure customers with lower
 prices and more exciting services. This tends to drive industry profitability
 down. In addition to low profits, the telecom industry suffers from high
 exit barriers, mainly due to its specialized equipment. Networks and billing
 systems cannot really be used for much else, and their swift obsolescence
 makes liquidation pretty difficult. The following figures and charts would
 give a clear picture of the key players in Indian telecommunication
 industry and the competition in them.

                         Business Comparison




GSM mobile segment
GSM subscriber base grew 2.67% mom to 42mn in April 2005. MTNL
continued to witness the highest growth in subscriber additions, driven by
strong growth in both Mumbai and Delhi circles. Reliance and Bharti

                                                                             25
followed MTNL in mom growth. Bharti maintained its leadership position
with 27% of the market share, and contributed 37% to the total GSM
additions for the month.




Circle ‘C’ continued its growth momentum and reached the subscriber base
of 2.6mn in April’05. Growth has come from the Assam and the North
Eastern circles. J&K also witnessed a growth of over 6% mom. However, all
these circles are starting from a very low base. Circle ‘B’ saw a growth of
3% mom to reach a subscriber base of 12mn largely from the WB, Andaman
and the Rajasthan circles. This was followed by circle ‘A’, the largest circle
that showed 2.68% growth in its subscriber base.



                                                                           26
CDMA mobile segment
CDMA subscriber base grew 3.7% mom to 11mn. Tata Teleservices
continued to witness a growth in excess of 10% mom to reach a subscriber
base of 1.2mn. Growth has largely come from UP (East) and the Himachal
circles. Tata Teleservices (M) witnessed a growth of over 10% in both
Mumbai and Maharashtra circles.

Reliance Infocomm maintained its market leadership with 86%. Growth for
the company came from Himachal and the WB circles. Reliance Infocomm
contributed over 70% of the net additions for April 2005.




                                                                     27
Fixed line
During March 2005, 0.59mn subscribers were added in the fixed line
segment and the total subscriber base stood at 46.5mn. Growth in fixed line
segment continues to be driven by the fixed wireless terminals.

Fixed Wireless Terminals (FWT)
FWT witnessed a growth of 8.3% mom. Tata maintained it leadership
position with 60.7% market share amongst private players. Reliance
witnessed a growth of 9% mom taking the total subscriber base to 1.3mn.
Growth for Reliance has come from Andhra Pradesh and Himachal Pradesh
circles.




                                                                        28
Fixed wire line segment
The subscriber base in fixed wire line segment stood at 1.5mn, the segment
witnessing a growth of 3%. Reliance witnessed a growth of 25% mom,
growth coming from all the metros, which grew above 18% and the C circle.

Bharti remained the market leader with 56% market share and also
contributed 40% to the total net additions.




                                                                       29
                               Chapter-4

Future Technologies
         The wireless communication field is a very fast growing area with
the number of users and their demand for better resources increasing day by
day. The R&D departments of many companies are working on a future
technology that can meet these demands at a lower cost. 3G is necessary but
not sufficient for the demands today. So the world is taking its leap towards
the fourth generation wireless communication that promises to bring an end
to most of the problems faced. 4G wireless is expected to be launched by
2010, but there are numerous challenges faced by researchers in achieving
the desired features.
         Most of the ongoing researches are in the area of distributed
computing, mobile agents, multimedia support etc. Some other research area
is to improve the Quality of Service from the viewpoint of both the user and
service providers. 4G wireless infrastructures are expected to be deployed in
an environment where many other types of wireless and wired
communication systems already exist.

4G VISION

A. Brief History of Generations
    First Generation:
          1G was based on analog technology and basically intended for
analog phones. It was launched in the early 1980s. It introduced the first
basic framework for mobile communications like the basic architecture,
frequency multiplexing, roaming concept etc. Access technology used was
AMPS (Advances Mobile Phone Service).
    Second Generation:
          2G was a revolution that marked the switching of mobile
communication technology from analog to digital. It was introduced in the
late 1980s and it adopted digital signal processing techniques. GSM was one
of the main attractive sides of 2G and it introduced the concept of SIM
(Subscriber Identity Module) cards. Main access technologies were CDMA
(Code Division Multiple Access) and GSM (Global System for Mobile
Communication).



                                                                          30
   2.5 Generation:
         2.5 G was basically an extension of 2G with packet switching
incorporated to 2G. It implemented hybrid communication which connected
the internet to mobile communications.
   3 Generation:
        The basic idea of 3G is to deploy new systems with new services
instead of just provide higher bandwidth and data rate. Support for
multimedia transmission is another striking feature of 3G. It employs both
circuit switching and packet switching strategies. The main access
technologies are CDMA (Code Division Multiple Access), WCDMA
(Wideband CDMA), and TS-SDMA (Time division Synchronous CDMA).

B. Limitations of 3G
Why do we need 4G?
        To answer this question we need to understand some of the major
limitations of 3G. Some of the reasons for a new generation of mobile
communication are listed below
• Difficulty of CDMA to provide higher data rates
• Need for continuously increasing data rate and
   band width to meet the multimedia requirements
• Limitation of spectrum and it’s allocation
• Inability to roam between different services
• To provide a seamless transport end-to-end mechanism
• To introduce a better system with reduces cost

C. Some main desired Features of 4G:
 High usability and global roaming:
        The end user terminals should be compatible with any technology, at
any time, anywhere in the world. The basic idea is that the user should be
able to take his mobile to any place, for example, from a place that uses
CDMA to another place that employs GSM.
Multimedia support:
        The user should be able to receive high data rate multimedia services.
This demands higher bandwidth and higher data rate.
Personalization:
        This means that any type of person should be able to access the
service. The service providers should be able to provide customized services
to different type of users.




                                                                           31
MULTIMEDIA – VIDEO SERVICES

        4G wireless systems are expected to deliver efficient multimedia
services at very high data rates. Basically there are two types of video
services: bursting and streaming video services. Streaming is performed
when a user requires real time video services, in which the server delivers
data continuously at a playback rate. Streaming has little memory
requirement as compared to bursting. The drawback of streaming video is
that it does not take advantage of available bandwidth. Even if the entire
system bandwidth is available for the user, streaming video service will
transmit data only at a particular playback rate.
        Bursting is basically file downloading using a buffer and this is done
at the highest data rate taking advantage of the whole available bandwidth.
The flaw with this type of transmission is that it demands a large memory
requirement. So work is being done to come up with a new scheme that
limits the memory requirements and can exploit the available bandwidth of
the system.

APPLICATIONS OF 4G

Virtual Presence:
        This means that 4G provides user services at all times, even if the
user is off-site.
Virtual navigation:
        4G provides users with virtual navigation through which a user can
access a database of the streets, buildings etc of large cities. This requires
high speed data transmission.
Tele-Medicine:
        4G will support remote health monitoring of patients. A user need not
go to the hospital and can get videoconference assistance for a doctor at
anytime and anywhere.
Tele-geoprocessing applications:
         This is a combination of GIS (Geographical Information System) and
GPS (Global Positioning System) in which a user can get the location by
querying.
Crisis management:
        Natural disasters can cause break down in communication systems. In
today’s world it might take days or weeks to restore the system. But in 4G it
is expected to restore such crisis issues in a few hours.


                                                                           32
Education:
       For people who are interested in life long education, 4G provides a
good opportunity. People anywhere in the world can continue their
education online in a cost effective manner.




                                                                       33
      4G seems to be a very promising generation of wireless
communication that will change the people’s life in the wireless world.
There are many striking attractive features proposed for 4G which ensures a
very high data rate, global roaming etc. Table 1 shows the features and
comparison between the different generations. New ideas are being
introduced by researchers throughout the world, but new ideas introduce
new challenges. There are several issues yet to be solved like incorporating
the mobile world to the IP based core network, efficient billing system,
smooth hand off mechanisms etc. 4G is expected to be launched by 2010
and the world is looking forward for the most intelligent technology that
would connect the entire globe.




                                                                         34
                         FUTURE TRENDS


Customer churn
       The Indian telecom landscape has today emerged as one of the most
dynamic business Segment in the country. The telecommunication services
have made a rapid stride both in quality and quantity. However the users at
large are found dissatisfied with the quality of service made available to
them. The process of technological sophistication has gained the momentum
but the users are yet to get the quality service. The cellular industry has
reached a critical juncture. Deregulation and its domino effects of price free-
for-alls, high customer churn and the increasing commoditization of
services, together with the economic slowdown and consequent budget cuts,
have all taken their toll. Companies have risen to these challenges through
re-organization, revision in management strategy, downsizing and
consolidations, but global and national Competitive pressures are biting
hard. They must dig deep to find business solutions that offer the scalability
and flexibility to secure the roots of their future success. Churn is the gross
rate of customer loss during a given period. Churn can be shown as follows:

Monthly Churn = (C0 + A1 - C1) / C0
Where:
C0 = Number of customers at the start of the month
C1 = Number of customers at the end of the month
A1 = Gross new customers during the month
    As an example, suppose a carrier has 100 customers at the start of the
month, acquires 20 new customers during the month, and has 110 customers
at the end of the month. It must have lost 10 customers during the month, 10
percent of the customers it had at the start of the month.
According to the formula:

Monthly Churn = (100 + 20 - 110) / 100 = 10%




                                                                            35
      Churn can be broken down into involuntary churn, where the carrier
cuts off service, Oftentimes due to repeated nonpayment of invoices, and
voluntary churn, where the customer chooses to disconnect service. While
eliminating unprofitable customers is an important goal for carriers, this
paper focuses on voluntary churn and how it can be more effectively
managed.
      Churn management can be defined as the process of finding potential
customers who are considering leaving and then preventing them from
churning. The purpose of churn management is to minimize the loss due to
subscribers and to maximize profits by retaining a stable and profitable
customer base.

A logical approach to churn:
   Ø Capture customer information
   Ø Segment the total market
   Ø Identify the characteristics of various segments
   Ø Locate the most flickering/floating segments
   Ø Identify the reasons for churn
   Ø Manage churn

Recommendations:
1) Keep Innovating
   India is today one of the world’s most promising markets, but for the
   telecom companies it is both promising and difficult. With at least 6
   operators in each circle, the Indian market is extremely competitive. The
   customer is very demanding and is willing to churn easily and adding
   fuel to fire, ARPU is dropping by 4 percent every quarter. So to survive
   and prosper, telecom companies must innovate and innovate every day,
   every hour. It is obvious that to attract and retain customers and meet
   their ever growing demands and creates profits, service providers must
   come up with not just with innovative services and products, but must go
   for new innovative ways of reaching out to the customers. And this is
   what Indian telecom companies seem to be doing- innovating.
2) Segmentation and Competitive Differentiators will lead to growth path
   The kind of growth that the operators have been witnessing,
   differentiators will die and it is segmentation which would be the key.
   The biggest challenge of tomorrow is to define who we are. The answer
   to that is going to define differentiators and segments and build a loyal
   tribe of customers for us. Besides branding and segmentation, operators


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   are working to create differentiators by coming up with new Value
   Added Services (VAS) and it has started paying off with the increase in
   revenue and reduction in customer churn.
3) Key developments for increase usage of VAS- A shift from GPRS to
   EDGE to

W-CDMA
The world is poised to embrace mobile data services as a way for users to
stay connected while on the move. Mobile data services are key in driving
the critical business metrics - subscriber growth, increased Average Revenue
Per User (ARPU) and reduced churn. . 3G is going to play a major role in
getting services on a mobile phone like paying bills, reminder services,
watching television images, teleconferencing, music playbacks, games,
traffics jam updates, digital photography, navigation and many more
applications.
4) Post/Pre-paid convergence- helps reduce churn and increase ARPU
   Ø Give prepaid subscribers the same features & services that postpaid
      have: e.g. GPRS is a must.
   Ø Prepaid subsidies are history in some markets, so other/new “features”
      have to keep up attractiveness for new (prepaid) customers.
   Ø Mobile Internet, mobile data (WAP, GPRS, LBS) services require
      real-time charging for consumed content.
   Ø Cost control is desired by ALL customers - A reservation / expense
     limit scheme for postpaid subscribers.
   Ø Anonymous payment via prepaid is also attractive to postpaid
     subscribers.
   Ø Flexibility is a must - Additional flexibility in design of pricing for
     prepaid users.
   Ø Prepaid - postpaid migration options for customers.
   Ø Simplicity of payment will stimulate consumption and so increase
       ARPU.
   Ø Cost Control - Safe Feeling - “Easier” Spending
   Ø ”One-stop-shop” for customers: one order/customer management
       interface.
   Ø Keep customers that want to change the contract type or who want
       more flexibility in the tariff.
5) Emphasize on enterprise-wide CRM strategy that can generate benefits to
   all business and functional units. Address the robustness, flexibility and

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   scalability solutions to address the current changes and future trends in
   the industry. Outline a cohesive CRM methodology and business strategy
   for adoption.
6) Acquire loyal customers initially, take preventive measures with existing
   customers, identify customers most likely to defect (offering incentives to
   those customers you want to keep)
7) Limit the scope of churn through the effective use of channels
   With the proliferation of new technologies and the growing demand for
   telecommunication services, the demand on spectrum has increased
   manifold. It is therefore, essential that spectrum be utilized efficiently,
   economically, rationally and optimally. There is a need for a transparent
   process of allocation of frequency spectrum for use by a service and
   making it available to various users under specific conditions
8) Build dynamic and equitable profit sharing relationship with the content
   providers
   Content providers are responsible for data in the mobile phone. There is a
   revenue sharing model in which both the service provider and the content
   provider gets a share of the service being used. For e.g., for every SMS
   done, service provider gets 80 percent and the content provider gets 20
   percent. So to encourage better and innovative content, a healthy
   relationship with the content provider is very important.
9) Games and content should be developed keeping local trends and taste in
   mind
   Since a major portion of population is illiterate or cannot understand
   English, data should be used of a local language. Nokia has already come
   out with a mobile phone in local language and many are following suit.
   Since many telecom companies are setting up their mobile manufacturing
   base in India, the product will be more near to the consumer and will
   have local taste in mind.
10) Local market understanding
   In North Korea, most of the websites are in local language and games,
   which is the major revenue generator is also produced in local language.
   So an understanding of the mindset of the local consumer is a must. India
   is a price sensitive market till date. But there is a difference between the
   mentalities of people living in urban areas with those living in rural areas.
   Also the offerings and services should be given according to the region.
   Indian states are divided into Class A, Class B, and Class C regions,
   where Class A is the heaviest users, i.e. in the metros.



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11) Market data more aggressively
   Data includes the VAS given by the cellular service provider. This data
   should be innovative and should be marketed very aggressively showing
   the benefits to the customer. This is the only solution to acquire new
   customers and retain the existing ones.

   Given the pace of expansion of telecom, it is very hard to predict the
future trends in telecom industry. Consolidation, that is the buzzword of the
present state of industry. However, barring Airtel, there seems to be no other
provider who would straddle in the fixed line as well as mobile telephony
business. Airtel would be keen to gobble up the small time fixed line
operators in order to avoid the duplication costs. They have done so with
their mobile telephony business.

    Why consolidation is a not good for us? For all the arguments that these
companies forward in the name of economies of scale, ultimately it boils
down to the user options and choice. There are a few players now in the
telecom landscape. Few of them who had bid for the licenses exited out their
business realizing ineffectual regulatory regime. Some of them had jumped
in the fray little realizing the incremental costs. In the meltdown that
happened, the few with deep pockets survived. Well, given that the thrust on
quality of services is almost nil, there is nothing really to differentiate one
from another. In fact, the multiplicity of their plan options serve to confuse
the user rather than track his usage options or get him the best deal on his
investment. True that these people are not in charity. With the GSM
operators. We might see better billing systems in the future!

    Similarly in the fixed line telephony business. BSNL hardly has any
competition in this field. It s true that people are surrendering their phones
on a big scale and shifting on to mobile telephones. However, for broadband
access one has to depend on the fixed line operators. Especially when
Internet through cable has been a non-starter. Well, there are enough reasons
to tear your hair apart rather than fight out for what is due to you given the
upfront payment costs that one has incurred. Given the talk of imminent
merger of` BSNL and MTNL, that again is not really a good idea. This is
because, being a government enterprise, it is essentially important for
national security because telecom is one of the most crucial sectors of the
economy. There is no guarantee that a private operator may not pull the plug
in times of emergency. Well, perhaps it may sound laughable at this time; no
other country allows FDI to the extent that we have done. Given the


                                                                            39
fascination of Indians to “emulate” the white races, well, it is surprising that
we have not learnt this thing from them. For arguments sake American
government does not allow FDI in its own telecom infrastructure.

Hence, consolidation is not good for the consumers.

       Broadband access down the line would be feasible. Reliance can
change the face of Internet access. However, that would take another 5 years
or so to be commercially feasible. Until then, one has to suffer the insanities
of the government owned telecom operators. Interestingly, there is 100%
FDI in the Internet sector. However, there are not players in the international
market that are falling over to invest in this sector in what is called as IT
destination of the world. One major reason is the local loop owned and
operated by BSNL. They are not ready to either open up the same or willing
to share it on a national scale. Part of the reason is that much of the local
loop cannot be utilized for broadband. Perhaps because of outdated
exchanges. Where is the thrust on the quality here?

       The recent mandate by TRAI had ended up in a deadlock. First, it
would give an advantage to the private players to drop the prices to capture
the market. BSNL would be hurt in the process. If Reliance can offer
unlimited calls on its network for a fixed limited sum, it is trouble for others
too. For too long we had to suffer high access rates.

       Last but not the least. We might just have a better regulator. That
would REALLY look in the interests of the consumers. Complaining to
TRAI on the service issues of telecom operators does not yield any result. It
is much better to articulate the same concerns here. What we need is a voice
of the consumer. Perhaps then, we might have some action taken on ground.




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Conclusion
   All these developments show that India has come a long way, from a very
closed economy to a more decentralized model. The government's reluctance
in the first round of reforms to break the dominance of DOT and to overhaul
the legal and regulatory regime led to endless litigation, which delayed the
liberalization process for almost a decade.
    Explosive growth of the Internet and wireless technologies and the threat
by investors to decamp and withdraw their investment led the government to
make decisions to untangle the problems. The 1999 Telecom Policy, the
Internet Policy, and the recent legal and regulatory initiatives to overhaul the
legal and regulatory regime are all steps in a
positive direction. Competition in basic, cellular and domestic long-distance
services will also help in the faster rollout of telephony. The government
will have to make some shrewder decisions in privatizing its incumbent
companies to create a level playing field. Separation of DOT policy making
role and creating BSNL for providing services is a positive move. However,
we have seen that DOT continues to view BSNL as a national incumbent
company. The new licensing regime of a one- time entry fee and rest by
revenue sharing is more practical and reasonable than the previous high
license fee regime. Nevertheless, in the licenses to the new entrants the DOT
has again taken a protectionist stand by asking them to pass all international
traffic only through the
national long-distance company BSNL. This is contrary to the government's
stand in which it stated that BSNL is an independent company and will be
treated the same as other companies.
   The decision to allow WLL by the TRAI to achieve universal access goals
was a positive decision, especially when the technology is indigenously
developed, because it can tremendously cut the cost and help in spreading
telephony at a faster pace. However, the WLL controversy also highlights
that it is important for the policy makers to make mature decisions and to
create a level playing field to avoid adverse effects to the liberalization
policy.
   Since India has allowed competition in various services, is it not time for
the policy makers to consider issuing a single license for offering various
services with minimum requirements while framing the new legislation.
  The overall liberalization trend shows that, subject to these lingering
transition problems, the government's mindset has significantly moved from
a closed regime to a pro-competitive regime. In this round of reforms the



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government is much more ready to partner with various public and private
interest groups to achieve public policy goals.

References

www.trai.gov.in
www.indiainfoline.com
www.dot.gov.in




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