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Internet Marketing Indian Telecom Sector

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Internet Marketing Indian Telecom Sector

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									       Internet Marketing: Indian Telecom Sector                             2009-2010




              Internet Marketing
            Indian Telecom Sector
       An Initial Project report submitted to the University of Manchester
                       For the Degree of Master of Science in
                  The Faculty of Engineering and Physical Science

                                          Year 2009-2010

                                         Mahwash Goni
                                   School of Computer Science




UNIT                    COMP60990 Research Methods and Professional Skills

STUDENT ID              75296660

SUPERVISOR              Prof. Christopher Holland
      Internet Marketing: Indian Telecom Sector                                                   2009-2010


ABSTRACT

A research is being conducted towards the completion of a dissertation on the topic “INTERNET
MARKETING: INDIAN TELECOM SECTOR”. The aim of this research is to carry out an in-depth analysis
of the online market for mobile phone services in India. This involves application of the Internet marketing
framework to two major competitors for the assessment of the contribution of Internet Marketing towards the
organization’s Business effectiveness, Marketing effectiveness and Internet effectiveness. Following this a
competitor analysis will be done to monitor the use of e-commerce in order to acquire and retain customers.
The significance of Internet Marketing in context of the overall marketing strategy of the companies will also
be assessed to understand the importance of the Internet as a marketing channel. The research will also
include a global comparison of the Indian scenario with that of the UK and USA telecom sector.


This research requires the analysis of both qualitative and quantitative data which will be a combination of
secondary data, independent research and interview data.


The Deliverables of this research will be a report covering the analysis of the growth and development of the
online market, general market trends, a profile of each company’s performance and Internet Marketing
Strategy and a forecast of the future likely developments including new technology innovations.
      Internet Marketing: Indian Telecom Sector                                                          2009-2010




Declaration

        No portion of the work referred to in this report has been submitted in support of an application for
        another degree or qualification of this or any other university or other institute of leaning.




Copyright

i.   Copyright in the text of this report rests with the author. Copies (by any process) either in full, or of
     extracts, may be made only in accordance with the instructions given by the author. Details may be
     obtained from the appropriate Graduate Office. This page must form part of any such copies made.
     Further copies (by any process) of copies made in accordance with such instructions may not be made
     without the permission (in writing) of the author.


ii. The ownership of any intellectual property rights which may be described in this report is vested in the
     University of Manchester, subject to any prior agreement to the contrary, and may not be made available
     for use by third parties without the written permission of the University, which will prescribe the terms
     and conditions of any such agreement.


iii. Further information on the conditions under which disclosures and exploitation may take place is
     available from the Head of the School of Computer Science.
         Internet Marketing: Indian Telecom Sector                                                                                           2009-2010


Table of Contents
1. Introduction and Overview...............................................................................................................1
     1.1. Research Focus..........................................................................................................................2
2. Literature Review.............................................................................................................................3
     2.1. Internet Marketing.....................................................................................................................3
     2.2. Online Marketing Domains.......................................................................................................3
     2.3. Internet Marketing benefits for Marketers................................................................................4
     2.4. 6 C’s of Internet Marketing.......................................................................................................5
     2.5. Internet Marketing Strategy Framework...................................................................................6
3. Research Methodology.....................................................................................................................8
     3.1. Project Plan................................................................................................................................8
     3.2. Potential Problems.....................................................................................................................9
     3.3. Importance of Research.............................................................................................................9
4. Background and Initial Data Results..............................................................................................10
     4.1. Historical Background.............................................................................................................10
     4.2. The Story of Growth................................................................................................................12
     4.3. Regulatory Framework............................................................................................................13
     4.4. Market Structure......................................................................................................................13
     4.5. Services Provided by the Telecom Sector...............................................................................14
     4.6. Market Data: Performance Indicators.....................................................................................15
           4.6.1. Data Interpretation..........................................................................................................16
     4.7. Competition Overview............................................................................................................18
     4.8. Conclusion...............................................................................................................................19
5. List of References...........................................................................................................................20
6. APPENDIX




List of Figures
Figure 1. Online Domain......................................................................................................................................3
Figure 2. Market and Product Strategy Grid.........................................................................................................4
Figure 3. Internet Marketing Strategy Development Framework.........................................................................6
Figure 4. Regulatory Framework........................................................................................................................13
Figure 5. Telecom Circles in India......................................................................................................................13
         Internet Marketing: Indian Telecom Sector                                                                                         2009-2010


Figure 6. Wireline Market Shares Dec 09...........................................................................................................14

Figure 7. Market Shares GSM and CDMA.........................................................................................................15

Figure 8. Subscriber Growth...............................................................................................................................15

Figure 9. Trends in Overall Subscriber Growth

              And Teledensity in India (2008-09) ...................................................................................................16

Figure 10. Composition of Telephone Subscribers.............................................................................................17

Figure 11. Market Share: Rural and Urban ........................................................................................................17

Figure 12. Composition of Wireless and

               And Wireline subscribers in India (2008-09)....................................................................................17

Figure 13. Wireless Subscribers and Teledensity...............................................................................................17

Figure 14. Wireline Subscribers and Teledensity...............................................................................................17

Figure 15. Wireless Subscription: GSM vs. CDMA...........................................................................................18
      Internet Marketing: Indian Telecom Sector                                                     2009-2010




1. INTRODUCTION AND OVERVIEW


The Indian Telecom Sector is the fastest growing Telecommunications market in the world and hence the
centre of everyone’s attraction today. Supporting 621.28 Million subscribers, it is the third largest in the world
and second largest in terms of wireless connections (Source: Telecom Regulatory Authority of India, Press
Release 20/2010). This sector has undergone major transformations through significant reforms, initiated by
the Government of India, which started in the 1980’s. Today the sector boasts an exceptional growth rate with
about 15 million new subscribers added to the telecom subscriber base every month (Source: TRAI). The
mobile phone market in India is dominated by certain key players. The tremendous growth in this sector can be
attributed to the efforts of The Department of Telecommunications of India, which is striving hard to provide
world-class infrastructure, at globally competitive tariffs. Major reforms have been taken to increase the
teledensity by extending the connectivity to the unconnected rural India and hence their efforts to reduce the
digital divide have made India the most attractive telecom market in terms of foreign investments. In addition
to this, the Information Technology advancements and innovations in India have landed it among the top 10
Internet using nations of the world with 52 million “active” internet users. (Source: www. ComScore.com,
Economic Times Exclusive: annual survey by market research agency IMRB and Internet and Mobile
Association of India). As such this scenario provides a huge opportunity for the Telecom companies in India to
escalate their online presence and exploit the potential of the unconventional INTERNET MARKETING
strategies to their advantage.

The Internet is believed to be the most transforming invention in the human history and rightly so. Internet
today has changed everything- our style work, the way we learn, way of playing, the way we communicate and
most significantly the way we do business. The factor that has enabled this is the ease of accessibility of the
internet anywhere any time. With most of the mobile companies now providing mobile internet, anything in the
world is now just a click away. Moreover with about 27% of the world’s population online (Source:
http://www.internetworldstats.com/stats.htm), we can only begin to imagine the huge potential Internet has to
offer for the businesses to market their products and services. The cut-throat competition clubbed with the
dynamic market conditions has made Internet Marketing a business imperative because the Internet is an
indefeasible trend. Under the existing circumstances a business that follows only the traditional and
conventional marketing methods is bound to lose valuable customers without an online presence. People
normally search for products and services with their computers and if a business is not on the web the usual
perception is that it cannot be trusted and they are more likely to choose another company to do business with.




                                                                                                         Page | 1
Internet Marketing: Indian Telecom Sector                                                2009-2010


 1.1. REASEARCH FOCUS
 The Internet Marketing suite is ideal marketing tools in a broad range of industries, butere is its
 relevance as apt as it is in the technology-driven, early adopter environment of the Indian
 telecommunication Sector. The companies in the telecom sector thrive not only based on, how
 innovative technology and applications they develop but also, the tools they use to communicate that
 innovation to their potential and existing customers. I have come across several research papers that
 analyse the imperativeness, interaction and implications of Internet for Marketing; however, no
 particular effort has been made to understand its role in the Indian Telecom sector. My research
 therefore aims at understanding whether or not the Indian Telecom companies consider Internet as an
 important marketing channel in the ambience of huge and dynamic Indian market and if they do, it
 would be interesting to know the importance of Internet Marketing in context of their overall
 marketing strategy and how the Internet is influencing the marketing strategies of the Indian Telecom
 companies and the effect those strategies have on the company’s growth and reputation among the
 general public.




                                                                                              Page | 2
   Internet Marketing: Indian Telecom Sector                                                       2009-2010


2. LITERATURE REVIEW

    2.1. INTERNET MARKETING


    The economies across the world are witnessing an era of rapid globalization and this has opened vast
    opportunities for businesses around the world. More opportunities result in higher competition and to
    survive it the firms need to improve their performance and be better than the best. Such a scenario
    forces the firms to find unique ways to create their ground in the market and to make their presence
    felt. Thanks to the various digital technologies this task doesn’t seem so daunting anymore. The
    information superhighway consisting of digital telephone networks, interactive TV (ITV), mobile
    phones and most importantly the Internet allow the marketers to reach and interact with consumers on
    a local, regional and global basis. (Paul, 1996). According to Philip Kotler, “the online marketing is
    the fastest growing form of direct marketing”. The customer’s perception of convenience, price,
    product information and service has been significantly affected by the internet and modern marketing
    requires businesses to be committed to customer orientation (Jaworski and Kohli, 1993). Therefore a
    substantial web presence is absolutely essential for all the companies today.
    So, What is Internet Marketing? (Chaffey et.al, 2003) defines Internet Marketing as “The use of
    Internet and the related digital technologies to achieve marketing objectives and support the modern
    marketing concept. These technologies include the Internet media and other digital media such as
    wireless mobile, cable and satellite media.”
    Basically the companies should have a website and make use of search engines, pop up ads, banners,
    E-mail, links, and web 2.0 which includes social networks, blogs, wikis, podcasts, videocasts, forums
    and RSS feeds. This will help the companies to generate trust and loyalty among the customers and
    will help them in maintaining their customer relationships. A research conducted by a student at The
    University of Manchester develops a framework that shows how the customer satisfaction is directly
    influenced by the website design and its information content. (Elia, 2008)

    2.2. ONLINE MARKETING DOMAINS
    (Kotler and Armstrong, 2008) states that there are four major online marketing domains. They are
    business-to-consumer (B2C), business-to-business (B2B), consumer-to-consumer (C2C) and
    consumer-to-business (C2B).
                                                                    Targeted to consumers   Targeted to business
      Figure 1. Online Domains                       Initiated by
                                                                     B2C                    B2B
    Source: Kotler and Armstrong, 2008               business        Business-to-Consumer   Business-to-Business


                                                     Initiated by    C2C                    C2B
                                                                     Consumer-to-Consumer   Consumer-to-Business
                                                     consumer




                                                                                                          Page | 3
Internet Marketing: Indian Telecom Sector                                                   2009-2010


 The B2C online marketing domain is the most famous one. It deals with the selling of the goods and
 services directly to the customers. People are ready to buy anything online. Products ranging from the
 very cheap compact discs to the high street fashion brands are available at the click of a mouse. The
 organizations such as DELL and Amazon fall under this category. According to Philip Kotler and Gary
 Armstrong the B2B Online marketing “Uses B2b websites, e-mail, online product catalogs, online
 trading networks and other online resources to reach new business customers, serve current customers
 more efficiently and obtain buying efficiencies and better prices” (Kotler and Armstrong, 2008). In this
 domain apart from selling their products companies also develop relationships with the business
 customers and in some cases they even customize their websites for individual clients. C2C online
 marketing is “the online exchange of goods and information between final consumers” (Kotler and
 Armstrong, 2008). The classic example of this domain is EBay. Its success in the C2C market is now
 pulling in businesses who find it the perfect platform for liquidating their excess inventory. Apart from
 this the C2C market also consists of information sharing. The consumers communicate with each other
 by means of the web 2.0 suite. The most commonly used means being the blogs and forums which can
 be either commercial or non-commercial. Many companies use these blogs to research about their
 target customers because often they indicate the consumer’s preferences, likes and dislikes. Some even
 set up their own blogs and use them to reach the fragmented audiences. Finally, the C2B domain
 includes “Online exchanges in which consumers search out sellers, learn about their offers, and
 initiate purchases, sometimes even driving transaction terms.” (Kotler and Armstrong, 2008). This
 domain involves the communication that is initiated by the customers. The consumer uses the company
 website to search for an item, initiate the transactions, ask questions, give suggestions and get
 feedback.



 2.3. INTERNET MARKETING BENEFITS FOR MARKETERS
 Internet is a marketing channel that provides an additional source of revenue for the marketer. Chaffey
 et al. (2003) shows the marketing opportunities provided by the Internet by applying the strategic
 marketing grid (Ansoff, 1957) which shows four strategic directions.


               New
                         Market Development       Diversification

 Market
                         Market Penetration       Product Development
             Existing
                                Existing                   New
                                              Product
                         Figure 2. Market and Product Strategy grid
                               (Source: Chaffey et al., 2003)

                                                                                                 Page | 4
Internet Marketing: Indian Telecom Sector                                                       2009-2010




 The Market development and the Market Penetration provide a more conservation approach to the use
 of Internet whereas; Diversification and Product Development are innovative in nature.
 The Market penetration strategy represents a conservative use of the internet where it is used to sell
 the existing products into the existing markets. This can be done by online advertisements by using the
 various online promotion techniques which include banner advertisements, pop ups e.t.c. this strategy
 mainly focuses on increasing the awareness of the product and the company among the customers. In
 the Market Development strategy, the internet is used to develop a new market for an existing
 product. This strategy takes the advantage of the low advertising cost and the global reach of Internet.
 The Product Development strategy aims at developing new products and services for the existing
 market and using the Internet for their delivery.



 2.4. 6 C’s OF INTERNET MARKETING
 According to Bocij et al. (2003) in Chaffey et al. (2003) the following benefits of the presence of
 Internet have been given:
     1. Cost Reduction: Internet reduces the need for sales and marketing enquires and also for
         printing and distributing the marketing communication material. All this can be published on
         the website. It therefore significantly reduces the advertising costs for a company.
     2. Capability: Internet provides opportunities for exploiting new markets.
     3. Competitive Advantage: A company can achieve a competitive advantage by introducing a
         new tool before its competitor and can retain that advantage until its competitor has the same
         capability.
     4. Communications Improvement: Internet is an excellent medium to improve the
         communications with the customers, staff, suppliers and distributors.
     5. Control: Better marketing research can be done with the help of the internet by tracking the
         customer behaviour and the staff response to the customer queries and problems.
     6. Customer Service Improvement: provided by interactive queries of the data base containing
         customer information. Personalization of the websites for the individual users also helps in
         achieving high customer satisfaction.




                                                                                                    Page | 5
Internet Marketing: Indian Telecom Sector                                                     2009-2010


 2.5. INTERNET MARKETING STRATEGY FRAMEWORK
 Chaffey et al. (2003) defines the Internet marketing strategy as “the definition of approach by which
 the internet marketing will support the marketing and business objectives of the organizations.” Many
 marketing researchers believe that the companies do not require a separate Internet marketing strategy.
 They argue that the Internet marketing plan should be incorporated within the overall marketing
 strategy of the organisations. Chaffey et al. (2003), however, argues that the significance of a separate
 internet marketing strategy depends on the relevance of the internet to the particular organisation. It
 warrants a separate strategy where the Internet generates huge revenues by contributing significantly to
 the sales and by reducing the cost. It further states that since the internet is a relatively new medium of
 marketing, it should be given special attention, though the Internet strategy should be a part of the
 marketing plans and should be governed directly by the marketing strategy.
 The following figure gives a framework for the Internet Marketing strategy development:




                        Figure 3. Internet Marketing Strategy Development Framework
                                         Source: Chaffey et al. 2003


 This framework shows that the Internet marketing strategy is developed with the help of inputs from
 the environment analysis and the overall marketing plan. This strategy should consist of clearly defined
 goals. Once the strategy is in place the next step is to define the Internet marketing plan which consists
 of the details of creating and executing the online presence. After the creation of the site and the online
 promotions, it is important to monitor it continuously to make sure that the strategic objectives are
 being achieved. The strategy analysis can be used as a feedback to influence future strategies.




                                                                                                   Page | 6
Internet Marketing: Indian Telecom Sector                                                   2009-2010


 Chaffey et al. (2003) states that, the analysis can be done by measuring the contribution of Internet
 marketing to the organisations:
 Business effectiveness- This is determined by measuring the web site’s online revenue contribution
 and profitability and comparing that to the cost of producing updating and promoting the site. A cost-
 benefit analysis is done.
 Marketing Effectiveness- these measures include
     •   Leads
     •   Sales
     •   Customer retention and loyalty
     •   Market share
     •   Brand enhancement
     •   Customer service


 Internet Effectiveness- These measures access the success of the website and the characteristics of the
 visitors. According to Smith and Chaffey (2001) in Chaffey et al. (2003) the Key Performance
 Indicators (KPI’s) are:
     •   Unique visitors- the number of separate, individual visitors who visit the site.
     •   Total number of visits to the website.
     •   Repeat visits- average number of visits per individual.
     •   Duration- average length of time the visitor spends on the website.
     •   Subscription rates- number of visitors subscribing for the services such as the newsletters.
     •   Conversion rates- percentage of visitors converting to subscribers.
     •   Churn rate- percentage of the subscribers withdrawing
     •   Click-through-rate (CTR) from banner adds or web link on another site.




                                                                                                  Page | 7
   Internet Marketing: Indian Telecom Sector                                                   2009-2010


3. RESEARCH METHODOLOGY

    3.1. PROJECT PLAN
     The following objectives have been identified for this research:
        1. Understanding the Indian Telecom market structure and identifying the scope of internet
            marketing for the same.
        2. Applying the Internet Marketing framework to two major competitors.
        3. Evaluation of the nature of online competition in context of the development of the overall
            market by using competitor analysis.
        4. International comparison.


    To achieve the first objective of the research I had to do some literature review. Business articles and
    academic papers were used to examine and understand the theories related to the topic being
    investigated. Both primary and secondary data has been gathered. The introduction of empirical data at
    the later stages of this research will also be required to effectively apply the Internet Marketing
    framework to the chosen companies.
    The project plan is developed to follow a systematic approach to achieve the objectives of this research
    within the given time frame. So far the main focus of this research has been literature review. Initially
    some general literature was consulted and this also included regular discussions with the supervisor.
    Once the objectives of the research were identified more specific literature was consulted to further
    understand the problem and the feasible domain of research. The Grey literature was used as the major
    source of such information. The literature review will be followed by Data Collection. The data will
    include the secondary data such as the industry intelligence data, and data regarding unique visitors
    from website sources such as ComScore.com and wireless intelligence. Primary data will also be
    collected by means of online surveys. The survey will intend to find the importance of online presence
    of the telecom company to the Indian customer. The data collected so far will be understood and will
    be used in formulating the interview questionnaire for the Telecom company representatives. The
    Interviews will be conducted and their response will enable me to understand the importance of the
    Internet Marketing strategies from the company’s perspective.
    Once all the data from different sources has been collected, the data will be thoroughly analyzed and
    the findings of the research will be summarized in the form of outcome and recommendations. The
    research strategy will be the collection of primary and secondary data about the performance indicators
    of the Internet Marketing in the Indian Telecom sector and comparing them to the UK and USA
    statistics. The statistical data will be analysed using established frameworks and theories of Internet
    Marketing.




                                                                                                     Page | 8
      Internet Marketing: Indian Telecom Sector                                                        2009-2010


The following figure shows the Gantt chart for the project plan:




        3.2. POTENTIAL PROBLEMS
        The major limitation during this research will be the unavailability of accurate internet data. The
        internet data includes the data about the websites unique visitors, its web visibility and search. The data
        will be collected from the sources such as the Google ad planner, Google trends for websites and
        ComScore.com. Although many efforts are put to ensure that the data on these websites is accurate as
        far as possible still these figures are mainly estimates and may not be absolutely accurate.



        3.3. IMPORTANCE OF RESEARCH
        The findings of this research will enable us to understand the impact of internet as a marketing tool on
        the Indian Telecom companies, and thus will enable us to sketch a global comparison. It will also
        measure the importance of the internet in context of the overall marketing strategies of the companies.
        Hence this research can be useful to companies who want to exploit the potential of this indispensable
        channel for their benefit. It will also be useful to practising managers in mobile communication firms,
        marketing managers and strategy researchers interested in market intelligence. Today companies lay a
        lot of emphasis on their online presence and their internet marketing strategies, so much so that the
        overall marketing strategy sometimes revolves around it, this research can therefore be very helpful in
        strategy development in a rapidly evolving high-tech market. Apart from this, this research can also be
        used as a basis for further research by academic researchers and the research can be extended to
        different markets.




                                                                                                           Page | 9
      Internet Marketing: Indian Telecom Sector                                                   2009-2010


4. BACKGROUND AND INITIAL DATA RESULTS


Before venturing into the Internet marketing strategies of the telecom companies an understanding of the
Indian Telecom Sector and its market structure together with the regulatory framework surrounding it is
important. To understand the market structure a research was done into the academic and grey literature and
various topics were explored.

        4.1. HISTORICAL BACKGROUND
        Indian telecommunication sector has undergone a major process of transformation. The Govt. has
        brought about significant policy reforms. As indicated on the official website of The Department of
        Telecom, this revolution in the field of telecom began with the announcement of NTP 1994 (National
        Telecom Policy) which was further emphasized and carried forward under NTP 1999 (New Telecom
        Policy). There were three main occupants of the fixed service sector before the reforms started in 1994.
        They were, DoT (Department of Telecom), MTNL (Mahanagar Telephone Nigam Limited) and VSNL
        (Videsh Sanchar Nigam Limited). MTNL specifically operated in two metros Delhi and Mumbai,
        VSNL provided international telephony and DoT had an all India presence except Delhi and Mumbai.
        DoT enjoyed the policy making powers and therefore had a monopoly over the telecom sector. The
        Telecom reforms of 1999 restructured DoT to separate its service providing sector from the policy-
        maker. The service provider was initially called DTS (Department of Telecom Services) which was
        later corporatized and renamed as BSNL (Bharat Sanchar Nigam Limited). The Govt. further
        emphasized private participation in this sector. Although the coming in of the private players has
        tremendously increased the competition, it has also significantly improved the quality of service
        bringing it to international standards. Another initiative that requires special mention here is the
        Government’s “Bharat Nirman” Program that aims at bringing the rural teledensity to 40% by 2014
        and Broadband coverage of all 250,000 villages.(Source: www.dot.gov.in)


        The Indian Telecom sector has achieved a phenomenal growth during the last few years and is primed
        to take a big leap in the future also. The chart on the following page shows the major milestones in the
        development of the Indian Telecom Sector over time.




                                                                                                      Page | 10
Internet Marketing: Indian Telecom Sector                                                                     2009-2010



        All
       •All the foreign telecommunication companies were nationalized to form the Posts, Telephone and Telegraph
        (PTT), a monopoly run by the government's Ministry of Communications. Telecom sector was considered as a
1947    strategic service and the government considered it best to bring under state's control.



        The
       •The private sector was allowed in telecommunications equipment manufacturing.
1980


                                                                                                              long-
       • Department of Telecommunications (DOT) was established. It was an exclusive provider of domestic and long
1985    distance service that would be its own regulator (separate from the postal system).


                               owned
       •Two wholly government-owned companies were created: the Videsh Sanchar Nigam Limited (VSNL) for
        international telecommunications and Mahanagar Telephone Nigam Limited (MTNL) for service in
1986    metropolitan areas.


1991    Telecom
       •Telecom equipment manufacturing was delicensed .




        value
       •value added services were declared open to the private sector.
1992


        A
       •A major breakthrough was the clear enunciation of the government’s intention of liberalizing the telecom
1994    sector in the National Telecom Policy resolution of 13th May 1994.



        Telecom
       •Telecom Regulatory Authority of India (TRAI) was fromed.
1997


        New                      formed.NTP-99 laid down a clear roadmap for future reforms, contemplating the
       •New telecom Policy was formed.       99
1999    opening up of all the segments of the telecom sector for private sector participation.



        The
       •The Government of India corporatized the operations wing of DoT on 01 October 2000 and named it as Bharat
2000    Sanchar Nigam Limited (BSNL).



       •CDMA was launched.
2003



        Calling
       •Calling Party Pays (CPP) inttroduced.
2004

        For
       •For three months in a row India beats China for the number of subscribers added every month.
        The
       •The turnover of the telecom sector in India increased by 4% to reach nearly USD 8 billion during last quarter
        (Q4) of 2009
2009    The
       •The sector is facing intensive price war among the various telecom companies operating in the country.
        The
       •The revenue generated in Q4 of 2009 is less than the revenue generated in Q1 of 2009, although 133 million
        new customers were added during this 9 month period.


                   SOURCE: TRAI (TELECOM REGULATORY AUTHORITY OF INDIA)
                                                 www.trai.gov.in


                                                                                                                   Page | 11
Internet Marketing: Indian Telecom Sector                                                     2009-2010


 4.2. THE STORY OF GROWTH
 The story of growth of the Telecom Sector over the past two decades can be divided into three phases.
 (Arvind 2004 and Indian Telecom Sector: Brochure www.dot.gov.in )
  The first phase of reforms began in the 1980’s. It is during this period that the private sector was
 allowed in the telecommunications equipment manufacturing. Mahanagar Telephone Nigam (MTNL)
 and Videsh Sanchar Nigam (VSNL) were created. A high-powered telecom commission was set up in
 1989.
 The second phase of reforms started in 1990’s. The Indian economy stared growing and this benefitted
 the telecom sector as well. During this phase many countries of the world had started reforms in the
 telecom sector which greatly influenced then Indian policy makers and the reforms that followed
 opened up the telecom sector for the private sector. In 1991 telecom equipment manufacturing was
 delicensed. Six private companies namely Bharti Telenet, Essar Commvision, Shyam Telecom, Hughes
 Tele.com, Tata Teleservices and Reliance were given operating licenses in 1994, thereby opening the
 basic telephony to private sector. The NTP 1994 and NTP 1999 encouraged full competition and
 allowed unrestricted entry of private players in all service sectors. This phase also saw a migration
 from the fixed license fee to a revenue sharing regime. Yet another milestone during this phase was
 corporatisation of the operations wing of Department of Telecommunications (DoT) under the name of
 BSNL (Bharat Sanchar Nigam Limited). Eight cellular licenses were finalized for four metros.
 The third phase of reforms in this sector started at the beginning of this decade and has resulted in
 exponential increase in the growth rate. This phase saw the restructuring of tariff rates and termination
 of monopoly of VSNL in International Long Distance services due to its privatisation.
 September/October 2001 saw the issuing of 17 fresh licenses to private companies. Wireless in Local
 Loop (WLL) was introduced for providing telephone connection in urban, semi-urban and rural areas.
 Government allowed CDMA technology to enter the Indian market. Unified Access Service Licenses
 regime for basic and cellular services was introduced in October 2003. This regime enabled services
 providers to offer fixed and mobile services under one license. Consequently 27 licenses out of 31
 licenses converted to Unified Access Service Licenses. In 2005 the FDI was hiked to 74% and in 2007
 the GOI permitted the providers to apply for cross over spectrum as a result of which new licenses
 were issued. Today every circle in India has 12 players. The story of reforms continues with the 3G
 and 4G spectrum auctions going on in India and Mobile Number Portability is set to hit the scene by
 30th June 2010. This will allow the companies to further diversify their offerings and will directly affect
 their marketing strategy.




                                                                                                  Page | 12
Internet Marketing: Indian Telecom Sector                                                                                 2009-2010


  4.3. REGULATORY FRAMEWORK
  The Regulatory framework provides a level playing field for all the players in India. The main
                                                                          Mi
  governing body for the industry is the Department of Telecommunication, Ministry of India. TRAI
  (Telecom Regulatory Authority of India) assists the Government to take timely decisions and introduce
                                                                                        functions
  a new technology. The following figure gives an overview of the governing bodies. The fun
                 ch
  performed by each of the bodies are briefly described in APPENDIX




                                                                Framework




                                 Government bodies                                       Independent bodies




 Wireless planning     Department of                                                                  Telecom Disputes
                                                  Telecom    Group on telecom
 and coordination    telecommunication                                            TRAI                  and Appellate
                                                commission    and IT (GOT –IT)
      (WPC)                (DOT)                                                                      Tribunal (TD SAT)




                                                 Figure 4. Regulatory Framework

         (Source: www.dot.gov.in; Official website Department of Telecommunications, Govt. Of India)


  4.4. MARKET STRUCTURE
  The country is divided into 23 Circles which include 4 metros and 19 circles. The Metros include
                                    .
  Delhi, Mumbai, Chennai and Kolkata. The 19 circles are further classified into A, B, C category based
  on economic parameters and revenue potential. Each circle has a license and twelve operators are
  allowed per circle.




                                                                                 www.dot.gov.in
                                     Figure 5. Telecom circles in India (Source: www.dot.gov.in)



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Internet Marketing: Indian Telecom Sector                                                        2009-2010


                 OVIDED
 4.5. SERVICES PROVIDED BY THE TELECOM SECTOR
 The Telecom sector in India is divided into two segments based on the kind of services that it provides.
 They are the Fixed Service Providers (FSPs or Wireline Service Providers) who provide the basic
                                                                      services.
 services and the Cellular Service Providers who provide the wireless services. In addition to these the
                                                         Services.
 telecom sector also provides the Internet and Broadband Services (Source: www.dot.gov.in, Official
 Website, Department of Telecom, Government of India)
 The FSP’s provide the basic services that consist of, national or domestic long distance, international
 long distance services and WLL (Wireless in Local Loop) services. This market forms only 6.6 % of
 the overall telecom subscribers and is largely controlled by the state operators BSNL and MTNL, who
 account for about 90 % of revenues from these services. Apart from the state owned companies the
 following 5 private operators provide these services: Reliance communications Ltd., Tata Teleservices,
                                             HFCL Infotel Ltd. These companies focus on the
 Bharti Airtel Ltd., Shyam Telelink Ltd. and H
 business/corporate sector and hence are presently available in selective urban areas. They offer services
 such as leased line, ISDN, videoconferencing and closed user groups. Inspite of all this they
          ely
 collectively account for only 5 percent of the total Wireline subscriptions.



                                  Wireline Market Share Dec 09
                        3.14%      2.98%    .0.46%
                                                     0.14%                       BSNL
                8.06%
                         9.42%                                                   MTNL
                                                                                 Bharti Airtel
                                                      75.80%                     Reliance
                                                                                 TATA
                                                                                 HFCL


                                   Figure 6. Wireline Market Share Dec. 09
     Source: TRAI (The Indian Telecom Services Performance Indicators: October - December 2009)


                                                    dominated
 Cellular services on the other hand are completely dominated by the Private Companies and they
 account for 93.4% of the total Indian telecom subscriber base (Source: TRAI). This market in the
                                                                                i
 Indian Telecom Sector is growing at a stupendous rate. There exists a division in the wireless market
 based on the technology used i.e. Global System for Mobile Communications (GSM) and Code
                          (CDMA).The GSM technology being the dominant among the two. This
 Division Multiple Access (CDMA).
                                                          Hutch,
 sector is dominated by the players like Airtel, Vodafone-Hutch, and Idea Cellular, while the CDMA
 sector is dominated by Reliance and Tata Indicom. All these companies are striving hard to take the
 advantage of the low teledensity in India by extending their networks to the deepest most rural areas of
 the country. The Govt. of India has brought about reforms for the reduction in tariffs for airtime,


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Internet Marketing: Indian Telecom Sector                                                                  2009-2010


                                                                                             demand.
 national long distance, international long distance, and handset prices and this has driven demand
                                                         ls
 Cellular operators generate their revenue from the rentals and the long distance national and
 international telephony, which are there major growth drivers.



               GSM Service Market Share                              CDMA Service Market Share

                                  28.19%     Bharti                                                 Reliance
                                                                           2.98%     0.33%
                    1%      0.63%            Vodafone
                                                                                    0.30%           Tata
                    4%                       BSNL                 5.44%
              7%                                                                                    Teleservices
        9%                                   Idea/Spice
                                                                     37.33%                         BSNL
                                                                                   53.71%
                            22%              Reliance
        14%
                                             Aircel                                                 Sistema
                                             TATA
                                                                                                    HFCL
                                             MTNL

                   14%                       Loop Mobile
                                                                                                    MTNL
                                             Others


                                      Figure 7. Market Shares GSM and CDMA
     Source: TRAI (The Indian Telecom Services Performance Indicators: October - December 2009)



 4.6. MARKET DATA: PERFORMANCE INDICATORS
 The Indian Telecom Sector has seen phenomenal growth over the last decade. The total subscribers
 have grown from a mere 22 Million in 1999 to 562.16 Million as on December 31st 2009 (Source
                        -09) and the numbers are still growing. The following graph shows the
 TRAI Annual Report 2008-     nd
                                  1999-2009:
 growth of the subscribers during 1999



                              Growth of Subscriber base from 1999 to 2009 (in millions)

                                                                                                    562.16


                                                                                           300.49
                                                                                  206.83
                                                                         140.32
                                                        75.54    98.41
          22.81     28.53    36.29   44.97     54.62


             1999    2000     2001     2002     2003      2004    2005     2006     2007     2008     2009


                                              Figure 8. Subscriber Growth
                                       Source: TRAI Annual Report 2008-2009


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Internet Marketing: Indian Telecom Sector                                                    2009-2010


 4.6.1 Data Interpretation
 A snapshot of the figures as on 31st December 2009 is shown in APPENDIX. A comparison is made
 with the figures of Sept-09 hence depicting the performance of the last quarter of the previous year.
  (Source: TRAI)
     •   The Telecom subscribers registered a growth rate of 10.4% growing from 509.03 Million in
         Sept-09 to 562.16 Million at the end of Dec-09.
     •   The overall teledensity has reached 47.88.




         Figure 9.Trends in Overall Telecom Subscribers and Teledensity in India (2008-09)
     Source: TRAI (The Indian Telecom Services Performance Indicators: October - December 2009)


     •   The figures clearly show a divide between Urban-Rural subscribers and Wireless-Wireline
         subscribers.
     •   The Urban teledensity 110.96 is very large as compared to the Rural teledensity of just 21.16.
         This indicates the huge potential Rural Telephony holds for the Indian Telecom Companies.
     •   According to TRAI (Telecom Regulatory Authority of India) there have been 57% of total net
         additions in the urban areas as compared to 65% in the previous quarter. This implies there has
         been a rapid increase in the rural subscriptions. These subscriptions however have been in the
         wireless segment. The overall share of the rural subscribers has increased to 31% from 29.8%
         in Sept-09.




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Internet Marketing: Indian Telecom Sector                                                        2009-2010




                  Figure 10                                 Figure 11. Market Share: Rural and Urban
              Source: TRAI (The Indian Telecom Services Performance Indicators: October - December 2009)

     •     We can also see that the wireless market is very large as compared to the Wireline. The total
           wireless (GSM + CDMA) subscriber base has reached 525.09 Million bringing the wireless
           teledensity to 44.72. On the other hand the Wireline teledensity has gone down to 3.16 from
           3.29 in Sept-09, indicating that more and more people of India are shifting from Wireline to
           wireless services.




             Figure 12. Composition of Wireless and Wireline Subscribers in India (2008-09)




   Figure 13. Wireless Subscribers and Teledensity          Figure 14. Wireline Subscribers and Teledensity
         Source: TRAI (The Indian Telecom Services Performance Indicators: October - December 2009)




     •     The figures indicate that within the wireless market the GSM subscription is growing at a
           faster rate and this has resulted in widening the gap between the growth rates of GSM and

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Internet Marketing: Indian Telecom Sector                                                    2009-2010


         CDMA. The TRAI Performance Indicator report of the last quarter of 2009 states that the
         growth rate of GSM is 5.6 times in comparison to CDMA and the GSM subscribers constitute
         80.3% of the wireless market. These figures also direct us to the fact that although Reliance
         controls more than half of the CDMA market share, it has still a long way to go in terms of the
         overall wireless market.




                                    Figure 15. Wireless Subscription: GSM vs. CDMA
         Source: TRAI (The Indian Telecom Services Performance Indicators: October - December 2009)


     •   The Internet and Mobile Association of India press release states that India has 52 million
         active mobile users. In context of the gigantic number of the telecom subscribers this numbers
         looks like a dwarf. Hence it would be interesting to see how far internet goes to suffice the
         marketing plans of the companies in India.



 4.7. COMPETITION OVERVIEW
 The market data suggests that there are three types of major players in the telecom services. They are
 the state owned companies like BSNL and MTNL, the Indian owned private companies like Reliance
 and Tata Teleservices and the companies with foreign investment like Vodafone, Bharti Tele-ventures
 (Airtel), Idea cellular, Aircel and Spice Communications. The state owned companies clearly dominate
 the fixed line market. Bharti Airtel is the market leader in the wireless segment. However, according to
 the TRAI data Vodafone is much ahead in terms of share of monthly net additions to the subscriber
 base. For the month of March 2010 the share of net additions of Vodafone was 17.8% as compared to
 the 14.77% of Bharti Airtel( Source: TRAI ,Press Release April 2010), indicating that Vodafone is
 proving to be a strong competitor for Airtel and clearly is becoming the more preferred choice.




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Internet Marketing: Indian Telecom Sector                                                 2009-2010




 4.8. CONCLUSION
 “Marketing is the process by which companies determine what products or services may be of interest
 to customers, and the strategy to use in sales, communications and business development. It is an
 integrated process through which companies create value for customers and build strong customer
 relationships in order to capture value from customers in return”(Kotler and Armstrong, 2008).


 The analysis of the data shows that as huge as the Indian Telecom market seems to be, it still has an
 enormous potential to grow and this can be attributed to the low teledensity in the country. The
 companies can explore the growth avenues like infrastructure sharing, enterprise telecom services,
 virtual private networks and most importantly rural telephony. All these avenues can be fully exploited
 only if the consumers are aware of the kind of services provided by the companies and this is possible
 by having a sound marketing strategy and the internet boom means that they need to have an online
 presence and use it in t he best possible way to attract customers.




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       Internet Marketing: Indian Telecom Sector                                                2009-2010


5. LIST OF REFERENCES

  1. Ansoff, H. (1957), Strategies for Diversification, Harvard Business Review, September- October, 113-
        24.
  2. Bocij, P., Chaffey, D., Greasley, A. And Hickie, S. (2003), Business Information Systems. Technology
        Development and Management in E-business, 2nd edn. Financial Times, Prentice Hall, Harlow.
  3. Chaffey, D., Mayer, R., Johnston, K., Chadwick, F.E., (ed) (2003), Internet Marketing. Strategy,
        Implementation and Practice. Financial Times, Prentice Hall, Harlow.
  4. Department of Telecom (DoT), Ministry of India, Official Website, www.dot.gov.in
  5. Dossani, R. (Ed.) 2002, Telecommunications reform in India. Quorom Books.
  6.     Elia, M., (2008), Internet Marketing, Website Design and Consumer Behaviour.
  7. Jaworski, B., and Kohli, A., (1993), Market Orientation: Antecedents and Consequences, Journal of
        Marketing, July 53-70.
  8. Kotler, Philip, Principles of Marketing/Philip Kotler, Gary Armstrong, (2008), 12th ed. Prentice Hall.
  9. Panagariya, Arvind (2004). "India in the 1980s and 1990s: A Triumph of Reforms".
  10. Paul, P., (1996), Marketing on the Internet, Journal of Consumer Marketing, 13, 27-39.
  11. Smith, P.R. and Chaffey, D. (2001). E-Marketing: Excellence at the Heart of E-Business. Butterworth
        Heinemann, Oxford.
  12. Telecom Regulatory Authority of India (TRAI), Official Website, www.trai.gov.in .
  13. TRAI Press Release No. 20/2010, Telecom Subscription Data as on 31st March 2010,
        26th April, New Delhi, India.
  14. TRAI, Annual Report 2008-09.
  15. TRAI, The Indian Telecom Performance Indicators, October-December 2009, 6th April 2010, New
        Delhi, India.
  16. www.ComScore.com
  17. www.internetworldstats.com/stats.htm




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   Internet Marketing: Indian Telecom Sector                                            2009-2010


APPENDIX
  1. Telecom Data




    Source: TRAI (The Indian Telecom Services Performance Indicators: October - December 2009)




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       Internet Marketing: Indian Telecom Sector                                                                     2009-2010




2. Regulatory Framework
                                            “The WIRELESS PLANNING & COORDINATION (WPC) Wing of the Ministry of
                                            Communications, created in 1952, is the National Radio Regulatory Authority responsible
                                            for Frequency Spectrum Management, including licensing and caters for the needs of all
                                            wireless users (Government and Private) in the country. It exercises the statutory
                                            functions of the Central Government and issues licenses to establish, maintain and operate
                                            wireless stations. WPC is divided into major sections like Licensing and Regulation (LR),
                                            New Technology Group (NTG) and Standing Advisory Committee on Radio Frequency
    Wireless Planning & Coordination        Allocation (SACFA). SACFA makes the recommendations on major frequency allocation
                 (WPC)                      issues, formulation of the frequency allocation plan, making recommendations on the
                                            various issues related to International Telecom Union (ITU), to sort out problems referred
                                            to the committee by various wireless users, Sitting clearance of all wireless installations
                                            in the country etc.”

                                            Source: http://210.212.79.13/


                                            “The Department of Telecommunications is part of the Ministry of Communications
                                            and Information Technology in the executive branch of the Government of India. It has
                                            been formulating developmental policies for the accelerated growth of the
                                            telecommunication services. The Department is also responsible for grant of licenses for
                                            various telecom services like Unified Access Service Internet and VSAT service. The
   Department of Telecommunications         Department is also responsible for frequency management in the field of radio
                 (DoT)                      communication in close coordination with the international bodies. It also enforces
                                            wireless regulatory measures by monitoring wireless transmission of all users in the
                                            country.”

                                            Source: Wikipedia

                                            “The Telecom Commission and the Department of Telecommunications are
                                            responsible for policy formulation, licensing, wireless spectrum management,
          Telecom Commission                administrative    monitoring      of   PSUs,  research and  development and
                                            standardization/validation of equipment etc.”

                                            Source: http://www.dot.gov.in/profile.htm

                                            “Handles ad-hoc issues of the Telecom Industry.”
        Group on telecom and IT
              (GOT –IT)                     Source: www.dot.gov.in



                                            “It is an independent Regulatory body. The main objectives of TRAI are to provide a fair
                                            and transparent policy environment, which promotes a level playing field and facilitates
                                            fair competition. In pursuance of above objective TRAI has issued from time to time a
                                            large number of regulations, orders and directives to deal with issues coming before it and
  Telecom Regulatory Authority Of India     provided the required direction to the evolution of Indian telecom market from a
                (TRAI)                      Government owned monopoly to a multi operator multi service open competitive market.
                                            The directions, orders and regulations issued cover a wide range of subjects including
                                            tariff, interconnection and quality of service as well as governance of the Authority.”

                                            Source: http://www.dot.gov.in/osp/Brochure/Brochure.htm
Telecom Disputes Settlement and Appellate   “Set up under Section 14 of the Telecom Regulatory Authority of India Act, 1997 by
          Tribunal (TD SAT )                TRAI (Amendment) Act, 2000 (hereinafter called the “Act”) to adjudicate disputes and
                                            dispose of appeals with a view to protect the interests of service providers and consumers
                                            of the telecom sector and to promote and ensure orderly growth of the telecom sector.”

                                            Source: http://www.tdsat.nic.in/profile2.htm




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