Abstract— The telecommunication network in India is one of the largest in the world providing wide-ranging services such as basic, cellular, internet, radio paging, VSAT etc. India is the fifth country to cross the 100 million mobile subscriber mark to join Russia, Japan, United States and China. Indian Telecom Sector is one of the fastest growing sectors of the economy, growing at an average of more than 20 percent over the last four years The country has an investment potential estimated at US$ 37 billion by 2005 and US$ 69 billion by 2010.

India has 48 million fixed telephone connections, growing at 22 per cent per annum and almost 100 million cellular phone connections, growing at 100 per cent per annum. The telecom network in the country comprises over 35,000 exchanges with switching capacity of over 47 million, 427 digital trunk automatic exchanges, and over 326,271 route km of optic fibre network. In addition to the two state-owned companies BSNL and MTNL, several private players have established a significant presence in both the basic and cellular markets.

The Indian telecommunications sector has undergone a major process of transformation because of significant Government policy reforms during the recent years. The New Telecom Policy, 1999 focused on creating an ideal environment for investment, establishing communication infrastructure by leveraging on technological development and providing affordable telecom services to all. These objectives of the policies have resulted in rapid growth of subscribers and lower tariffs. We believe that with these major initiatives of the Government, the mobile market in India will have a promising future.

Keywords—Indian telecom sector, Telecom Policy, Tariff, Mobile market

1 INTRODUCTION

1.1History of Cellular Telephony in India

NITIALLY Department of Telecommunications (DoT) was the only monopoly operator in the country. Telecommunication sector was recognized by the Government of India as one of the few basic infrastructure sectors for the country [1]. Under the Government policy of economic liberalization, privatization and competition in

Manuscript received November 16, 2006.

V. Thulasi Bai is with the Satyabama Institute of Science and Technology, Chennai, TamilNadu, India (phone: 91 44 22276905; fax: 91 44 22387333 e-mail: thulasi_bai@ yahoo.com).

A.Ganesan is with Bharat Sanchar Nigam Limited (BSNL), Southern Telecom Region, Chennai, TamilNadu, India as Deputy General Manager (phone 91 9444003939 e-mail:aruganesan@hotmail.com).

S. K. Srivatsa is with Electronics Department, Anna University, Chennai, TamilNadu, India (e-mail: profsks@rediffmail.com).

India, private sectors have been allowed to enter the public telecommunication field (where Government was a monopoly). In 1992 telecommunication sector in India was liberalized to bridge the gap through government spending and to provide additional resources for the nation’s telecom target. The objective of the reform was making the telecommunications within the reach of all, thereby achieving universal service, covering all villages and bringing the telecommunication services to the world standard, while protecting the defence and security needs of the country. In 1993 the telecom industry got an annual foreign investment of Rs 20.6 million. In 1994 license for providing cellular mobile services was granted by the Government of India for the Metropolitan cites of Delhi, Mumbai, Kolkata & Chennai. Initially Cellular mobile services were duopoly (i.e. not more than two cellular mobile operators could be licensed in each telecom circle), under a fixed license fee. In 1995, government opened up 19 more telecom circles and issued mobile licenses. To regulate and settle disputes Telecom Regulatory Authority of India was set up in 1997 and in 1999 National Telecom Policy was announced by the Government of India. In order to speed up the development of the telecom sector, all telecom services were opened up for private sector participation. Unrestricted entry is allowed in the basic services, national and international long distance service, in global mobile personal communication by satellite (GMPCS) service, VSAT and Public Mobile Radio Trunked Service (PMRTS). All telecom sectors under DoT was handed over to new public Sector Undertaking viz, Bharat Sanchar Nigam Limited (BSNL) which was registered under Company’s Act in 1^st October 2005.BSNL covers the entire country except Delhi and Mumbai Metros which are under Mahanagar Telephone Nigam Limited (MTNL).

1.2 Major Service providers in India.

Two different technologies are deployed by the mobile operators in India namely GSM and CDMA.The GSM service providers are Bharthi, BSNL, Hutch, IDEA, Aircel, Reliance, Spice, MTNL and BPL, whereas the CDMA service providers are TATA, HFCl, Shyam, and Reliance. Figure 1 shows the market share of each service provider in India.

India’s mobile market is dominated by foreign companies for high end telecom equipments, handsets, transmission equipments etc., [2]. Nokia, Samsung, and Motorola are the three important vendors for handsets. Other vendors who have their share in this market are L.G, Alcatel, Sony Ericsson, Siemens, National Panasonic, Philips, Mitsubishi, and Sagem.

II MOBILE SUBSCRIBER STATISTICS

Recently, mobile phone connections in India have crossed the 100-million mark, which means over nine in 100 Indians have a phone. Adding on to this benevolent and happy information, telecom companies are anticipating the number will nearly treble in the next two years. According to a survey, by 2006, the cellular networks are expected to cover 3,50,000 (out of 6,07,000) villages, covering 450 million people [3].

Figure 1 Market Share of both mobile and wire line Service Providers in India

2.1 GSM Subscribers

The cumulative All India GSM subscriber base rose to 72.12 million in April 2006 from 69.19 million in March 2006 which is a growth of 4.23% for a month under review [4]. Table I shows the subscribers growth rate for one month along with market share of each provider with coverage

2.2 CDMA Mobile Subscribers

The total cumulative all India CDMA subscriber base rose by 0.97 million from 23.25 million in March 2006 to 24.22 million in April 2006, representing a growth of 4.2% in the month under review. A summary picture of the company wise performance is given in Table II.

III TELECOM IN RURAL INDIA

India has an urban population of about 26.8% and rural population is about 73.2% [5]. And there are over 600,000 villages in India. But a vast section of the rural

Table I. GSM Subscribers growth rate

Company	No of Subscribers (in million)		% Market Share	Service Areas
Company	March 2006	April 2006	% Market Share	Service Areas
Bharthi	19.57	20.68	28.7%	23
BSNL	17.16	17.59	24.4%	21
Hutch	15.36	16.06	22.3%	16
IDEA	7.37	7.64	10.6%	11
Aircel	20.61	2.83	3.9%	7
Reliance	1.90	2.01	2.8%	8
Spice	1.93	1.98	2.7%	2.
MTNL	1.94	2.02	2.8%	2
BPL	1.34	1.31	1.8%	1
Total	69.19	72.12	100%

sector is still cut off from the benefits of telecom services. The rural population of around 700 million is waiting for its share of economic growth. Initially the big telephone companies focused only on urban centres, which they felt were more profitable. However, this mindset is gradually changing with the realisation that there is equal, if not bigger money in rural areas.

Table II. CDMA Subscribers growth rate

Company	No of Subscribers (in million)		% Market Share	Service Areas
Company	March 2006	April 2006	% Market Share	Service Areas
Reliance	18.307	18.809	77.65%	20
TATA	4.851	5.323	21.98%	20
HFCl	0.062	0.062	0.26%	1
Shyam	0.027	0.028	0.11%	1
Total	69.19	72.12	100%

It is estimated that a one per cent increase in rural connectivity can generate 0.5 per cent economic growth. Thus a well-planned 10 per cent increase in rural connectivity can propel India into double-digit growth and unprecedented prosperity.

Rural India possesses enormous potential in terms of economy and human resources. Recent experiments have confirmed that ICT (information and communication technology) helps improve the timeliness and efficiency of rural farm operations and enhance income through producer-oriented markets. Hence the communication ministry has requested the finance ministry for higher allocations from the USO Fund for executing rural telephony network. The finance ministry has made a budgetary allocation of 15 billion from the USO Fund. The rural telephony targets include, providing 50 million telephones by 2007(i.e. one phone per three rural households) and 80 million by 2010 (i.e. one phone per two rural households) and provisioning mobile access to all villages with population more that 5,000 by 2006 and more than 1,000 by 2007.The Government is confident that the Bharat Nirman Programme target of providing coverage to remaining 41,000 villages would be met by March 2007 which will be much earlier than a schedule of November 2007[6].

India plans to establish 0.25 million, village knowledge centres. The ICT industry can establish rural call centres modelled on the Kisan Call Centre established by the Ministry of Agriculture to provide domain knowledge in the services, agriculture and manufacturing sectors. This spread will increase the volume of users and automatically bring down bandwidth cost, with a spiralling effect on efficiency and economy. Advanced telecom services are no longer considered a luxury but a necessity for all. Thus, providing telecom services to every individual in a country like India is a huge challenge, and at the same time holds immense opportunities for those in the telecom industry.

IV ECONOMIC BENEFITS OF MOBILE SERVICES IN INDIA

According to a study conducted by the reputed international agency, Ovum on “The economic benefits of mobile services in India” the Indian mobile industry is a major contributor to the social and economic growth of the country, in terms of employment generation, revenues to the Government, GDP growth and rural development[7].

4.1 Employment

Because of the mobile industry about 3.6 million jobs could be generated directly or indirectly. Ovum has also estimated that employment dependent on the industry is expected to rise by at least 30% over the next 12 months.

4.2 Government Revenues

The Government can generate Rs. 145 billion per annum through License Fees, Spectrum Fees, Import Duties, Taxes, etc. from Mobile industry.

4.3 GDP

The mobile services industry can generate an annual GDP contribution of Rs. 313 billion.

4.4 Rural Development

Research shows that having access to telecommunications would substantially improve the social and economic conditions of people living in rural areas by improving access to family, education, health and financial services and by enabling the development of non-agricultural economic activity. Government has set a target of 20% for rural mobile coverage by the end of 2004 and 75% by the end of 2006.

Taking the OVUM findings as the base, COAI has tried to estimate the benefits from mobile communications for the future years. The benefits listed by OVUM are for a subs base of 48 million in January 2005. Pro-rating the data on a simplistic estimate at a mobile subscriber base of 200 million in 2007, the industry would contribute 10 million jobs and Rs 500 billion annual revenue to the Government.

V GOVERNMENT POLICIES

India is one of the most deregulated telecom markets in the world. Private participation is permitted in all segments of the services such as international long distance, domestic long distance, basic, cellular, internet, radio-paging, and a number of value-added services. Private participation in international voice services has been a significant step undertaken by the government. Private players have been allowed to provide international long distance services since April 2002; two years ahead of schedule. The governments New Telecom Policy (NTP) 1999, further de-regulated the sector with respect to services like basic, international long distance (ILD), national long distance (NLD) and Wireless in Local Loop (WLL) among others. The government has liberalized the sector with the following objectives[8]:

· Ensure availability of telephones on demand

· Provide universal access to basic telecom services at affordable prices

· Benchmark telecom services with global standards

· Position India as a major manufacturing base and exporter of telecom equipment

· Introduce all value added services available internationally

· Achieve higher telecom penetration

The government has relaxed significantly the foreign investment norms in the sector. Presently 49 per cent equity participation is permitted in telecom services and 74 per cent in Internet services under the automatic route. Maximum foreign equity participation for Internet Service Providers (ISPs) is 100 per cent. Private investors, both domestic and foreign, have already invested over US$ 2,449 million in different segments of the industry. 100 per cent FDI is allowed for manufacturing telecom equipment.

To effectively regulate the sector, facilitate growth and development, promote transparency and ensure fair competition, the government has set up the Telecom Regulatory Authority of India (TRAI) as an independent regulatory body and the Telecom Dispute Settlement Appellate Tribunal (TDSAT)as a dispute settlement body. Both have been set up for price regulation, ensuring technical compatibility, recommending terms and conditions of license, facilitate competition, protecting consumer interest, resolution of disputes, etc.,

Wireless in Local Loop (WLL) has been introduced for providing telephone connections in urban, semi-urban and rural areas promptly. As per the NTP-99, adequate access to telecommunications facilities in the rural areas is to be ensured. In this regard, Telecom Regulatory Authority of India (TRAI) has made recommendations in respect of the policy on Universal Service Obligation. Steps are being taken for fulfillment of USO, its funding and implementation.

Initially all International long distance services were taken by VSNL.Later this monopoly of VSNL for International Long Distance services (ILDS) was terminated on March 31,2002. Letter of Intent (LOIs) was issued to five companies for ILDS of which one has been converted in to license. TRAI has given its recommendations for opening up of Internet Telephony in 2002, which are under consideration of the government. Disinvestment of PSUs in the telecom sector has also been undertaken during the year. In February 2002, the disinvestment of VSNL was completed by bringing down the government equity to 26% and the management of the company was transferred to Tata Group, a strategic partner.

FDI upto 49% is allowed subject to licensing and security requirement and adherence by the companies to the license conditions for foreign equity cap and lock-in period for transfer and addition of equity and other license provisions in basic, cellular, value added services and global mobile personal communications by satellite.

FDI upto 74%, with FDI beyond 49% requiring Government approval, is permitted in ISPs with gateways, radio-paging and end-to-end bandwidth, subject to licensing and security requirement. FDI upto 100% is allowed in ISPs not providing gateways (both for satellite and submarine cables), Infrastructure Providers providing dark fibre (IP category), Electronic Mail and Voice Mail, subject to prevalent conditions. No equity cap is applicable to manufacturing activities. Full repatriability of dividend income and capital invested in the telecom sector. Competition introduced in all service segments. International long distance services opened on 01.04.2002. National long distance services opened for free competition.

Revenue sharing regime in place of existing fixed license fee was introduced for both basic and cellular service operators. Fourth cellular operator, one each in four metros and thirteen circles were permitted with seventeen fresh licenses issued to private companies in September/October 2001. National and International automatic roaming facility was permitted for cellular subscribers. 25 new Basic Service License Agreements were signed by private operators. Wireless in Local Loop Internet Services were opened for free competition and they were permitted to establish own international gateways (satellite or submarine cable) for carrying Internet traffic. National Internet Backbone (NIB) was commissioned and Global Mobile Personal Communication by Satellite (GMPCS) was opened for free competition.

As a result of positive response to the investment policy being pursued for the sector, about 45% of the total inflow of FDI so far has come during the current year itself. During the period August, 1991-November, 2001, the actual flow of FDI was Rs.81224 million. In terms of approval of FDI, telecom sector is the second largest after energy sector. More than 32% of the total inflow of FDI in the telecom sector has come for cellular and basic services and about 54% for the holding companies.

VI COMPARISON WITH CHINA.

Telecom is one of the rare infrastructural areas in which India can hold a candle to China [9].More Indians than Chinese will soon be signing up for mobile telephone services each month, a symbolic milestone in India’s rapid catch-up with its richer and more populous northern neighbour.But according to Morgan Stanley research, most infrastructure services are 50-100 per cent more expensive in India than in China. Figure 2 shows India–China performance based on number of subscribers added per year.

Villages

China has a totals of 701,031 villages while India has 607,491.Telephone service is available in 97 percent of villages against 89 percent in India [10].

Figure 2 Mobile India –China Performance

Mobile

The mobile subscribers in India are growing at a rate of a CAGR of around 85 percent since 1999.Now over 4 million mobile subscribers are added every month. On the other hand China has registered a growth of 16 percent in the mobile subscribers base in 2005 with a monthly addition of 5 million subscribers every month.

Mobile MOU

Minutes of usage (MOU) of GSM and CDMA based cell services in India are 32 percent and 70 percent, respectively, higher when compared to Chinese services. Inspite of higher MOU, the ARPU in India is lower than China for the reasons that tariffs in India are lower . Table III shows the comparison of usage pattern of mobile cellular services in India and China.

Table III Comparison of usage pattern of mobile cellular services

Minutes of usage (MOU) per subscriber
Services	China		India
Services	2004	2005	2004-2005	2005-2006
GSM pre-paid	194	214	233	308
GSM post-paid	517	524	599	675
GSM total	297	300	330	393
CDMA total	292	277	N.A	470

SMS per subscriber per month

Average number of SMS sent per month per subscriber in China is 37,which is the weighted average of all network services for the year 2005.While in India it is 40,which is average SMS in respect of GSM cellular service providers for the quarter ending December 2005.

Revenue

Total telecom revenue of Chinese telecom companies increased to $72.2 billion with a growth rate of 11.8 percent. Telecom revenue in India increased to $19.5 billion with a growth rate of 14.7 percent.

Average Revenue Per Usage (ARPU)

ARPU in India and China is comparable in GSM pre-paid segment but ARPU for post-paid segment is much higher in China. ARPU for CDMA services are higher in China whereas ARPU for Basic telephone services are higher in India, see Table IV.

Table IV Average Revenue Per Usage in China and India

Average Revenue per User (ARPU) in US$
Services	China		India
Services	2004-05	2005-06	2004-2005	2005-2006
Basic	9.14	8.54	15.00	14.50
Mobile -CDMA	10.31	9.31	5.7	5.56
Mobile -GSM	9.62	9.43	8.89	8.00
Mobile-GSM postpaid	20.18	19.98	20.34	14.00
Mobile-GSM prepaid	6.77	5.94	5.25	6.00

The telecom network is set for some great expansions. This includes having 250 million telephones by 2007 and 500 million by 2010.While the mobile coverage will be expanded to 85 percent of geographical area. There will be a reprieve on the spectrum front as well with 45 MHz additional spectrum being vacated from defense ministry for the growth of mobile services. A Rs.10 billion project is underway specifically for this purpose. Manufacturing is in focus and the objective is to make India a center of excellence as far as R&D is concerned particularly catering to the South East Asia market. Also India is planning for the production of mobile handsets for US$ 25.

Over the next five years to 2010, Gartner expects China’s mobile subscriber base, the largest in the world, to grow at a compounded annual rate of 11 per cent, compared with 31 per cent for India’s, the fastest-growing major market worldwide. On June 9, India announced it had become the fifth member of what its telecoms regulator called the “100m mobiles club”, joining Russia (130m in February), Japan (141m in January), the US (170m in January) and China (410m in January). India will continue to play catch-up with China for some time as coverage is patchy. India’s mobile networks are still largely focused on major cities. Coverage extends to 30 per cent of its 1.1bn population, compared with about 95 per cent in China.

VII TELECOM INFRASTRUCTURE IN SAARC COUNTRIES.

After a brief period of sluggish growth, Asia has been showing consolidation in the telecommunication sector. It is again China and the SAARC countries that are the real potential for growth in Asia and the World. Many domestic subscriber bases have doubled in recent years with tariff prices in the region, amongst the lowest in the world. The business plan for the most of the telecos in the region is to build a profitable business model even when voice tariffs fall to one of the lowest in the world – a one cent- a- minute level, when the US and Europe tariffs are considered low at 20-25 cent – a – minute level[11].

Today, global players in the telecom industry are developing interest, and are increasingly investing in SAARC markets. Nokia and Ericsson have successfully done this and now, Motorola too has announced a $100mn plant in Chennai. Global service providers are buying stakes in local players. Having said this, it is the largely unapproachable rural sector in these areas, where there are opportunities for growth. Innovative delivery options, a favorable regulatory regime, and aggressive pricing stances will ensure that these opportunities are cashing in on.

India

India is clearly the leader in terms of penetration and its growth in the SAARC region. India’s mobile subscribers double the number of fixed line statistics. The telecom story continues to be the best advert of the country’s reform process. In the last six years, the number of mobile subscribers has gone up from just about 1 million to 100million, a subscriber base that only four other countries – China, US, Japan and Russia can boast of.

The explosive growth in numbers is directly juxtaposed to the steep decline in the cost of mobile phones and effective tariffs, bringing the phone within the reach of people even below the middle-class.

The setting of the Universal Services Obligation Fund (USOF) to grant subsidy to telecom operators is a huge step, which will increase the teledensity in the rural areas. This step will be responsible for reaching the magic teledensity 25% by 2010. Government has set aside nearly Rs. 12 billion to grant subsidies to the telecom operators and infrastructure providers who are willing to set up the telecom industry.

For India’s rapidly growing telecom sector, 2005 was a year of high tempo. Mobile connections grew faster than ever before and value added services made their presence felt and accounted for a notable share of revenues. On the regulatory front, FDI limit was hiked from 49% to 74%, long distance entry barriers were lowered, new uniform tariff structure for the entire country called ‘IndiaOne’ was announced and subsidies were announced by the government for operators to promote rural telephony.

Pakistan

Pakistan’s telecom market is in the process of evolving to come to grips with the transition from a regulated, state owned monopoly to a deregulated, competitive structure. Penetration of telecom services remains low. The government has ambitious plans to increase the fixed line teledensity of 2.5% in 2003 to 7% in 2010(they achieved 3.8% in 2005)

Currently, Pakistan is witnessing massive growth in its telecom industry. In the four – year period up to 2009, nearly $4 billion of investment is expected in the sector. Pakistan’s telecom sector today, employs 20,000 people and this is set to grow rapidly in the near future. The country’s investment friendly policies such as the fixed line Deregulation policy (July 2003), Mobile policy (2004), and the Broadband policy (Dec 2004) have created an atmosphere favorable for investment. There is an opportunity for massive growth in the country, as 70% population living the rural areas are largely un-approached by modern telecom.

Sri Lanka

Sri Lanka’s Telecommunications sector has been embroiled in the face of a nearly two decade long conflict between the government and separatist Tamil Tiger Rebels. The Tsunami and other natural calamities in recent years have also affected both existing physical assets and investment as well. With the hope of enduring peace and a general improvement in the country’s socio-economic well-being, the sector is poised for rapid progress.

Bangladesh

Bangladesh is one of the more underdeveloped, densely populated countries in the world. It has one of the lowest number of fixed phones per hundred people in the world. It is one phone per hundred people, which is 6 times lower than that in neighboring India.

Nepal

Nepal is another country that has seen slow progress in the telecom space. The weak economy means that most investment has come through foreign institutional aid such as World Bank loans etc. the country’s mountainous topography has made it an uphill task to set up basic telecom infrastructure. Socio-political instability in the region also affected the development process. Moreover, more than 98% of the population has no access to telephones. More than 60% of the existing phones are in kathmandu alone. Rural services have been neglected largely as the setting up of a rural network would require significant investment. Overall 50% of the demand in the country for telephone access remains unmet.

Other SAARC Countries

Bhutan had been in isolation from the rest of the world till very recently. The country’s only link with the outside world had been the trunk call facility to India since 1974. It was only in June 1999 that the first television station was set up in the country. The terrain combined with a low economic capability that had hindered any development at all, in the telecom field. There had been a burst of growth in the recent past, with fixed line subscribers doubling annually in recent years. Investment has grown and there has been basic progress with infrastructural – building as well. Mobile, Internet networks and market remains highly developed, with there being only a minute presence even today.

The Maldives archipelago boasts of a modern, and efficient telecom network. There is now complete land coverage with fixed line connections. There was a monopoly in the market till very recently, a telco owned jointly by the Maldives Government and a Cable & Wireless plc(UK) that is accredited with the building of this impressive infrastructure came into picture. It would be fair to say that some amount of cooperation in the area would help the progress in the telecom industry.

Broadly speaking it is socio-political factors that were the last hudles in the way of extensive telecomm development in the region. Most governments have been enthusiastic towards telecom progress and have crested favorable environment for this. The region shall need highly innovative business practices, technology and services to address the real potential. The governments in the SAARC region may rightfully applaud itself as coming out a winner in the mobile phone segments with a combination of rightful deregulations in regulatory framework and focus on to increase the teledensity region. This region gradually continues to be one of the most interesting platforms for the telecom revolution.

Type of Services	Bangladesh	Sri Lanka	Pakistan	India
Fixed line telephones	950,000	974,200	5,870,000	48mn
Mobile Subscribers	3,958,100	2,156,500	21,651,800	100mn
Number of ISP’s	100	23	150 licensed Estimated- 80	168
Internet User’s	420,000	400,000	4.5 mn	10mn
Internet Subscribers	81,000	90,000	350,000	5.8mn
Internet penetration	0.3%	2.1%	2.9%	5.4%

VIII FUTURE OF MOBILE COMMUNICATION IN INDIA

India initially started with GSM technology for mobile communication. Being a technology neutral country, India later allowed for CDMA technology also. Now 2.75G EDGE technologies has been implemented and used. BSNL has got license for bringing 3G into operation. Trials are being conducted for 3G implementation in the four metropolitan cities of India.Commercial 3G will be started by March 2007.

With the dwindling revenues of the operators from the data and voice there is a need to look at newer applications to fuel growth of the telcos.TV on Mobile has emerged as a solid and potent answer to this consumer yearning. South Korea, China, South Africa, Australia and Europe have seen this need and have acted upon the same by implementing TV on Mobile. India is around the corner for implementation of similar technology for the benefit of consumers, operators, content providers and Government. It promises to be a USD 1 billion industry by 2010, if roadmaps are created and implemented properly [12].

IX DISCUSSIONS

However, there are major barriers to India maximizing the economic and social benefits, which the mobile services industry can deliver. The Indian industry generates relatively little cash - with earnings before interest, depreciation and amortization (EBIDTA) margins at 23% compared with international norms of 40% to 50%.

The scope for the Indian industry to invest, expand and grow into rural areas is limited because of the lower cash flow generation. There is thus a danger that, while current prospect for expansion are excellent, growth will not be sustained. The three main causes for the above are:

· The high levels of industry specific taxes levied through license fees, spectrum charges, import duties, etc.

· The major cross subsidy (of Rs 60 billion per year) from the mobile to the fixed operators through interconnect charging arrangements and access deficit charge.

· The inadequate margins (free cash flows) resulting from high levels of competition and churn, which raise sales and marketing costs.

9.1 Recommendations by OVUM

In order to maximise economic and social benefits the Government should consider the following three measures:

· To reduce industry specific taxes, which currently account for more than 20% of the industry cost base, to be more in line with international best practices.

· To remove the cross subsidy from mobile to fixed operators by introducing cost based interconnect, removing ADCs, and funding rural development from a separate universal service fund.

· To promote infrastructure sharing to facilitate expansion of mobile networks in rural areas.

There is one further problem facing the Indian industry. Currently 53% of the revenue generated by the industry is exported in payments to terminal and network equipment suppliers. If the Government wants to maximize the economic benefits from the industry then it should consider what steps it can take to establish an indigenous terminal and network equipment and component supply industry, as has happened in China.

X CONCLUSION

India has one of the worlds largest telecommunication network. The telecom story continues to be the best evidence of the efficacy of the reforms process. In just six years, the number of mobile subscribers has gone from just about one million to 100 million, a subscriber base that only four other countries China, the US, Japan and Russia can boast of. None can doubt the correlation between this explosive growth in numbers and the steep decline in the cost of the mobile phone and of its usage. Effective tariffs have dropped from over Rs 14 a minute to Re 1, bringing the phone within reach of people even below the middle-class.

The Government may have, therefore, landed itself a winner in the mobile phone, but the task of taking telecom to the other 90 per cent of the population will call for even greater innovation in policymaking, technology and marketing. Still three-fourths of the land mass is not illuminated by a cellular signal and the price of the instrument is beyond the reach of a substantial section of the population let alone the charges for its use. These issues, of course, can be resolved by decisive policy action, such as a creative use of the Universal Services Obligation fund that now has over Rs 70 billion, releasing adequate spectrum to operators in the metros, and a proactive investment policy that invites many more equipment manufacturers to set up base in this country. The road for India achieving the top most position in telecommunication is no longer a dream as India is nearing China in all aspects in few years India will over power all countries and achieve its target of top most position in telecom industry.

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[1]. Growth of Telecommunication Services, Report of Spectrum Management Committee

[2]. www.voicendata.com

[3]. Telecom growth in India: Strong & steady-Telecom Guide21st April 2005.

[4]. Cellular Operators Association on India.Available on www.coai.com

[5]. G. Madavan Nair. (2005) ‘Space technology for Bridging the health Divide’, M.V.Arunachalam Endowment Lecture, 16th July 2005.

[6]. Billion Indian connections Piyush Goyal Mar 16, 2006 Business line

[7]. OVUM Report on Economic Benefits of Mobile Services in India A Case Study for the GSM Association -January 2005

[8]. Industry and Services Infrastructure Telecommunications write the website

[9]. India’s mobile phone growth nears China’s,By Jo Johnson in New Delhi,FROM FINANCIAL TIMES , 30 Jun 2006

[10]. Trais report on Telecom Sector in China and India,June27,2006.

[11]. Maran Mantra:FDI and Hi-Growth in TelecomLive,July2006

[12]. Cellular Mobile communication-3G and Beyond, Proceeding of Broadcasting – Emerging Technologies in Mobile World,September8,2006.

[13]. The 100 million club Jun 12, 2006 Editorial Business line

Technical College - Bourgas,