Descriptive qualitative approach towards the financing needs of Indian telecom sector and different by Sanjay Gupta

Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India

University Centre Address InfoTech, University Study Centre (Sikkim Manipal University), 3/7, Central Park, City Centre, Durgapur-713216, West Bengal.

Centre Code 0249 Title of the project report â&#x20AC;&#x153;Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India.â&#x20AC;?

By- Neeraj Kumar Singh (Roll No-520751161) A project report submitted in partial fulfillment of the requirements for the degree of Master of Business Administration of Sikkim Manipal University, India.

Sikkim-Manipal university of Health, Medical and technological sciences, Distance education wing, Syndicate house, Manipal-576104.

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Project Synopsis Title â&#x20AC;&#x153;Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider in India.â&#x20AC;?

Objectives The objective of the project can be summarized as follows1) The first objective is to access the Indian telecom sector, its current status & structure, its appellate authority, its telecom policies, service offerings, investment opportunities & incentives, research & development works, growth potential, government vision and mission etc. 2) The second objective is to find out the socio-economic impact of telecommunication investment in developing countries like India, the effect of information and communication technologies, the digital divide in developing and developed nations. 3) The third objective is to find out different financing strategies and financial ways to finance a telecom projects in India, and to access the different financial risks associated with. 4) The fourth objective is to establish the relation between the telecom investment and its effect on the growth in global perspective. 5) The fifth objective is to take the case of B.S.N.L. ( A govt. of India enterprise), a telecom service provider, to access its current business structure, service offerings, current growth in terms of revenue and profits, service expansions, its asset structure, social commitment. 6) The sixth objective is to find out the telecom trends in global perspective, high growth drivers, business patterns, cost efficient operation, and how to expand in low ARPU Rural markets. 7) The seventh objective is to see the picture of public-private partnership contribution in telecom growth in India, their investment pattern and their differential contribution to the telecom growth. 8) The eighth objective is to look into the telecom investment opportunities and potential in Indian telecom sector and the public private investment avenues and nodal agencies. 9) At last, to bring out the conclusion for financing needs of telecom sectors, their socio-economic effects, find out the viable technological options to grow in rural telephony, proving the purpose of peopleâ&#x20AC;&#x2122;s growth, analyzing the global telecom growth and public private contributions, observing the chunk of investment required to revolutionize the growth, in developing nations like India.

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Methodology To fulfill the objective of the project, different research methodologies have been used to come on the conclusions. Mainly descriptive study has been made to keep the research simple and narrative and some time quantitative and mainly qualitative approaches have been made to the subject. Mainly secondary data which have been collected from different websites, magazine, research papers, interactions and books, have been used for analysis purpose. Different case studies have been taken in to consideration to bring out some facts. Company financials available in public domains have been compared and telecommunication papers available on websites of ministry of finance, D.O.T., and TRAI have been looked up. Some surveys of telecom vendors in India, have also been taken into consideration to pull out the conclusions on the subject.

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Acknowledgement

I am very much thankful to the people who have helped me in preparation of this project, directly or indirectly. I would like to give special thanks to Mr. Srikanta Ghosh, faculty at Sikkim Manipal University study centre, Durgapur, who has given me the opportunities to do this project.

I am very much grateful to Mr. D. Rana, D.E. (Admin), B.S.N.L., Durgapur, Mr. N. Chakraborty, S.D.E. / Panagarh & B.B., B.S.N.L., Durgapur for their endeavor support for completing this project. I am thankful to my friends giving their remarkable contribution and special thanks to Mr. Srikanta Ghosh, who not only explained the topics very well but has thrown the light on the practical aspect of the project too.

(Neeraj Kumar Singh)

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Table of Content 1. Executive Summary of the Project ………………………………………………………………7 2. Bharat Sanchar Nigam Limited (Company Profile) ………………………………………….9 2.1 Introduction ………………………………………………………………………………9 2.2 Vision, Mission & Objectives ………………………………………………………...11 2.3 Organization Chart of BSNL ………………………………………………………….12 2.4 Staff ……………………………………………………………………………………13 2.5 Finance …………………………………………………………………………………14 3. Indian Telecom Sector at a Glance ……………………………………………………………15 3.1 Status of Telecom Sector………………………………………………………… ……15 3.2 Target Set by the Government …………………………..…………………………….29 3.3 Indian Telecommunications at a glance …………………………………………………31 3.4 Bharat Nirman …………………………………………………………………………32 4. Institutional History of the Telecom Sector in India ………………………………………….34 4.1 Progress of Reforms …………………………………………………………………...36 4.2 Pre-reform Period and Telecommunication in India …………………………………..38 4.3 Liberalization and Reforms in Telecom Sector since early 1990’s …………………...39 5. Why Telecom Investment and Expansion?? ...............................................................................47 5.1 Traditional methods of financing telecommunication in developing countries .......……47 5.2 Investing in telecommunication projects – a multiplication effect? ...............................49 5.3 What is Information and Communications Technology? ...............................................50 5.4 The Digital Divide ……………………………………………………………………..51 6. What is creative or innovative financing? ....................................................................................59 6.1 What is financial engineering? .........................................................................................59 6.2 Financing Strategies……………………………………………………………………..61 6.3 Financing ways …………………………………………………………………………65 6.4 Financial risks …………………………………………………………………………..73 6.5 Leverage effects on ways to finance telecommunication ………………………………78 6.6 How financial development may promote growth …………………………………….79 6.7 The importance of telecommunication for economic growth ………………………….80 7. B.S.N.L. as a Telecom Service Provider ………………………………………………………85 7.1 BSNL as an integrated telecom service provider ……………………………………...85 7.2 Growth Plan ……………………………………………………………………………92 7.3 Projects Recently Implemented / Under Development ………………………………..94 7.4 Social Commitment ……………………………………………………………………95 7.5 Summary of financial statement ……………………………………………………….96 8. Telecom Trends and High Growth Drivers ……………………………………………………98 8.1 General Outlook of communication services ……………………………………………98 9. Cost efficient operations and rural telecom infrastructure convergence ………………………105 9.1 Optimised network operations …………………………………………………………106 9.2 Price to optimize network utilization…………………………………………………...108 9.3 Shared access is a bridge to personal connectivity……………………………………..108 9.4 India's WiMAX subscribers to top 13 million by 2013 ………………………………111 -5By- Neeraj Kumar Singh (Roll No- 520751161)

10. The Role of Public & Private Players in Indian Telecom Sector………………………………113 10.1 Airtel as a private telecom service provider……………………………………………115 10.2 Performance parameters of BSNL ……………………………………………………119 11. Telecom Investment opportunities and Potential In India …………………………………….129 11.1 Opportunities …………………………………………………………………………...129 11.2 Potential ………………………………………………………………………………..130 11.3 Investment Facilitation Agencies …………………………………………………...131 12. Methodology ………………………………………………………………………………….133 12.1 The road to answering our purpose……………………………………………………..133 12.2 Data collection methods………………………………………………………………...134 12.3 Source critique………………………………………………………………………….134 13. Analysis ……………………………………………………………………………………….134 13.1 The benefits of wireless ……………………………………………………………….135 13.2 Delivering service to customers ……………………………………………………….136 13.3 Technology choices ……………………………………………………………………137 13.4 Enter WiMAX …………………………………………………………………………138 13.5 Looking to the future …………………………………………………………………..138 13.6 Streamlining Telco’s process efficiency ………………………………………………139 13.7 Growing pains …………………………………………………………………………139 13.8 Next-generation technologies ………………………………………………………….140 13.9 Public-Private Investment ……………………………………………………………..141 13.10 World telecoms and IT outlook ………………………………………………………..143 14. Findings, Conclusions, and Recommendations ……………………………………………….146 15. References …………………………………………………………………………………….148 15.1 Internet………………………………………………………………………………….148 15.2 Articles………………………………………………………………………………….150 15.3 Literature………………………………………………………………………………..152 16. Explanation Of Words ………………………………………………………………………..153 17. Appendix ………………………………………………………………………………………170 17.1 Basic Information of Indian economy and social structure …………………………..170 17.2 Financial Statement of BSNL …………………………………………………………171 17.3 Financial Performance of Airtel ………………………………………………………177 17.4 World Telecom and Telecom Industry ………………………………………………..178 17.5 Tele-density Picture in India …………………………………………………………..179 17.6 Economic and social indicators of India ………………………………………………180 17.7 Sector Distribution of Investment Commitments to Infrastructure Projects ………….188 17.8 Auditor General of India Report on Outstanding Billed Amount in Telecom ………...189

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Unit-1

Executive Summary of the Project

India has taken positive steps towards liberalizing the telecommunications market and introducing private investment and competition in basic telecommunications services. Foreign equity in value-added services is limited to 51 percent. For basic services, the limit is 49 percent as it has been difficult to raise the amounts of money needed to finance the new networks, creative financing arrangements have been allowed in some cases that extend the limit to 74 percent. The Indian Telecommunications network with 353 million connections (as on September 2008) is the third largest in the world. The sector is growing at a speed of 46-50% during the recent years. NTP-99 laid down a clear roadmap for future reforms, contemplating the opening up of all the segments of the telecom sector for private sector participation. The Government is committed to expanding rural connectivity through a slew of measures so that rural users can access information of value and transact business. This will include connecting block headquarters with fiber optic network, using wireless technology to achieve last mile connectivity and operating information kiosks through a partnership of citizens, panchayats, civil society organizations, the private sector and Government. Telecommunication plays a central role in helping developing countries participate in the global economy. Telecommunication is pervasive in all aspects of our lives, from the stereo in your living room to the mobile phone you carry with you. These technological innovations we have in our lives are often taken for granted and it is unfeasible for us to imagine how we can function without them. By encouraging the establishment of telecommunication industries within their countries, not only is their GNP boosted from the production of higher value-added goods, but also, the economy can progress to that which is predominantly characterized by secondary or tertiary industries Usually financial engineering are used to reduce the financial risk, a second thing is to restructure cash flows for better financial management. Because financial engineering are used to finance projects it can be used to finance telecom projects around the world, and especially in India. This kind of infrastructure project is according to Merna & Njiru (2002) important in developing countries because they are in need for that. Infrastructure projects in developing countries bring several improvements of the country, they lead to: Human welfare and economic development. Reduction of poverty. The environment will be improved. â&#x20AC;&#x153;A well spread out telecommunication network provides a great impetus to the economic growth in a country. Considering the significance of its contribution and also the need to integrate with the global economy, several policy initiatives have been taken by the government.â&#x20AC;? (Ministry of Finance, Govt. of India, 2004-11-26)

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To understand the telecom sector growth, it is needed to analyze the giant companies working in telecom sector. The health of these companies tells the story of operating environment of Indian telecom industry. Bharat Sanchar Nigam Limited, a government of India enterprise, formed on 1st October-2000, from its parent body Department of Telecom ( DOT ) working under ministry of telecommunication, India, is playing a major role in India’s telecom arena. When B.S.N.L. formed, the growth of telecom in India was very much dismal, great challenges were before the government to fire the telecommunication growth, pacing the structural growth of India. So, corporatization of DOT done. New entity, B.S.N.L, got more independence, made professional approach in its growth keeping the mission of government’s social view, and maintaining its financial health. It has been expanded into different kind of telecom fields and being competitive with others private players in the sector. Because it is wholly owned by government, it can be said to be the government purpose vehicle, to regulate the Indian telecom industry, fulfilling the purpose of socio-economic development of India. The exploded growth in Indian telecom industry after telecom reforms has shown at the one side a tremendous telecom infrastructure growth both by B.S.N.L. and other private players, but at the other side, fierce competition between these operators, has shrank the margins of operation. At the one side where Indian people have got improved and diverse services at better prices, the financial health of these companies have been affected. Here, we have taken the case of B.S.N.L, and analyzed its business operations, its financial needs, growth areas, non-profitable operations, in the perspective of Indian telecom sector as a whole. The growth figure of Airtel has been seen and analyzed the contribution of private players in telecom growth in India. Now different technologies and market efficient technologies are available. Their social impact has been viewed and trend in telecom evolution has been considered to make the viable investment. The telecommunication markets are evolving all over the world very rapidly and day by day a new technology is coming to rock the bourses but at some cost. The time span of these technologies are very less, and before implementing the options available, the company should analyze its commercial aspect, and should try implementing the project of lesser break-even time. In this competitive era, you can’t get the chance to be left out in implementing the new technology, in spite of how much it cost to your exchequer. New technology in telecom brings the new dimension of businesses, and new reform in social arena, so it is indispensable for the country’s growth. All development, expansion, growth need financing. How these financing can be arranged. Different kinds of innovative ways of financing are available and which will be suited best, it should be analyzed case by case basis, so that financing needs may be fulfilled and growth can be intact.

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Unit-2 2.1

Bharat Sanchar Nigam Limited (Company Profile)

Introduction

Bharat Sanchar Nigam Ltd. formed in October, 2000, is World's 7th largest telecommunications company providing comprehensive range of telecom services in India like Wireline, CDMA mobile, GSM Mobile, Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP services, IN Services etc. Within a span of five years it has become one of the largest public sector unit in India.

BSNL has installed quality telecom network in the country and now focusing on improving it, expanding the network, introducing new telecom services with ICT applications in villages and wining customer's confidence. Today, it has about 46.188 million basic line telephone capacity, 7.96 million WLL capacity, 45.288 million GSM Capacity, 4.854million internet capacity, 5.807 million broadband capacity, more than 37382 fixed exchanges, 60000 BTS, 287 Satellite Stations, 480196 Rkm of OFC Cable, 63730 Rkm of Microwave Network connecting 602 Districts, 7330 cities/towns and 5.5 Lakhs villages.

BSNL is the only service provider, making focused efforts and planned initiatives to bridge the RuralUrban Digital Divide ICT sector. In fact there is no telecom operator in the country to beat its reach with its wide network giving services in every nook & corner of country and operates across India except Delhi & Mumbai. Whether it is inaccessible areas of Siachen glacier and North-eastern region of the country. BSNL serves its customers with its wide bouquet of telecom services.

BSNL is numero uno operator of India in all services in its license area. The company offers vide ranging & most transparent tariff schemes designed to suite every customer. BSNL cellular service, CellOne, has more than 46.732 million cellular customers as on March-2009, garnering 16.19 percent of all mobile users as its subscribers. In basic services, BSNL is miles ahead of its rivals, with 29.346 million Basic Phone subscribers i.e. 85 per cent share of the subscriber base and 92 percent share in revenue terms.

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BSNL has more than 5.436 million WLL subscribers and 3.693 million Internet Customers who access Internet through various modes viz. Dial-up, Leased Line, DIAS, Account Less Internet(CLI). BSNL has been adjudged as the NUMBER ONE ISP in the country.

BSNL has set up a world class multi-gigabit, multi-protocol convergent IP infrastructure that provides convergent services like voice, data and video through the same Backbone and Broadband Access Network. At present there are 3.557 million DataOne broadband customers and 5.807 million equipped capacity at the end of March-2009. The company has vast experience in Planning, Installation, network integration and Maintenance of Switching & Transmission Networks and also has a world class ISO 9000 certified Telecom Training Institute.

Scaling new heights of success, the present turnover of BSNL is more than Rs.351,820 million (US $ 8 billion) with net profit to the tune of Rs.99,390 million (US $ 2.26 billion) for financial year 200607. The infrastructure asset on telephone alone is worth about Rs.630,000 million (US $ 14.37 billion).

BSNL plans to expand its customer base from present 47 millions lines to 125 million lines by December 2007 and infrastructure investment plan to the tune of Rs.733 crores (US$ 16.67 million) in the next three years.

The turnover, nationwide coverage, reach, comprehensive range of telecom services and the desire to excel has made BSNL the No. 1 Telecom Company of India.

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2.2

Vision, Mission & Objectives

2.2.1 VISION To become the largest telecom Service Provider in Asia.

2.2.2 MISSION i.

To provide world class State-of-art technology telecom services to its customers on demand at competitive prices. To Provide world class telecom infrastructure in its area of operation and to contribute to the growth of the country's economy.

ii.

2.2.3 OBJECTIVES 

To be the Lead Telecom Services Provider.



To provide quality and reliable fixed telecom service to our customer and there by increase customer's confidence.



To provide mobile telephone service of high quality and become no. 1 GSM operator in its area of operation.



To provide point of interconnection to other service provider as per their requirement promptly.



To facilitate R & D activity in the country.



Contribute towards: i. National Plan Target of 500 million subscriber base for India by 2010. ii. Broadband customers base of 20 million in India by 2010 as per Broadband Policy 2004. iii. Providing telephone connection in villages as per government policy. iv. Implementation of Triple play as a regular commercial proposition.

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2.3

Organization Chart of BSNL

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2.4

Staff

Distribution of Group-wise staff strength of DoT and BSNL (numbers) as on 31st March 2007 is indicated below:

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2.5

Finance

Bharat Sanchar Nigam Limited, the largest Public Sector Undertaking of the Nation, is certainly on a financial ground that's sound. The Company has a net worth of Rs. 88,128 crores (US$ 22.02 billion), authorised equity capital of Rs. 10,000 crores (US $ 2.50 billion), Paid up Equity Share Capital of Rs. 5,000 crores (US $ 1.25 billion) and Revenues is Rs. 38053 crores (US $ 9.51 billion) in 2007-08.

(Note: 1 US $ = 40.02 INR as on 31-03-2008)

2.5.1 Gross Investment in Fixed Assets The BSNL is making substancial investment year to year for its network expension and mordenisation. During the current financial year BSNL has made the gross investment of Rs. 7180 crore ( US $ 1.79 billion) in Fixed Assets. These investments have been financed by the internal accruals.

2.5.2 Cumulative Capital Outlay BSNL has Gross Fixed Assets of over Rs. 124578 Crores (US $ 31.13 billion) as on 31.03.2008.

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Unit-3

Indian Telecom Sector at a Glance

The telecom services have been recognized the world-over as an important tool for socio-economic development for a nation. It is one of the prime support services needed for rapid growth and modernization of various sectors of the economy. Indian telecommunication sector has undergone a major process of transformation through significant policy reforms, particularly beginning with the announcement of NTP 1994 and was subsequently re-emphasized and carried forward under NTP 1999. Driven by various policy initiatives, the Indian telecom sector witnessed a complete transformation in the last decade. It has achieved a phenomenal growth during the last few years and is poised to take a big leap in the future also.

3.1

Status of Telecom Sector

The Indian Telecommunications network with 353 million connections (as on Setember 2008) is the third largest in the world. The sector is growing at a speed of 46-50% during the recent years. This rapid growth is possible due to various proactive and positive decisions of the Government and contribution of both by the public and the private sectors. The rapid strides in the telecom sector have been facilitated by liberal policies of the Government that provides easy market access for telecom equipment and a fair regulatory framework for offering telecom services to the Indian consumers at affordable prices.

3.1.1 Telecom Regulatory Authority of India (TRAI) The entry of private service providers brought with it the inevitable need for independent regulation. The Telecom Regulatory Authority of India (TRAI) was, thus, established with effect from 20th February 1997 by an Act of Parliament, called the Telecom Regulatory Authority of India Act, 1997, to regulate telecom services, including fixation/revision of tariffs for telecom services which were earlier vested in the Central Government.

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TRAIâ&#x20AC;&#x2122;s mission is to create and nurture conditions for growth of telecommunications in the country in manner and at a pace, which will enable India to play a leading role in emerging global information society. One of the main objectives of TRAI is 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 provided the required direction to the evolution of Indian telecom market from a 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. The TRAI Act was amended by an ordinance, effective from 24 January 2000, establishing a Telecommunications Dispute Settlement and Appellate Tribunal (TDSAT) to take over the adjudicatory and disputes functions from TRAI. TDSAT was set up to adjudicate any dispute between a licensor and a licensee, between two or more service providers, between a service provider and a group of consumers, and to hear and dispose of appeals against any direction, decision or order of TRAI.

3.1.2 New Telecom Policy 1999 The most important milestone and instrument of telecom reforms in India is the New Telecom Policy 1999 (NTP 99). The New Telecom Policy, 1999 (NTP-99) was approved on 26th March 1999, to become effective from 1st April 1999. NTP-99 laid down a clear roadmap for future reforms, contemplating the opening up of all the segments of the telecom sector for private sector participation. It clearly recognized the need for strengthening the regulatory regime as well as restructuring the departmental telecom services to that of a public sector corporation so as to separate the licensing and policy functions of the Government from that of being an operator. It also recognized the need for resolving the prevailing problems faced by the operators so as to restore their confidence and improve the investment climate.

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Key features of the NTP 99 include: ·

Strengthening of Regulator.

National long distance services opened to private operators.

International Long Distance Services opened to private sectors.

Private telecom operators licensed on a revenue sharing basis, plus a one-time entry fee. Resolution of problems of existing operators envisaged.

Direct interconnectivity and sharing of network with other telecom operators within the service area was permitted.

Department of Telecommunication Services (DTS) corporatised in 2001.

Spectrum Management made transparent and more efficient.

All the commitments made under NTP 99 have been fulfilled, each one of them, in letter and spirit, some even ahead of schedule, and the reform process is now complete with all the sectors in telecommunications opened for private competition.

3.1.3 National Long Distance National Long Distance opened for private participation. The Government announced on 13.08.2000 the guidelines for entry of private sector in National Long Distance Services without any restriction on the number of operators. The DOT guidelines of license for the National Long Distance operations were also issued.

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Highlights - NLD Guidelines ·

Unlimited entry for carrying both inter-circle and intra-circle calls. Total foreign equity (including equity of NRIs and international funding agencies) must not exceed 74%. Promoters must have a combined net worth of Rs.25 million.

Private operators will have to enter into an arrangement with fixed-service providers within a circle for traffic between long-distance and short-distance charging centers.

Seven years time frame set for rollout of network, spread over four phases. Any shortfall in network coverage would result in encashment and forfeiture of bank guarantee of that phase.

Private operators to pay one-time entry fee of Rs.25 million plus a Financial Bank Guarantee (FBG) of Rs.200 million. The revenue sharing agreement would be to the extent of 6%.

Private operators allowed to set up landing facilities that access submarine cables and use excess bandwidth available.

Licence period would be for 20 years and extendable by 10 years.

3.1.4 International Long Distance In the field of international telephony, India had agreed under the GATS to review its opening up in 2004. However, open competition in this sector was allowed with effect from April 2002 itself. There is now no limit on the number of service providers in this sector. The licence for ILD service is issued initially for a period of 20 years, with automatic extension of the licence by a period of 5 years. The applicant company pays one-time non-refundable entry fee of Rs.25 million plus a bank guarantee of Rs.250 million, which will be released on fulfillment of the roll out obligations. The annual licence fee including USO contribution is @ 6% of the Adjusted Gross Revenue and the fee/royalty for the use of - 18 By- Neeraj Kumar Singh (Roll No- 520751161)

spectrum and possession of wireless telegraphy equipment are payable separately. At present 10 ILD service providers (9 Private and 1 Public Sector Undertaking) are there. As per current roll out obligations under ILD license, the licensee undertakes to fulfill the minimum network roll out obligations for installing at least one Gateway Switch having appropriate interconnections with at least one National Long Distance service licensee. There is no bar in setting up of Point of Presence (PoP) or Gateway switches in remaining location of Level I Taxâ&#x20AC;&#x2122;s. Preferably, these PoPs should conform to Open Network Architecture (ONA) i.e. should be based on internationally accepted standards to ensure seamless working with other Carrierâ&#x20AC;&#x2122;s Network.

3.1.5 Universal Service Obligation Fund Another major step was to set up the Universal Service Obligation Fund with effect from April 1, 2002. An administrator was appointed for this purpose. Subsequently, the Indian Telegraph (Amendment) Act, 2003 giving statutory status to the Universal Service Obligation Fund (USOF) was passed by both Houses of Parliament in December 2003. The Fund is to be utilized exclusively for meeting the Universal Service Obligation and the balance to the credit of the Fund will not lapse at the end of the financial year. Credits to the Fund shall be through Parliamentary approvals. The Rules for administration of the Fund known as Indian Telegraph (Amendment) Rules, 2004 were notified on 26.03.2004. The resources for implementation of USO are raised through a Universal Service Levy (USL) which has presently been fixed at 5% of the Adjusted Gross Revenue (AGR) of all Telecom Service Providers except the pure value added service providers like Internet, Voice Mail, E-Mail service providers etc. In addition, the Central Govt. may also give grants and loans. An Ordinance was promulgated on 30.10.2006 as the Indian Telegraph (Amendment) Ordinance 2006 to amend the Indian Telegraph Act, 1885 in order to enable support for mobile services and broadband connectivity in rural and remote areas of the country. Subsequently, an Act has been passed on 29.12.2006 as the Indian Telegraph (Amendment) Act 2006 to amend the Indian Telegraph Act, 1885.

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3.1.6 Unified Access Services Unified access license regime was introduced in November’2003. Unified Access Services operators are free to provide, within their area of operation, services, which cover collection, carriage, transmission and delivery of voice and/or non-voice messages over Licensee’s network by deploying circuit, and/or packet switched equipment. Further, the Licensee can also provide Voice Mail, Audiotex services, Video Conferencing, Videotex, E-Mail, Closed User Group (CUG) as Value Added Services over its network to the subscribers falling within its service area on non-discriminatory basis. The country is divided into 23 Service Areas consisting of 19 Telecom Circle and 4 Metro Service Areas for providing Unified Access Services (UAS). The licence for Unified Access Services is issued on nonexclusive basis, for a period of 20 years, extendable by 10 years at one time within the territorial jurisdiction of a licensed Service Area. The licence Fee is 10%, 8% & 6% of Adjusted Gross Revenue (AGR) for Metro and Category `A’, Category `B’ and Category `C’ Service Areas, respectively. Revenue and the fee/royalty for the use of spectrum and possession of wireless telegraphy equipment are payable separately. The frequencies are assigned by WPC wing of the Department

Telecommunications from the frequency bands earmarked in the applicable National Frequency Allocation Plan and in coordination with various users subject to availability of scarce spectrum. At present 3 to 6 service providers (2-5 Private and 1 Public Sector Undertaking) are there in most of the service areas.

3.1.7 Internet Service Providers (ISPs) Internet service was opened for private participation in 1998 with a view to encourage growth of Internet and increase its penetration. The sector has seen tremendous technological advancement for a period of time and has necessitated taking steps to facilitate technological ingenuity and provision of various services. The Government in the public interest in general, and consumer interest in particular, and for proper conduct of telegraph and telecom services has decided to issue the new guidelines for grant of license of Internet services on non-exclusive basis. Any Indian company with a maximum foreign equity of 74% is eligible for grant of license.

- 20 By- Neeraj Kumar Singh (Roll No- 520751161)

3.1.8 Interconnection Usage Charges In January 2003, TRAI notified the Interconnection Usage Charges (IUC) Regulation, 2003 and issued the same in October 2003, which covered arrangements amongst service providers for payment of IUC, covering Basic Services, including Wireless-in-Local Loop (Mobile), Cellular Mobile Services, National Long Distance (NLD) and International Long Distance (ILD) services. This regulation provided for charges payable by one operator to another for origination, transit and termination of calls in a multioperator environment. It came into force with effect from 1 February 2004. The main features of the new IUC regime were lower Access Deficit Charges (ADC), uniform termination charges of Rs 0.30 per minute irrespective of the terminating network, reduction of ADC on NLD and ILD calls, all of which resulted in lower tariff environment on voice telephony.

3.1.9 Broadband Policy 2004 Recognizing the potential of ubiquitous Broadband service in growth of GDP and enhancement in quality of life through societal applications including tele-education, tele-medicine, e-governance, entertainment as well as employment generation by way of high-speed access to information and web based communication; Government has announced Broadband Policy in October 2004. The main emphasis is on the creation of infrastructure through various technologies that can contribute to the growth of broadband services. These technologies include optical fibre, Asymmetric Digital Subscriber Lines (ADSL), cable TV network; DTH etc. Broadband connectivity has been defined as â&#x20AC;&#x153; Always Onâ&#x20AC;? with the minimum speed of 256 kbps. It is estimated that the number of broadband subscribers would be 9 million by 2007 and 20 million by 2010. With a view to encourage Broadband Connectivity, both outdoor and indoor usage of low power Wi-Fi and Wi-Max systems in 2.4 GHz-2.4835 GHz band has been delicensed. The use of low power indoor systems in 5.15-5.35 GHz and 5.725-5.875 GHz bands has also been delicensed in January 05. The SACFA/WPC clearance has been simplified. The setting up of National Internet Exchange of India (NIXI) would enable bringing down the international bandwidth cost substantially, thus making the broadband connectivity more affordable. - 21 By- Neeraj Kumar Singh (Roll No- 520751161)

The prime consideration guiding the Policy includes affordability and reliability of Broadband services, incentives for creation of additional infrastructure, employment opportunities, induction of latest technologies, national security and bring in competitive environment so as to reduce regulatory interventions. By this new policy, the Government intends to make available transponder capacity for VSAT services at competitive rates after taking into consideration the security requirements. The service providers permitted to enter into franchisee agreement with cable TV network operators. However, the Licensee shall be responsible for compliance of the terms and conditions of the licence. Further in the case of DTH services, the service providers permitted to provide Receive-Only-Internet Service. The role of other facilitators such as electricity authorities, Departments of ITs of various State Governments, Departments of Local Self Governments, Panchayats, Departments of Health and Family Welfare, Departments of Education is very important to carry the advantage of broadband services to the users particularly in rural areas. The Year 2007 was declared the year of broadband. Target has been set for 20 million broadband connections by 2010 and providing Broadband connectivity to all secondary and higher secondary schools, public health institutions and panchayats by 2008. In rural areas, connectivity of 512 KBPS with ADSL 2 plus technology (on wire) will be provided from about 20,000 existing exchanges in rural areas having optical fibre connectivity. Community Service Centres, secondary schools, banks, health centres, Panchayats, police stations etc. can be provided with this connectivity in the vicinity of above-mentioned 20,000 exchanges in rural areas. DOT will be subsidizing the infrastructure cost of Broadband network through support from USO Fund to ensure that Broadband services are available to users at affordable tariffs.

- 22 By- Neeraj Kumar Singh (Roll No- 520751161)

3.1.10

Tariff Changes

The Indian Telecom Sector has witnessed major changes in the tariff structure. The Telecommunication Tariff Order (TTO) 1999, issued by regulator (TRAI), had begun the process of tariff balancing with a view to bring them closer to the costs. This supplemented by Calling Party Pay (CPP), reduction in ADC and the increased competition, has resulted in a dramatic fall in the tariffs. 路

The peak National Long Distance tariff for above 1000 Kms. in 2000 has come down from US$

0.67 per minute to US$ 0.02 per minute in 2006. 路

The International Long Distance tariff from US$ 1.36 per minute in 2000 to US$ 0.16 per minute in

2004 for USA, Canada & UK. 路

The mobile tariff for local calls has reduced from US$0.36 per minute in 1999 to US$ 0.009 - US$

0.04 per minute in 2006. 路

The Average Revenue Per User of mobile is between US$ 5.06 - US$ 7.82 per month

- 23 By- Neeraj Kumar Singh (Roll No- 520751161)

3.1.11

Foreign Direct Investment (FDI)

In Basic, Cellular Mobile, Paging and Value Added Service, and Global Mobile Personal Communications by Satellite, Composite FDI permitted is 74% (49% under automatic route) subject to grant of license from Department of Telecommunications and adherence by the companies (who are investing and the companies in which investment is being made) to the license conditions for foreign equity cap and lock in period for transfer and addition of equity and other license provision. (Press Note 3(2007)) Foreign direct investment upto 74% permitted, subject to licensing and security requirements for the following: ·

Radio Paging Service

FDI upto 100% permitted in respect of the following telecom services: ·

Infrastructure Providers providing dark fibre (IP Category I);

Electronic Mail; and

Voice Mail

The above would be subject to the following conditions: ·

FDI upto 100% is allowed subject to the conditions that such companies would divest 26% of their

equity in favor of Indian public in 5 years, if these companies were listed in other parts of the world. ·

The above services would be subject to licensing and security requirements, wherever required.

Proposals for FDI beyond 49% shall be considered by FIPB on case-to-case basis.

In manufacturing sector 100% FDI is permitted under automatic route.

- 24 By- Neeraj Kumar Singh (Roll No- 520751161)

3.1.12

Investment Opportunities and Incentives

An attractive trade and investment policy and lucrative incentives for foreign collaborations have made India one of the world’s most attractive markets for the telecom equipment suppliers and service providers. ·

No industrial license required for setting up manufacturing units for telecom equipment.

Automatic approval of 100 percent foreign equity, technology fee up to US $ 2 million, royalty up to 5 percent for domestic sales and 8 percent for exports in telecom manufacturing projects.

Foreign equity of 74%(49 % under automatic route) permitted for telecom services - basic, cellular mobile, paging, value added services - and global mobile personal communications by satellite.

Telecom services projects extended a number of incentives:

Amortization of license fee

Tax holiday

Enhanced limit of external commercial borrowings

Rebate on subscription to shares/debentures.

Scope for tax exemption on financing through venture capital Concessional import duties for import of equipment by telecom service projects (including cellular,

basic, internet etc.) ·

Full repatriability of dividend income and capital invested in the telecom sector.

- 25 By- Neeraj Kumar Singh (Roll No- 520751161)

3.1.13

Network Expansion

The telecom sector has shown robust growth during the past few years. It has also undergone a substantial change in terms of mobile versus fixed phones and public versus private participation. The following table shows the growth trend of telecom sector from last five years: The number of telephones has increased from 54.63 million as on 31.03.2003 to 353.66 million as on 30.09.2008. Wireless subscribers increased from 13.3 million as on 31.03.2003 to 315.31million as on 30.09.2008. Whereas, the fixed line subscribers decreased from 41.33 million in 31.03.2003 to 38.35 million in 30.09.2008. The broadband subscribers grew from a meager 0.18 million to 4.91 million during the last 4 years.

3.1.14

Trend in Tele-density

Tele-density in the country increased from 5.11% in 2003 to 30.64 % in September 2008 i.e. an incremental growth of 34.15 % during last 5 years (about 7% per annum). In the rural area teledensity increased from 1.49% in Mar 2003 to approx. 11.5% in September 2008 and in the urban areas it is increased from 14.32% in Mar 2003 to 75.76% in september 2008.This indicates a rising trend of Indian telecom subscribers. 3.1.15

Rural Telephony

Apart from the 76.65 million fixed and WLL connections (as on Sep. 2008) provided in the rural areas, 551064 VPTs have been provided. Thus, 92% of the villages in India have been covered by the VPTs. More than 2 lakh PCOs are also providing community access in the rural areas. Further, Mobile Gramin Sanchar Sewak Scheme (GSS) â&#x20AC;&#x201C; a mobile Public Call Office (PCO) service is provided at the doorstep of villagers. At present, 2772 GSSs are covering 12043 villages. Also, to provide Internet service, Sanchar Dhabas (Internet Kiosks) have been provided in more than 3500 Block Headquarters out of the total 6337 Blocks in the country. The target of 80 million rural connection by 2010 will be met during

- 26 By- Neeraj Kumar Singh (Roll No- 520751161)

year 2008 itself. USO subsidy support scheme is also being utilized for sharing wireless infrastructure in rural areas with about 18,000 towers by 2010.

3.1.16

Opportunities

India offers an unprecedented opportunity for telecom service operators, infrastructure vendors, manufacturers and associated services companies. A host of factors are contributing to enlarged opportunities for growth and investment in telecom sector: ·

An expanding Indian economy with increased focus on the services sector

Population mix moving favorably towards a younger age profile

Urbanization with increasing incomes

Investors can look to capture the gains of the Indian telecom boom and diversify their operations outside developed economies that are marked by saturated telecom markets and lower GDP growth rates. Inflow of FDI into India’s telecom sector during Jan 1991 to August 2008 was about Rs 233,344 million. Also, more than 6 per cent of the approved FDI in the country is related to the telecom sector.

3.1.17

Research & Development

India has proven its dominance as a technology solution provider. Efforts are being continuously made to develop affordable technology for masses, as also comprehensive security infrastructure for telecom network. Research is on for the preparation of tested infrastructure for enabling interoperability in Next Generation Network. It is expected that the telecom equipment R & D shall be doubled by 2010 from present level of 15%. Modern technologies inductions are being promoted. Pilot projects on the existing and emerging technologies have been undertaken including WiMax, 3G etc. Emphasis is being given to technologies having potential to improve rural connectivity. 3G and Broadband Wireless Access(BWA) policies has since been issued. Also to beef up R&D infrastructure in the telecom sector and bridge the - 27 By- Neeraj Kumar Singh (Roll No- 520751161)

digital divide, cellular operators, top academic institutes and the Government of India together set up the Telecom Centres of Excellence (COEs). The main objectives of the COEs are as follows:

Achieve Telecom Vision 2010 that stipulates a definite growth model and take it beyond.

Secure Information Infrastructure that is vital for country’s security.

Capacity Building through Knowledge for a sustained growth.

Support Planned Predictive Growth for stability.

Reduce Rural Urban Digital Divide to reach out to masses.

Utilize available talent pool and create environment for innovation.

Management of National Information Infrastructure (NII) during Disaster

Cater the requirement of South East Asia as Regional Telecom Leader

- 28 By- Neeraj Kumar Singh (Roll No- 520751161)

3.2

Targets Set By The Government

3.2.1 Network expansion ·

500 million connections by the year 2010.

Provision of mobile coverage of 90% geographical area by 2010.

3.2.2 Rural telephony ·

One phone per two rural households by 2010 (about 80 million rural connections).

Reduce urban-rural digital divide from present 25:1 to 5:1 by 2010.

3.2.3 Broadband ·

Broadband with minimum speed of 1 mbps.

Broadband coverage for all secondary & higher secondary schools and public health care centres by the end of year 2008.

Broadband coverage for all Gram panchayats by the year 2010

3.2.4 Infrastructure Sharing ·

USO subsidy support scheme for shared wireless infrastructure in rural areas with about 18,000 towers by 2010.

Increase sharing in urban areas to 70% by 2010.

3.2.5 Introduction of Spread of IPTV and Mobile TV ·

IPTV in 600 towns by 2010. - 29 By- Neeraj Kumar Singh (Roll No- 520751161)

3.2.6 Manufacturing ·

Making India a hub for telecom manufacturing by facilitating more and more telecom specific SEZs.

Quadrupling production in 2010.

Achieving exports of 6 times from present level of 0.5 billion in 2010.

3.2.7 Research & Development ·

Pre-eminence of India as a technology solution provider.

Comprehensive security infrastructure for telecom network.

Tested infrastructure for enabling interoperability in Next Generation Network.

Doubling the telecom equipment R&D by 2010 from present level of 15%.

3.2.8 International Bandwidth ·

Facilitating availability of adequate international bandwidth at competitive prices to drive ITES sector at faster growth.

- 30 By- Neeraj Kumar Singh (Roll No- 520751161)

3.3

Indian Telecommunications at a glance

(As on 30th September 2008)

Rank in world in network size

3rd

Tele窶電ensity (per hundred populations)

30.64

Telephone connection (In million) Fixed

38.35

Mobile

315.31

Total

353.66

Village Public Telephones

5.6 lakh

Foreign Direct Investment (in million) (from 182042 January 2000 till August 2008)

million

Licenses issued Basic

CMTS

UAS

224

Infrastructure Provider I

177

ISP (Internet)

382

ISP with Telephony (Broadband)

125

National Long distance International Long Distance

24 19

- 31 By- Neeraj Kumar Singh (Roll No- 520751161)

3.4

Bharat Nirman

A time-bound plan for rural infrastructure by the Government of India in partnership with State Governments and Panchayat Raj Institutions 2005-2009. â&#x20AC;&#x153;Bharat Nirman will be a time-bound business plan for action in rural infrastructure for the next four years. Under Bharat Nirman, action is proposed in the areas of irrigation, road, rural housing, rural water supply, rural electrification and rural telecommunication connectivity. We have set specific targets to be achieved under each of these goals so that there is accountability in the progress of this initiative.â&#x20AC;? - Dr. Manmohan Singh Prime Minister Goal: Every village to be connected by telephone: remaining 66,822 villages to be covered by November 2007 The Department of Telecom in the Ministry of Communications and Information Technology has the responsibility of providing telephone connectivity to the 66,822 villages that remain to be covered.

3.4.1 Funds The resources for implementation of universal services obligation are raised through a Universal Service Levy which has presently been fixed at 5% of the adjusted gross revenue of all telecom service providers except the pure value added service providers like internet, voice mail, e-mail service providers. The rules also make a provision for the Central Government to give grants and loans to the Fund. The balance to the credit of the Fund does not lapse at the end of the financial year. USO Fund assigns the task of providing VPTs on the basis of bids through open tender and in this case the work has been assigned to Bharat Sanchar Nigam Ltd. Out of the 66,822 villages identified, connectivity in 14,183 remote and far-flung villages will be provided through digital satellite phone terminals. From the USOF, assistance is provided for both capital expenditure as well as operational expenditure. It is estimated that a total sum of Rs.451 crore would be required to provide VPTs in these 66,822 villages and the entire sum will be met out of USOF and no separate allocation from Government would be required.

- 32 By- Neeraj Kumar Singh (Roll No- 520751161)

3.4.2 Additional Incentives Telecom service providers are being assisted through the USOF to penetrate into the rural areas for the following activities: - Maintenance of existing village public telephones (VPTs). - Provision of an additional rural community phone in villages with a population of more than two thousand and where no public call office exists. - Replacement of village public telephones installed on Multi Access Radio Relay (MARR) technology. - Telephone lines installed in household in specified rural areas.

3.4.3 Increasing Rural Teledensity Rural teledensity will be significiantly enhanced during the period of Bharat Nirman.

3.4.4 Knowledge Connectivity The Government is committed to expanding rural connectivity through a slew of measures so that rural users can access information of value and transact business. This will include connecting block headquarters with fibre optic network, using wireless technology to achieve last mile connectivity and operating information kiosks through a partnership of citizens, panchayats, civil society organizations, the private sector and Government.

- 33 By- Neeraj Kumar Singh (Roll No- 520751161)

Unit-4

Institutional History Of The Telecom sector in India

The telegraph act of 1885 governed the telecommunications sector. Under this act, the government was in-charge of policymaking and provision of services . Major changes in telecommunications in India began in the 1980s. Under the Seventh Plan (1985-90), 3.6 percent of total outlay was set aside for communications and since 1991, more than 5.5 percent is spent on it (Figure 1). The initial phase of telecom reforms began in 1984 with the creation of Center for Department of Telematics (C-DOT) for developing indigenous technologies and private manufacturing of customer premise equipment. Soon after, the Mahanagar Telephone Nigam Limited (MTNL) and Videsh Sanchar Nigam Limited (VSNL) were set up in 1986. The Telecom Commission was established in 1989. When telecom reforms were initiated in 1994, there were three incumbents in the fixed service sector, namely DoT (Department of Telecom), MTNL and VSNL. Of these, DoT operated in all parts of the country except Delhi and Mumbai. MTNL operated in Delhi and Mumbai and VSNL provided international telephony. Given its all-India presence and policy-making powers, the DoT enjoyed a monopoly in the telecom sector prior to the major telecom reforms. However, subsequent to the second phase of reforms in 1999, which included restructuring the DoT to ensure a level playing field among private operators and the incumbent, the service-providing sector of DoT was split up and called Department of Telecom Services (DTS). DTS was later corporatized and renamed Bharat Sanchar Nigam Limited (BSNL). This meant separation of the incumbent service provider from the policy-maker. Broadly, DoT is now responsible for policy-making, licensing and promotion of private investments in both telecom equipment and manufacture and provision of telecom services. BSNL, a corporate body, is responsible for the provision of services. A crucial aspect of the institutional reform of the Indian telecom sector was setting up of an independent regulatory body in 1997 â&#x20AC;&#x201C; the Telecom Regulatory Authority of India (TRAI), to assure investors that the sector would be regulated in a balanced and fair manner. TRAI has been vested with powers to ensure its independence from the government. The government has retained the licensing function with itself. The main issue with respect to licensing has not been whether it should be with the regulator but that the terms and conditions of licensing should involve consultations with TRAI to ensure transparency in the bidding process Some of the main functions of TRAI include fixing tariffs for telecom services, dispute-settlement between service providers, protecting consumers through monitoring of service quality and ensuring compliance to license conditions, setting service targets and pricing policy for all operators and service providers.

- 34 By- Neeraj Kumar Singh (Roll No- 520751161)

Further changes in the regulatory system took place with the TRAI Act of 2000 that aimed at restoring functional clarity and improving regulatory quality. TRAI can frame regulations and can levy fees and charges for telecom services as deemed necessary. The regulatory body also has a separate fund (called the TRAI General Fund) to facilitate its functioning. To fairly adjudicate any dispute between licensor and licensee, between service provider, between service provider and a group of consumers, a separate disputes settlement body was set up called Telecom Disputes Settlement and Appellate Tribunal (TDSAT). Telecommunications is the transmission of data and information between computers using a communications link such as a standard telephone line. Typically, a basic telecommunications system would consist of a computer or terminal on each end, communication equipment for sending and receiving data, and a communication channel connecting the two users. Appropriate communications software is also necessary to manage the transmission of data between computers. Some applications that rely on this communications technology include the following: Electronic mail (e-mail) is a message transmitted from one person to another through computerized channels. Both the sender and receiver must have access to on-line services if they are not connected to the same network. E-mail is now one of the most frequently used types of telecommunication. Facsimile (fax) equipment transmits a digitized exact image of a document over telephone lines. At the receiving end, the fax machine converts the digitized data back into its original form. Voice mail is similar to an answering machine in that it permits a caller to leave a voice message in a voice mailbox. Messages are digitized so the caller's message can be stored on a disk. Videoconferencing involves the use of computers, television cameras, and communications software and equipment. This equipment makes it possible to conduct electronic meetings while the participants are at different locations. The Internet is a continuously evolving global network of computer networks that facilitates access to information on thousands of topics. The Internet is utilized by millions of people daily. Actually, telecommunications is not a new concept. It began in the mid-1800s with the telegraph, whereby sounds were translated manually into words; then the telephone, developed in 1876, transmitted voices; and then the teletypewriter, developed in the early 1900s, was able to transmit the written word. Since the 1960s, telecommunications development has been rapid and wide reaching. The development of dial modem technology accelerated the rate during the 1980s. Facsimile transmission also enjoyed rapid growth during this time. The 1990s have seen the greatest advancement in telecommunications. It is predicted that computing performance will double every eighteen months. In addition, it has been estimated that the power of the computer has doubled thirty-two times since World War II (With row, 1997). The rate of advancement in computer technology shows no signs of slowing. To illustrate the - 35 By- Neeraj Kumar Singh (Roll No- 520751161)

computer's rapid growth, Ronald Brown, former U.S. secretary of commerce, reported that only fifty thousand computers existed in the world in 1975, whereas, by 1995, it was estimated that more than fifty thousand computers were sold every ten hours (U.S. Department of Commerce, 1995). Deregulation and new technology have created increased competition and widened the range of network services available throughout the world. This increase in telecommunication capabilities allows businesses to benefit from the information revolution in numerous ways, such as streamlining their inventories, increasing productivity, and identifying new markets. In the following sections, the technology of modern telecommunications will be discussed.

4.1

Progress of reforms

4.1.1 Private Participation in Telecom For the provision of basic services, the entire country was divided into 21 telecom circles, excluding Delhi and Mumbai (Singh et. al. 1999). With telecom markets opened to competition, DoT and MTNL were joined by private operators but not in all parts of the country. By mid-2001, all six of the private operators in the basic segment had started operating (Table 1). Table 2 shows the number of village public telephones issued by private licensees by 2002. After a recent licensing exercise in 2002, there exists competition in most service areas. However, the market is still dominated by the incumbent. In December 2002, the private sector provided approximately 10 million telephones in fixed, WLL (Wireless Local Loop) and cellular lines compared to 0.88 million cellular lines in March 1998 (DoT Annual Report, 2002). 72 per cent of the total private investment in telecom has been in cellular mobile services followed by 22 per cent in basic services. After the recent changes, the stage is now set for greater competition in most service areas for cellular mobile Over time, the rise in coverage of cellular mobile will imply increased competition even for the basic service market because of competition among basic and cellular mobile services. 4.1.2 Teledensity and Village Public Phones (VPTs) India's rapid population increase coupled with its progress in telecom provision has landed India's telephone network in the sixth position in the world and second in Asia (ITU). The much publicized statistic about telecom development in India is that in the last five years, the lines added for basic services is 1.5 times those added in the last five decades! The annual growth rate for basic services has been 22 percent and over 100 percent for internet and cellular services. As Dossani (2002) argues, the comparison of teledensity of India with other regions of the world should be made keeping in mind the affordability issues. Assuming households have a per capita income of $350 and are willing to spend 7 percent of that total income on communications, then only about 1.6 percent of households will be able to afford $30 (for a $1000 investment per line).

- 36 By- Neeraj Kumar Singh (Roll No- 520751161)

Teledensity has risen to 4.9 phones per 100 persons in India compared to the average 7.3 mainlines per 100 people around the world. Figure 2 shows the growth rate of fixed and cellular mobile subscription between 1998 and 2002. Although, the coverage is still much higher in urban areas - 13.7 in urban areas compared to1.4 in rural areas, the government has made efforts to connect villages through village public telephones (VPT) and Direct Exchange Lines (DEL). This coverage increased from 4.6 lakhs in March 2002 to 5.10 lakhs in December 2002 for VPT and from 90.1 lakhs in March to 106.6 lakhs in December 2002 for DELs. BSNL has been mainly responsible for providing VPTs; more than 84 percent of the villages were connected by 503610 VPTs with private sector also providing 7123 VPTs . The overall telecom growth rate is likely to be high for some years, given the increase in demand as income levels rise and as the share of services in overall GDP increases. The growth rate will be even higher due to the price decrease resulting from a reduction in cost of providing telecom services. A noteworthy feature of the growth rate is the rapid rate at which the subscriber base for cellular mobile has increased in the last few years of the 1990s, which is not surprising in view of the relatively lower subscriber base for cellular mobile. 4.1.3

Foreign Participation

India has opened its telecom sector to foreign investors up to 100 percent holding in manufacturing of telecom equipment, internet services, and infrastructure providers (e-mail and voice mail), 74 percent in radio-paging services, internet (international gateways) and 49 percent in national long distance, basic telephone, cellular mobile, and other value added services (FICCI, 2003). Since 1991, foreign direct investment (FDI) in the telecom sector is second only to power and oil - 858 FDI proposals were received during 1991-2002 totaling Rs. 56,279 crores (Figure 4) (DoT Annual Report, 2002). Foreign investors have been active participants in telecom reforms even though there was some frustration due to initial dithering by the government. Until now, most of the FDI has come in the cellular mobile sector partly due to the fact that there have been more cellular mobile operators than fixed service operators. For instance, during the period 1991-2001, about 44 percent of the FDI was in cellular mobile and about 8 percent in basic service segment. This total FDI includes the categories of manufacturing and consultancy and holding companies 4.1.4 Tariff-setting An essential ingredient of the transition from a protected market to competition is the alignment of tariffs to cost-recovery prices. In basic telecom for example, pricing of the kind that prevailed in India prior to the reforms, led to a high degree of cross-subsidization and introduced inefficient decisionmaking by both consumers and service-providers. Traditionally, DoT tariffs cross-subsidized the costs of access (as reflected by rentals) with domestic and international long distance usage charges (Singh et. al. 1999). Therefore, re-balancing of tariffs - reducing tariffs that are above costs and increasing those below costs - was an essential pre-condition to promoting competition among different service providers and efficiency in general.

- 37 By- Neeraj Kumar Singh (Roll No- 520751161)

TRAI issued its first directive regarding tariff-setting following NTP 99 aimed at re-balancing tariffs and to usher in an era of competitive service provision. Subsequently, it conducted periodic reviews and made changes in the tariff levels, if necessary. Table 4 shows the current level of telephone charges in India effective from January, 2003. Re-balancing led to a reduction in cross-subsidization in the fixed service sector. Cost based pricing, a major departure from the pre-reform scenario, also provides a basis for making subsidies more transparent and better targeted to specific social objectives, e.g. achieving the USO. 4.1.5 Service Quality One of the main reasons for encouraging private participation in the provision of infrastructure rests on its ability to provide superior quality of service. In India, as in many developing countries, low teledensity resulted in great emphasis being laid on rapid expansion often at the cost of quality of service. One of the benefits expected from the private sector's entry into telecom is an improvement in the quality of service to international standards. Armed with financial and technical resources, and greater incentive to make profits, private operators are expected to provide consumers value for their money. Telephone faults per 100 main lines came down to 10.32 and 19.14 in Mumbai and Delhi respectively in 2002-03 compared to 11.72 and 26.6 in 1997-98 (Figures 6 and 7). Quality of service was identified as an important reform agenda and TRAI has devised QOS (Quality of Service) norms that are applicable across the board to all operators (Singh et. al. 1999).

4.2

Pre reform period and Telecommunication in India

Before 1990's Telecommunication services in India were complete government Monopoly - the Department of Telecommunication (DoT). Government also retained the rights for manufacturing of Telecommunication equipments. MTNL and VSNL were created in the year 1986.Early 1990's saw initial attempts to attract private investment. Telecommunication equipment manufacturing was deli censed in the year 1991. A notable revolution has occurred in the telecom sector. In the pre reforms era, this was entirely in the hands of the central government and due to lack of competition, the call charges were quite high. Further, due to lack of funds with the government, the government could never meet the demand for telephones. In fact, a person seeking a telephone connection had to wait for years before he could get a telephone connection. The service rendered by the government monopoly was also very poor. Wrong billing, telephones lying dead for many days continuously due to slackness on the part of the telecom staff to attend to complaints, cross connections due to faulty / ill maintained telephone lines, obsolete instruments and machinery in the telephone department were the order of the day in the pre reforms era.

- 38 By- Neeraj Kumar Singh (Roll No- 520751161)

Today, there are many players in the telecom sector. The ultimate beneficiary has been the consumer. Prices of services in this sector have fallen drastically. Telephone connections are today affordable to everyone and are also easily available. Gone are the days, when one had to wait for years to get a telephone connection. The number of telephone connections which was only 2.15 million (fixed lines) in 1981 increased to 5.07 million(fixed lines) in 1991. Today (as in 2003), there are 54.62 million telephone connections of which 41.33 million are fixed line telephone connections, 12.69 million are cellular mobiles and the remaining 0.60 million are WLL telephones1. Wireless in Local Loop (WLL) telephones and cellular mobile telephones were unknown in India a few years ago. Cell phones charges have come down so much that today one can see even a common man going around with a cell phone in his hand. The private companies are giving various incentives to attract customers, a situation which is entirely opposite to the conditions prevailing in the pre reforms era when one had to wait for years to get a telephone connection. The first step toward deregulation and beginning of liberalization and private sector participation was the announcement of National Telecom Policy 1994.NTP 1994 , for the first time, allowed private/foreign players to enter the 'basic' and the 'new cellular mobile section. FDI up to 49% of total equity was also allowed in these sectors. The policy allowed one private service provider to compete in basic services with the incumbent DoT in each DoT internal circle. It allowed duopoly in cellular mobile services in each circle. As part of the implementation of the NTP 94, licenses were issued against license fees through a bidding process. This policy initiated the setting up of an independent regulatorâ&#x20AC;&#x201C;the Telecom Regulatory Authority of India (TRAI), which was established in 1997. The main objective of TRAI is to provide an effective regulatory framework to ensure fair competition while, at the same time, protect the interest of the consumers.

4.3

Liberalization and reforms in Telecom sector since early 1990's

4.3.1 1991-92: 1. On 24th July 1991, Government announced the New Economic Policy.

2. Telecom Manufacturing Equipment license was delicensed in 1991.

3. Automatic foreign collaboration was permitted with 51 per cent equity by the collaborator.

- 39 By- Neeraj Kumar Singh (Roll No- 520751161)

4.3.2 1992-93: Value added services were opened for private and foreign players on franchise or license basis. These included cellular mobile phones, radio paging, electronic mail, voice mail, audiotex services, videotex services, data services using VSAT's, and video conferencing. 4.3.3 1994-95: 1. The Government announced a National Telecom Policy 1994 in September 1994. It opened basic telecom services to private participation including foreign investments.

2. Foreign equity participation up to 49 per cent was allowed in basic telecom services, radio paging and cellular mobile. For value added services the foreign equity cap was fixed at 51 per cent.

3. Eight cellular licensees for four metros were finalized. 4.3.4 1996-97: 1. TRAI was set up as an autonomous body to separate the regulatory functions from policy formulations and operational functions.

2. Coverage of the term "infrastructure" expanded to include telecom to enable the sector to avail of fiscal incentives such as tax holiday and concessional duties.

3. An agreement between Department of Telecommunication (DoT) and financial institutions to facilitate funding of cellular and basic telecom projects.

4. External Commercial Borrowing (ECB) limits on telecom projects made flexible with an increased share from 35 per cent to 50 per cent of total project cost.

5. Internet Policy was finalized. 4.3.5 1998-99: FDI up to 49 per cent of total equity, subject to license, permitted in companies providing Global Mobile Personal Communication (GMPC) by satellite services.

- 40 By- Neeraj Kumar Singh (Roll No- 520751161)

4.3.6 1999-00: 1. National Telecom Policy 1999 was announced which allowed multiple fixed Services operators and opened long distance services to private operators.

2. TRAI reconstituted: clear distinction was made between the recommendatory and regulatory functions of the Authority.

3. DOT/MTNL was permitted to start cellular mobile telephone service.

4. To separate service providing functions from policy and licensing functions, Department of Telecom Services was set up.

5. A package for migration from fixed license fee to revenue sharing offered to existing cellular and basic service providers.

6. First phase of re-balancing of tariff structure started. STD and ISD charges were reduced by 23 per cent on an average.

7. Voice and data segment was opened to full competition and foreign ownership increased to 100 per cent from 49 per cent previously. 4.3.7 2000-01: 1. TRAI Act was amended. The Amendment clarified and strengthened the recommendatory power of TRAI, especially with respect to the need and timing of introduction of new services provider, and in terms of licenses to a services provider.

2. Department of Telecom Services and Department of Telecom operations corporatized by creating Bharat Sanchar Nigam Limited.

3. Domestic long distance services opened up without any restriction on the number of operators.

- 41 By- Neeraj Kumar Singh (Roll No- 520751161)

4. Second phase of tariff rationalization started with further reductions in the long distance STD rates by an average of 13 per cent for different distance slabs and ISD rates by 17 per cent.

5. Internet Service Providers were given approval for setting up of International Gateways for Internet using satellite as a medium in March 2000.

6. In August 2000, private players were allowed to set up international gateways via the submarine cable route.

7. The termination of monopoly of VSNL in International Long Distance services was antedated to March 31, 2002 from March 31, 2004.

4.3.8 2001-02: 1. Communication Convergence Bill, 2001 was introduced in August 2001.

2. Competition was introduced in all services segments. TRAI recommended opening up of market to full competition and introduction of new services in the telecom sector. The licensing terms and conditions for Cellular Mobile were simplified to encourage entry for operators in areas without effective competition.

3. Usage of Voice over Internet Protocol permitted for international telephony service.

4. The five-year tax holiday and 30 per cent deduction for the next five years available to the telecommunication sector till 31st March 2000 was reintroduced for the units commencing their operations on or before 31st March 2003. These concessions were also extended to internet services providers and broadband networks.

5. Thirteen ISP's were given clearance for commissioning of international gateways for Internet using satellite medium for 29 gateways.

- 42 By- Neeraj Kumar Singh (Roll No- 520751161)

6. License conditions for Global Mobile Personal Communications by Satellite finalized in November 2001.

7. National Long Distance Service was opened up for unrestricted entry with the announcement of guidelines for licensing NLD operators. Four companies were issued Letter of Intent (LOI) for National Long Distance Service of which three licenses have been signed.

8. The basic services were also opened up for competition. 33 Basic Service licenses (31 private and one each to MTNL and BSNL) were issued up to 31stDecember 2001.

9. Four cellular operators, one each in four metros and thirteen were permitted with 17 fresh licenses issued to private companies in September/October 2001. The cell phone providers were given freedom to provide, within their area of operation, all types of mobile services equipment, including circuit and/or package switches that meet the relevant International Telecommunication Union (ITU)/ Telecom Engineering Centre (TEC) standards.

10. Wireless in Local Loop (WLL) was introduced for providing telephone connection in urban, semiurban and rural areas.

11. Disinvestment of PSU's in the telecom sector was also undertaken during the year. In February 2002, the disinvestment of VSNL was completed by bringing down the government equity to 26 per cent and the management of the company was transferred to Tata Group, a strategic partner. During the year, HTL was also disinvested.

12. Government allowed CDMA technology to enter the Indian market.

13. Reliance, MTNL and Tata were issued licenses to provide the CDMA based services in the country.

14. TRAI recommended deregulating regulatory intervention in cellular tariffs, which meant that operators need no longer have prior approval of the regulator for implementing tariff plans except under certain conditions.

- 43 By- Neeraj Kumar Singh (Roll No- 520751161)

4.3.9 2002-03 1. International long distance business opened for unrestricted entry.

2. Telephony on internet permitted in April 2002.

3. TRAI finalized the System of Accounting Separation (SAS) providing detailed accounting and financial system to be maintained by telecom service providers. 4.3.10 2003-04 1. 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.

2. Interconnection Usage Charge regime was introduced with the view of providing termination charge for cellular services and enable introduction of Calling Party Pays regime in voice telephony segment.

3. The Telecommunication Interconnection Usage Charges Regulation 2003 was introduced on 29th October 2003 which covered arrangements among service providers for payment of Interconnection Usage Charges for Telecommunication Services and covered Basic Service that includes WLL (M) services, Cellular Mobile Services, and Long Distance Services (STD/ISD) throughout the territory of India

4. The Universal Service Obligation fund was introduced as a mechanism for transparent cross subsidization of universal access in telecom sector. The fund was to be collected through a 5 per cent levy on the adjusted gross revenue of all telecom operators.

5. Broadcasting notified as Telecommunication services under Section 2(i)(k) of TRAI Act.

- 44 By- Neeraj Kumar Singh (Roll No- 520751161)

4.3.11 2004-05 1. Budget 2004-05 proposed to lift the ceiling from the existing 49 per cent to 74 per cent as an incentive to the cellular operators to fall in line with the new unified licensing norm.

2. 'Last Mile' linkages permitted in April 2004 within the local area for ISP's for establishing their own last mile to their customers.

3. Indoor use of low power equipments in 2.4 GHz band de-licensed from August 2004.

4. Broadband Policy announced on 14th October 2004. In this policy, broadband had been defined as an "always-on" data connection supporting interactive services including internet access with minimum download speed of 256 kbps per subscriber.

5. The Telecommunications (Broadcasting and Cable Services) Interconnection Regulation 2004 was introduced on 10th December 2004.

6. BSNL and MTNL launched broadband services on 14th January 2005.

7. TRAI announced the reduction of Access Deficit Charge (ADC) by 41 per cent on ISD calls and by 61 per cent on STD calls which were applicable from 1st February 2005.

4.3.12 2005-2006 1. Budget 2005-2006 cleared a hike in FDI ceiling to 74 per cent from the earlier limit of 49 per cent. 100 per cent FDI was permitted in the area of telecom equipment manufacturing and provision of IT enabled services.

2. Annual license fee for National Long Distance (NLD) as well as International Long Distance (ILD) licenses reduced to 6 per cent of Adjusted Gross Revenue (AGR) with effect from 1st January 2006.

- 45 By- Neeraj Kumar Singh (Roll No- 520751161)

3. BSNL and MTNL launched the 'One-India Plan' with effect from 1st March 2006 which enable the customers of BSNL and MTNL to call from one end of India to other at the cost of Rs. 1 per minute, any time of the day to phone.

4. TRAI fixed Ceiling Tariff for International Bandwidth, Ceiling Tariff for higher capacities reduced by about 70 per cent and for lower capacity by 35 per cent.

5. Regulation on Quality of Service of Basic and Cellular Mobile Telephone Services 2005 introduced on 1st July 2005.

6. BSNL announced 33 per cent reduction in call charges for all the countries for international calls.

7. Quality of Service (Code of Practice for Metering and Billing Accuracy) Regulation 2006 introduced on 21st March 2006.

4.3.13 11th plan (2007-20012) FDI in Telecom sector has increased in recent years with value of 81.62 billion with share of 10% in total inflow during January 2000 to June 2005. This is mainly in telecom services and not in telecom manufacturing sector. Therefore, it is essential to enhance the prospect for inflow of increased funds. The NTP 1999 sought to promote exports of telecom equipments and services. But till date export of telecom equipment remains minimal. Most of the state-of-the-art telecom equipments including mobile phones are imported from abroad. There is thus immense potential for indigenous manufacturing in India. Certain measures like financial packages, formation of a telecom export promotion council, creation of integrated facilities for telecom equipment through SEZ and encouraging overseas vendors to set up facilities in India, are required for making India a hub for telecom equipment manufacturing and attract FDI. The telecom sector has shown robust growth during the past few years. It has also undergone a substantial change in terms of mobile versus fixed phones and public versus private participation. The following table and discussions from the report of the working report on the telecom sector for the 11th plan (2007-2012)will show the growth of telecom sector since 2003:

- 46 By- Neeraj Kumar Singh (Roll No- 520751161)

Unit-5

Why Telecom Investment and Expansion??..

Globalization is a central driving force behind the rapid social, political and economic changes that are reshaping modern society and world order (Dunning & Hamdan, 1997). One of the key elements of globalization is telecommunication. Telecommunication plays a central role in helping developing countries participate in the global economy. Telecommunication is pervasive in all aspects of our lives, from the stereo in your living room to the mobile phone you carry with you. These technological innovations we have in our lives are often taken for granted and it is unfeasible for us to imagine how we can function without them. In certain parts of the world these thing are unheard of and the people who live there have not experienced the numerous benefits of modern telecommunications.

â&#x20AC;&#x153;Telecommunication maybe isnâ&#x20AC;&#x2122;t the highest priority for developing countries. The main reason for this is that telecommunication competes with food, housing, sanitation, health, transport and education. But it is important to focus on telecommunication investments, because it improves the other mentioned problems.â&#x20AC;? (John Williamson, The Rural Telecom Dilemma)

5.1

Traditional methods of financing telecommunication in developing countries

Funds for the development of infrastructure projects are traditionally obtained from general taxation or borrowed from multi-lateral and bilateral agencies (Merna & Njiru, 1998). The level of funding provided from national budget financing will depend on the priorities of the national government and its total tax resources. Due to low levels of public finance derived from general taxation, most developing countries rely on borrowing from multi-lateral and bilateral agencies to finance infrastructure developments. This has made most of the developing countries heavy with debt and is spending a large portion of their small finances in meeting debt payments, thus making developing countries borrowing to service debts and not financing infrastructure development projects. The level of finance available for borrowing the traditional sources has reduced in the recent past (Merna & Njiru, 1998). When introducing telecommunication into a country, financing it from state funding is probably the easiest method to use (ITU, 2002). Traditional methods of public financing and management of infrastructure projects have failed to keep pace with the rising demand for infrastructure services in most developing countries. The private sector has participated in infrastructure projects that are financed and managed by the public sector as consultants and contractors during the implementation phase of infrastructure development projects.

The main reasons to fund telecommunications infrastructure are the positive externalities that occur from the services used (World Bank, 1998).

- 47 By- Neeraj Kumar Singh (Roll No- 520751161)

5.1.1 Direct economic benefits Costs and time saved. substituting more expensive means of communication and learning.

5.1.2 Social and economic as well as political benefits Better provision of social services, e.g. education and health. Decentralization and integration processes. Integration and empowerment of communities.

Benefits from telecommunications infrastructure are several and can be grouped into three Categories: 1. Human welfare and economic development. 2. Reduction of poverty 3. Improvement of the environment. Infrastructures such as telecommunications are a vital factor to the activities of households and to economic production. Providing a service as telecommunications or other infrastructure service to meet the demand of businesses, households and other users is one of the major challenges of economic development Infrastructure represents the wheels of economic activity. Infrastructure services are used in the production process of nearly every sector. Users demand infrastructure services not only for direct consumption but also for raising their productivity (Bond, 1997). Adequate quantity and reliability of infrastructure such as telecommunication are key factors in the ability to participate and compete in international trade, even in traditional commodities

- 48 By- Neeraj Kumar Singh (Roll No- 520751161)

5.2

Investing in telecommunication projects â&#x20AC;&#x201C; a multiplication effect?

One benefit from what the innovations bring to developing nations is the improvement of the overall economy (Dunning & Hamdan, 1997). By encouraging the establishment of telecommunication industries within their countries, not only is their GNP boosted from the production of higher valueadded goods, but also, the economy can progress to that which is predominantly characterized by secondary or tertiary industries (Dunning & Hamdan, 1997). Should these industries flourish and even expand, investments by large foreign corporations dealing in the modern communication technologies may be expected as their confidence in the country's improving economy increase.

5.2.1 Macroeconomic Linkages between Infrastructure Reform and Poverty Category Economic growth

Employment

Public Expenditures

Benefits More private participation in infrastructure may help growth, and thereby poverty reduction, by increasing productivity and easing access to capital markets. In Latin America, a 1 % growth in per capita GDP leads to a reduction of the share of the poor of close to half a percentage point. If infrastructure reforms generate economic growth, there should ultimately be some employment creation, but it may take time.

Revenues from reforms (for example, privatisation) and the phasing out of subsidies generate fiscal space for other public programs that may be better targeted and more pro-poor.

Risks If economic growth benefits mostly the non poor, poverty may not be reduced by much and inequality may increase, with a possible reduction in social welfare. Infrastructure reform can contribute to broadly based growth.

Reforms may generate layoffs and reductions in wages, at least during the transition period. The negative impact of layoffs on poverty can be mitigated through severance packages and other policies. The poor may be hurt by the reduction of public subsidies for infrastructure services (there may be cuts in the subsidies for both connections and consumption).

- 49 By- Neeraj Kumar Singh (Roll No- 520751161)

5.3

What is Information and Communications Technology?

Information and Communications Technology (ICT) is an umbrella term that includes any communication device or application, encompassing: radio, television, cellular phones, computer and so on, as well as the various services and applications associated with them, such as videoconferencing and distance learning. ICT’s are often spoken of in a particular context, such as ICT’s in education, health care, or libraries (ITU, 2003). The Organization for Economic Co-operation and Development’s (OECD) definition makes a distinction between the manufacturing and service dimensions of the ICT. In 1998 OECD member countries agreed to define the ICT sector as a combination of manufacturing and services industries that capture, transmit and display data and information electronically. The important factor in this broad definition is that, as it breaks the traditional dichotomy between manufacturing and services, activities producing and distributing ICT products can be found everywhere in the economy (OECD, 2002). The definition OECD made, paves way for understanding the multi-dimensionality of the ICT and its applicability in helping reduce poverty across various sectors (OECD, 2002). The manufacturing sector of ICT hardware and software contributes to the economic growth and creates employment in countries like China, Malaysia and Mexico. India, on the other hand, has been a beneficiary of global software outsourcing, achieving spectacular growth in this sector. India exports software to 95 countries around the world and serves as a major outsourcing hub. The main market for the Indian software has been the USA, and to a lesser degree, Europe. 185 of the Fortune 500 companies outsourced their software requirements in India alone. ICT industry generated 7.7 billion USD in 1999 and creating over 180,000 jobs in India in 1998 (UNDP, 2001). Since these sectors rarely create direct employment for the very poor. There is no denying of the fact that ICT has been recognized as an important tool for socioeconomic development. Socio-economic development was earlier limited to providing services from top-down approaches to the communities who are less privileged, poor and disadvantaged (Mahmud, 2002).

- 50 By- Neeraj Kumar Singh (Roll No- 520751161)

5.4

The digital divide

According to ITU (2002) the digital divide is a result of socio-economic disparities, and thus it is little different from other income, health and education divides, linked to poverty. The digital divide, is therefore often just a symptom of a much more profound and longstanding economic and social division within and between societies, and which existed prior to the ICT revolution. Lack of information is one of the major causes for this situation (Jaggi, 2003). Relevant and concerned information, which they want to know, is missing. Hence, the gap between “information rich and information poor” community is also increasing. The new millennium has ushered in a world of greater inter-connectivity, accelerating the flow of free data and information, and shrinking time and national boundaries.

“The information and technology gap and related inequities between industrialized and developing nations are widening: a new type of poverty -information poverty - looms. Most developing countries, especially the least developed countries are not sharing in the communications revolution.” (United Nations, 2000)

- 51 By- Neeraj Kumar Singh (Roll No- 520751161)

- 52 By- Neeraj Kumar Singh (Roll No- 520751161)

- 53 By- Neeraj Kumar Singh (Roll No- 520751161)

- 54 By- Neeraj Kumar Singh (Roll No- 520751161)

- 55 By- Neeraj Kumar Singh (Roll No- 520751161)

- 56 By- Neeraj Kumar Singh (Roll No- 520751161)

- 57 By- Neeraj Kumar Singh (Roll No- 520751161)

In the past, ICT was generally considered as a luxury and was not considered as a viable option for development policy where other needs, such as building roads, hospitals and providing drinkable water, etc. were considered more urgent (Pedrelli et al, 2001). However, the digital divide has today become one of the most prominent considerations in the development divide, and the early judgment is no longer sustainable, especially when considering the following points: ICT provides exceptional opportunities to effectively fight against poverty in the developing countries: for example, ICT can support the poor in business development, foster empowerment of the poor, facilitate access to education and health, help improve the environment and prevent natural disasters. Thanks to the huge amount of information easily accessible and hardly controllable by governmental institutions, it strengthens democracy. United Nations (UN) considers ICT a priority for the development of poor countries, and many developing countries agree on the importance of the role that ICT can play in their development. International initiatives are proliferating. The G8 Dot Force, the UN ICT Task Force and several other initiatives are aimed at effectively promoting access to ICT in the developing countries. Exclusion from ICT increases the divide between the developed and developing countries.

- 58 By- Neeraj Kumar Singh (Roll No- 520751161)

Unit-6

What is creative or innovative financing?

When you are planning for a way to finance a project it is important to do a deep research of the different specific factors that a country has, and then choose a financial way based on those circumstances.

6.1

What is financial engineering?

financial engineering are divided in a public and a private sector. The public sector has four mechanisms for participation and they are direct, indirect, equity and risk. The private sector has three mechanisms for participation and they are debt, mezzanine and equity.

6.1.1 Public-private financial engineering

Financial Engineering

Public

Direct

Indirect

Private

Equity

Risk

Debt

Mezzanine

Equity

According to Gerald (1998) the word finance was introduced in 1960s. The term financial engineering is even younger and was introduced during the 1980s. A factor that made it easier to start use financial engineering was the introduction of computers and communication technology or also known as ICTâ&#x20AC;&#x2122;s. This has lowered the costs and time spending in these operations.

Finnerty (1988) defines financial engineering as the development and creative application of financial technology to solve financial problems and exploit financial opportunities.

- 59 By- Neeraj Kumar Singh (Roll No- 520751161)

â&#x20AC;?Financial engineering is the use of financial instruments to restructure an existing financial profile into one having more desirable properties.â&#x20AC;? Lawrence Galitz (1995) Financial engineering is about employing theoretical finance and computer modelling skills to make pricing, hedging, trading and portfolio management decisions. When you are using derivative securities and other methods, financial engineering aims to precisely control the financial risk that an entity takes on. Methods can be employed to take on unlimited risks under certain events, or completely eliminate other risks by utilizing combinations of derivative and other securities (Galitz, 1995). Financial engineering are usually used in these areas: Investment banking. Corporate Strategic planning. Risk management. Primary and derivative securities valuation. Swaps and derivatives trading or dealing. Financial information systems management. Portfolio management. Securities trading.

Usually financial engineering are used to reduce the financial risk, a second thing is to restructure cash flows for better financial management (Galitz, 1995). Because financial engineering are used to finance projects it can be used to finance telecom projects around the world, and especially in developing countries. This kind of infrastructure project is according to Merna & Njiru (2002) important in these countries because they are in need for that. Infrastructure projects in developing countries bring several improvements of the country, they lead to: Human welfare and economic development. Reduction of poverty. The environment will be improved.

- 60 By- Neeraj Kumar Singh (Roll No- 520751161)

6.2

Financing Strategies

In this section we will present the different strategies involved when financing telecommunication projects.

6.2.1 Build-Operate-Transfer (BOT) The build operate transfer system was according to Merna & Njiru (2002) introduced in the early 1980s by Targut Ozal who was the Prime Minister in Turkey at that time. The BOT system has also been referred to Ozalâ&#x20AC;&#x2122;s formula (Merna & Njiru, 2002). A normal BOT project last approximately 20-30 years. BOT means that a consortium owns the project for a specific time period. In other words, a franchise is received by a private entity from the public sector. This involves finance, design, construction, and operates a facility for a specific period. While the project is operating it is allowed to charge users to cover the investments. When the time period has exceeded, the ownership will be transferred back to the public sector. The revenue from the project is used to cover the debts and provide return on equity.

6.2.2 Build-Transfer-Operate (BTO) Menheere & Pollalis (1996) says that BOT are often used in projects that involve privatization or public private partnership. BOT and BOO also have this characteristics, but in BTO the ownership of the facility is directly transferred from the private party when the delivery is done. According to Ernst & Ngoc-Nga Pham (1994), the completed BOT project is transferred to the government. Then the government signs a contract with a private company to be able to operate the facility. During this time the government receives a payment from the operator. The BTO system was successfully used in Thailand, 1990, when they privatized parts of the telephone system.

6.2.3 Build-Own-Operate (BOO) As mentioned in BTO, BOO are used in projects that involve privatization or public private partnership. When you are using the BOO system, the private party have the ownership of the facility during the projects whole lifetime. Because the private party runs the facility they get return of their investments. They are also allowed to sell the facility at any time, at market value. In short terms the private party build, own and operate the facility.

- 61 By- Neeraj Kumar Singh (Roll No- 520751161)

6.2.4 Build-Lease-Transfer (BLT) Ernst & Ngoc-Nga Pham (1994) tells that the completed facility is leased to the government agency when you are using the BLT system. The roll that the government agency has is to assume the operating risk. The government agency is also responsible that payments are done to the private sector, these payments provides a fixed rate of return on equity and amortising of debts. While using the BLT system the government can shift the financial risk to the private sector.

6.2.5 Fiber-optic cable or satellite ITU (2004-09-20) defines this strategy as through fiber-optic cable or satellite set up a telecommunication network in developing countries. Some examples of this method are shown below. Fiber-optic Link Across the Globe (FLAG) FLAG cooperate with RASCOM (The Regional African Satellite Communication System) to ensure connectivity to countries that are land-locked. South African Far East (SAFE) Through private financing a telecommunication network are planned to be set up in this area. AFRILINK This is a pan-African proposal to set up submarine cables through the entire continentâ&#x20AC;&#x2122;s coastline. Project Oxygen This is according to ITU maybe the most interested fiber-optic cable projects. This fiber-optic cable network are planned to cover 90 % of the worldâ&#x20AC;&#x2122;s international telecom traffic. This method is like cross border initiatives, a method of financing telecommunication that will be covered later.

- 62 By- Neeraj Kumar Singh (Roll No- 520751161)

6.2.6 Privatization According to Ferreira & Khatami (1996) the public ownership during 1970s and 1980s in developing countries lead to economic instability and structural inefficiencies. When privatization was introduced in late 1980s the economy has improved in these countries. For instance in Latvia the government sold 60 % of the telecommunication to private companies, which lead to many bidders that wanted to invest in the countryâ&#x20AC;&#x2122;s telecommunication, for example Telia, Telekom Finland, France Telecom, Tele Danmark, OTE (Greece) and Deutsche Telekom. (Ferreira & Khatami, 1996) According to Merna & Njiru (2002) privatization is the most innovative way of financing infrastructure projects. The definition of privatization is according to Gayle & Goodrich (1990): â&#x20AC;&#x153;The process of reducing the roles of government while increasing those of the private sector activities or asset ownership.â&#x20AC;? Merna & Njiru (2002) also say that privatization should be preceded by liberalization because it will help open up the market to international competition. The privatization shall then be followed by a deregulation and the main purpose of this is that the privatized enterprises should face market forces. The main benefits that a privatization results in are the following: Increased quantity of production. Improved quality of the output. Reduced unit cost of production. In longer terms, expanded opportunities for growth and employment. Generation of new technologies. Increased foreign investments.

- 63 By- Neeraj Kumar Singh (Roll No- 520751161)

6.2.7 Acronyms Merna & Njiru (2002) describes a number of different acronyms that involves in different ways to finance infrastructure projects, these are:

BOD

Build-operate-deliver

BOL

Build-operate-lease.

BOOST

Build-own-operate-subsidies-transfer.

BOOT

Build-own-operate-transfer.

BRT

Build-rent-transfer.

BCC

Business-cooperation-contracts.

DBOM

Design-build-operate-maintain.

DBFM

Design-build-finance-maintain

DBFO

Design-build-finance-operate

FBOOT

Finance-build-own-operate-transfer.

ROL

Refurbish-operate-lease.

ROT

Rehabilitate-operate-transfer.

- 64 By- Neeraj Kumar Singh (Roll No- 520751161)

6.3

Financing ways

Here we will present the most common innovative ways to finance telecommunication projects.

6.3.1 Leasing According to Sigurd Hansson (1998) there are three different kinds of leasing: 1. Operational leasing â&#x20AC;&#x201C; The company that lends out the material are responsible for reparations and maintains. If new material or products are launched the company upgrade the system to these new models. 2. Financial leasing â&#x20AC;&#x201C; In this case a leasing company will be involved. The country that wants to set up a telecommunication network in their country give monthly payments to the leasing company. The leasing company then gives a payment to the supplier which sends the material for the telecommunication network to the country. 3. The third way is when a sale of a service happens in the same time period when lending out a good.

How leasing works today:

Customer

Supplier

Leasing Company

- 65 By- Neeraj Kumar Singh (Roll No- 520751161)

Deeper explanations of the leasing process that are showed in this figure are: 1. The customer decides which supplier they want to buy from; they decide price, delivery and installation conditions. They also decide that the leasing company will be the buyer. 2. The leasing contract is established between the customer and the leasing company. 3. The leasing company then buys the equipment and it will be delivered to the customer. 4. The leasing company pays for the equipment to the supplier. 5. When the customer has got the equipment, they will start to pay the leasing company, usually every month. 6. When the renting time has expired, the customer can continue to rent the equipment, but at this time to a significant lower price. The big advantage to lease instead of buying is that the customer does not need to have financial resources except for the monthly payments. This will lead to that the country can establish a telecommunication network in a short time period and then pay the leasing company on a monthly basis.

6.3.2 Joint venture loans If the loan for the investment is very big it could be difficult for one single company to lend the total sum. One solution to this problem is joint venture loans, which means that two or more companies share the risks and benefits of the loan. Copeland, Koller & Murrin (2000) explain that joint venture loans are an effective partnership, but to make this happen they must be structured. An survey that these authors have made show that when two company are involved in a joint venture that are evenly split, there is a 60 % chance to success, but if the joint venture is not evenly split the chance to success is only 31 %. It is also important in this perspective to have two companies that are evenly strong and also as strong as possible to increase the chance to success. If one of the companies is weaker than the other it will generate a hinder to successful management, the main reason for this is that the strong part of the joint venture will dominate in decision making, which will lead to that the strong company put its own interest above the weaker company and even the whole joint venture. Flexibility and autonomy are the main factors for a joint venture to work well. Flexibility is important because the market and customer needs changes all the time. To facilitate that these factors will be involved in the joint venture, it is recommended that an independent president are chosen and also do a full business system.

- 66 By- Neeraj Kumar Singh (Roll No- 520751161)

A joint venture often ends when the predetermined goal has been reached; it is recommended to prepare for this break up in advance so that all parties that are involved are prepared for that.

6.3.3 Gifts Gifts to developing countries could come in different forms. It could be a sum of money from example a foreign telecom operator that wants to invest in new markets. A better method for the telecom operator would be to give telecom equipment to the developing country, which would lead to a lock-in effect. The most common way gifts are given are from help organizations like U.S. Agency for International Development (USAID) or SIDA, that makes a donations by either give out money for a certain project, give guarantees or subsides.

6.3.4 Guarantees When an investor sends money that is aimed for a specific developing country, there could be a risk that the country uses the money for other projects. To reduce this risk the investor could, according to Stromberg (2003), give the country some instructions where the money will be spent, in other words set up guarantees for the investment. These guarantees provides credit enhancement to financing infrastructure projects which according to Stromberg (2003) leads to economic growth and reducing poverty. An effect that the guarantees has, is when they are set it could be easier to get money from other investors, because they see that it is decided where the money will be invested and they do not risk to send money to developing countries that will use the money for other projects than has been determined (Stromberg, 2003).

6.3.5 Telecom subsidies A definition of a subsidy is according to Cannock (2001) a grant or a monetary gift, usually given from the government to a specific project. Another form of subsidies is that the government reduces the taxes for a company that needs assistance; thereby they get more financial resources. The subsidiary method is good to financing telecommunications projects. One part of the subsidy has been a gift from the government to the operators. The next part of the money will be paid when the equipment has been installed. Finally the remaining money will be paid to the operators in semi-annual installments that will last for several years.

- 67 By- Neeraj Kumar Singh (Roll No- 520751161)

6.3.6 Aid A definition by Merna & Njiru (2002) of aid is a direct gift of money from a government or the World Bank. The gift of money could be in different forms for example loans, grants and funds to development banks. The aid is aimed for developing countries to raise their community and social welfare. The donor could be involved in the project and decide what shall be done. Aid is usually aimed for two different sectors. Projects aid This form of aid is often very structured from the donor. Programme aid This form of aid finance imports in return for sectoral policy reforms. It can be described in two different forms. Bilateral aid The definition of bilateral aid is money sent from one government to another government. This aid is aimed to finance a specific project in the country that gets the money. Some examples of bilateral aid agencies around the world are UKâ&#x20AC;&#x2122;s Department for International Development (DfID), the Overseas Economic Cooperation Fund (OECF) of Japan and finally Kreditanstalt Fur Wiederaufbau (KFW) in Germany. Multi-lateral aid This aid is primarily aimed for infrastructure projects. These projects are financed by multilateral development banks (MDBs). Some examples of these banks are the World Bank Group, the Asian Development Bank (ADB), the African Development Bank (AfDB) and the InterAmerican Development Bank. These banks drawing funds from several countries and their loans are usually more favorable than commercial banks.

- 68 By- Neeraj Kumar Singh (Roll No- 520751161)

6.3.7 Cross-border initiatives A cross-border initiative means that several countries cooperate to build up a common telecommunication networks. Through the past decades several projects of this type has been successful in developing countries (ITU, 2004-09-20). Pan-African Telecommunications Network (PANAFTEL) This project was built in the mid 1970s. It involved a cross-border network of radio links. The Regional African Satellite Communication System (RASCOM) This project was established in 1993. The task of the RASCOM project was to harness the satellite communication for the 40 African countries that was involved. The SPACECOM Project This project was launched in 1994 by ITU. This project focused on bringing space technology to rural development, especially in Kenya, Uganda and Tanzania.

6.3.8 Vendor and supplier financing According to ITU (2004-09-20), vendor and supplier financing for telecommunication can take two different forms. 1. Interest rate subsidy. This involves reduction in interest payments of a loan. 2. Loans and guarantees. When this financing method is used the vendor put its own credit at risk. Pacific Telecommunications Council (2004-10-20) illustrate that vendor and supplier financing could have a good supportive role in building up telecommunication, but a problem could be that the large amount of money that is required for these projects, could be difficult to capture through this method. A problem that ITU (2004-09-20) says about vendor and supplier financing is that this method only covers the cost of imported equipment, and therefore not other costs like labor and domestic equipment. Despite this there have been successful telecommunication projects in developing countries that have used this method, for example in Thailand

- 69 By- Neeraj Kumar Singh (Roll No- 520751161)

6.3.9 High yield dept (junk bonds) High yield debt also referred to junk bonds means that the private investors are satisfied with a good return. To be able to receive a good return from a telecom project it is important to invest at an early stage (ITU, 2003). Ideally for the investor is of course to have high returns and low risk. It is very difficult to combine these two. Therefore the investor tries to be positioned between these two goals with a medium return and risk. According to (ITU, 2003) junk bond is a successful tool for financing telecommunication projects in the future.

6.3.10 Reverse bid A definition (Merna & Njiru, 2002) of a reverse action would be that the buyers post their need for a project and then the suppliers bid to realize the need. The supplier that demands the least amount of money gets the deal and could start the project. A connection to this market could be to start with a developing county that are interested in building a telecommunication network in their country. They spread the information to different suppliers and get bids from them. Then they decide which offer that are best suitable for them. This could be a good starting point and thereafter decide which financial tool the country wants to use to invest in the telecommunication network. (Merna & Njiru, 2002)

6.3.11 Pre-Paid The pre-paid system was introduced in Germany in the 1920s, but it is a fairly recent concept in the United States. A definition (Investorwords, 2004-12-02) of pre-paid would be that you pay for access to a certain product or service in advance. These payments are often done on a monthly basis. A connection to the telecommunication industry would be that when the telecommunication network is built, the country has to pay on a monthly basis to access the network.

6.3.12 Options According to Neftci (2004), options are an instrument of volatility. There are several kinds of options, the two basic ones are call and put options, which Hull (2003) defines as follow. Call option A call option gives the holder the right but not the obligation to buy the underlying asset at a certain date for a certain price. - 70 By- Neeraj Kumar Singh (Roll No- 520751161)

Put option A put option gives the holder the right but not the obligation to sell the underlying asset at a certain date for a certain price. Neftci (2004) describes that there are several more options but they usually are divided in two categories, which are plain vanilla and exotic options. The options in the plain vanilla category are treated with the Black-Scholes model, which is a model for pricing European options. This model was developed 1973 by Fisher Black, Myron Scholes and Robert Merton. The main difference between an American option and a European option according to Hull (2003) is that the American option could be exercised at any time during its lifetime and the European option only can be exercised at the end of its lifetime. Options can be used in big projects like a telecommunication investment. The advantage that this method has is that it provides insurance for the investor. The main reason for this according to Hull (2003) is that the investor has the right but not the obligation to take an action, if there would be big price movements the investor can take an action on the basis of that.

6.3.13 Self financing As mentioned in many articles, for example by the Ministry of Communication: Science and Technology (2004-11-19), a criteria for a successful self financed telecommunication company in a developing country is that there are already a telecommunication network in the country, that the company owns.

6.3.14 Public Private Partnership Merna & Njiru (2002) indicate that public private partnership could be divided into three different types of partnerships. These are sharing, dominant and independent. Sharing public private partnership This partnership means that the private and public sector share the risk for the project. If there is any risk that they together cannot control, the public sector usually takes the responsibility for that risk. Dominant public private partnership This kind of partnership is usually financed by a soft loan that the public sector usually is responsible for. A soft loan is a loan with lower rates than an ordinary bank loan. - 71 By- Neeraj Kumar Singh (Roll No- 520751161)

Independent public private partnership This partnership is used in projects with high risks. When this method is used the public sector does direct financing investments in the project. Principally is a public private partnership a form of privatization, but with a big difference that the public sector also are involved. The partnership is involving the government and one or more private sector companies. (Merna & Njiru, 2002)

6.3.15 Domestic ways of financing telecommunication investments If a country is not interested in foreign investors for their telecommunication projects, there are some different options that could be successful. Private sector investments According to Kessides (2004), investments from foreign private company could be a big risk for the developing countries. If the country instead chooses to concentrate on the private sector in the domestic market they will reduce the risk. Private sector investments have risen from 6.2 billion USD in 1990 to 57.3 billion USD in 1998. In resent years it has reduced a bit. Public sector investments This is a method that was used in Pakistan when they upgraded their telecommunication system in 1980. The public sector in a developing country could be one part of financing a telecommunication network (Asia Trade Hub, 2004-10-28). Government-owned telecommunication According to Hadi Salim (1995) this system leads to that the government has monopoly of the telecommunication market in the country. As mentioned in the article by Hadi Salim there could be a problem with government owned telecommunication because the government is suspicious of technology. Customers pay for the investments If a country chooses to use this method they have to make precise calculation of how much the investments will cost. When this is done they have to continue calculate how many customers and how much they have to use the telecom services on a monthly basis. When this is done they know how big the loan would be and they also know how long time it will take to repay it (ITU, 2003).

- 72 By- Neeraj Kumar Singh (Roll No- 520751161)

6.4

Financial risks

When it comes to financial risks that could be involved in telecommunication projects Merna & Njiru (2002) claims that risks are usually known before because there are always two parties involved that has opposite viewpoints. The authors define financial risks as: â&#x20AC;&#x153;The impact on the financial performance of any entity exposed to risk.â&#x20AC;? There are several kinds of financial risks that Merna & Njiru (2002) describes, and here follows a presentation of them. Currency risk This kind of risk is usually seen in cross border flow of funds. When a country that wants to invest in telecommunication has to deal with foreign currencies, it normally results in some form of currency risk. A problem that can arise in developing countries is that they have exotic currencies, which means that they have a currency that not are traded on any existing exchange market, which may result in a more difficult process. The currency risk could also be a problem for foreign investors and other organizations that give money support to developing countries, which could result in big losses when the money are exchanged to a local currency.

Interest rate risk Interest rate risk is a risk that affects both the borrowing and investing sides directly. This risk is usually classified in a short and a long time perspective. In the short time perspective the investment and its risk mainly depend on the money market. In the long time perspective the rate could be paid for example every 6 month until the loan matures. Equity risk The equity is usually connected with the share capital, if the shares rise or fall it will affect the equity. The risk of equity is connected with warrants and convertible bonds. If a company let investors buy warrants and bonds on the shares of a company there would be a risk involved, because the company could both win and lose on the deal, because they do not know if the share price will rise or fall in the future.

- 73 By- Neeraj Kumar Singh (Roll No- 520751161)

Commercial risk Commercial risks are related to the completion, operation or input and output of the project and it could affect the financial performance. A connection to the different related factors are that the first which is completion, is a risk if the project is not finished when it was supposed to, which will result in more expenditure. The second, which is operation, could be a risk if, for example a telecommunication does not work properly or are involved in some legal issues which also result in more expenditures. The third and final, is input and outputs. The risk in this case is that a project often are dependent of suppliers, if the supplier for some reason cannot deliver the required material, the whole project could be affected.

Liquidity risk Liquidity risk has a connection to commercial risk. If the project does not reach its goals it could result in a liquidity risk. This risk is usually a result of that a seller is forced to sell under the market price which will result in lower incomes and volatile liquidity. Counterparty risk or credit risk Counterparty risk which is also called credit risk is seen in any financial transaction that involves two parties. An example could be a developing country that has signed a contract with a financial institution of borrowing money; this will be enclosed with a risk because it is not for sure that the financial institution could accomplish the deal at the right time. It could also be in diverse, when the loan is going to be paid back and the lender cannot accomplish the payments, because of some problems. Political risk This kind of risk follows by a publicity guaranteed loan or a loan directly to a foreign government. The definition of political risk is: â&#x20AC;&#x153;The exposure to a loss in cross-border lending caused by events that are, at least to some extent, under the control of the government of the borrowing country.â&#x20AC;? (Nagy, 1979) In other words, a political risk is the risk that the investor could lose the money because of the countries political structure. Some examples of political risks are tax laws, expropriation of assets, the government repudiation to sign a contract, inconvertibility of foreign currency. Other factors that may affect the political risk in a country could be war, terrorism or civil disturbance.

- 74 By- Neeraj Kumar Singh (Roll No- 520751161)

Regulatory risk Montgomery Research (2004-12-02) defines regulatory risk as the external regulatory actions and development that can impact the financial and operational performance of a company; this could include revenue requirement, cost structure and operational processes. It is important that companies understand how the regulatory market model works and then try to lessen the effects of the regulatory risk. Montgomery Research (2004-12- 02) gives the following statement that companies should follow. 1. Assign probabilities for every potential outcome for each regulatory scenario. 2. Quantify the financial impact for each regulatory scenario to the company. 3. Finally, calculate the expected results and variance for each regulatory risk scenario. Inflation Inflation is defined (Investorwords, 2004-12-02) as a sustained rise in the general levels of prices, which in other words means that the money loosens its value and the price for different projects could reach unlimited values. One factor that can contribute to inflation is that the money supply in a specific country increases. There are a lot of different methods of measuring inflation and here follow a description of some of them. o Consumer price index This method compares the prices of products at different time periods. The products that are chosen, are products that are bought by the typically consumer. o Producer price index This method compares the price incomes for different products to a producer at different time periods. The main difference between this method and the consumer price index is that the taxes that the consumer pays could vary from the taxes that the producer has to pay. o Wholesale price index Here the change of price is measured at the wholesaler. o Commodity price index The price change of a selection of commodities is measured.

- 75 By- Neeraj Kumar Singh (Roll No- 520751161)

o GDP deflator This is measured by the total amount of money spend on GDP. This method is the broadest measure of price levels. (Investorwords, 2004-12-02) A small amount of inflation in a country usually has a positive effect on the economy, but when the inflation increases it could have dramatically effects on the economy. A British economist called A.W. Phillips found a relationship between inflation and unemployment. When the inflation is high, the unemployment is low and vice versa, the Phillips curve is shown in the following figure.

- 76 By- Neeraj Kumar Singh (Roll No- 520751161)

6.4.1 Other typically risks in telecommunication projects Merna & Njiru (2002) describes some other risks that may affect, for example an investment in telecommunication. Technological risk This is a risk that could be seen in all technological projects, for example in a telecommunication network. The risks contain temporarily shut downs of the network for some reasons, it can also be because of an upgrading of the network. Operating risk These risks are involved in commercial risk and it covers these scenarios. 1. The risk that the project cannot run at the predicted efficiency. 2. The risk that the project gets too expensive to run. 3. The project could be delayed, for example the suppliers could not deliver the needed material. 4. Natural disasters may arise that disturb the projects, for example fire and flooding. High transaction costs This is a part of operating risk, which contain the risk that the cost of using a network gets too high. Transaction cost also covers the risk that the business deals are too

- 77 By- Neeraj Kumar Singh (Roll No- 520751161)

6.5

Leverage effects on ways to finance telecommunication

A definition of leverage could be as follow, â&#x20AC;&#x153;The ability to control large amounts of a financial asset with a comparatively small amount of capital.â&#x20AC;? (The Handbook of World Stocks, Derivative & Commodity Exchanges, 2004-10-29) Usually the road to a successful leverage project is that a person/country that wants to invest in a project spends a minor sum of their budget and loan the rest of the money. This will generate that they have money left for other investments (The Handbook of World Stocks, Derivative & Commodity Exchanges, 2004-10-29). A leverage effect can be seen in three different projects: 1. Start-up grants/gifts. 2. Financial snow-ball effect. 3. Creating new investments. (LOCREGIS, 2004-10-29) A connection to this segment could be a developing country with a limited amount of money that wants to invest in telecommunication, therefore creating new investments. To be capable of manage this, is to take some percentage of their money and then loan the rest to build up the telecommunication network. Then they will have the remaining money left to upgrade the network or spend in other projects. According to the International Labor Organization (2004-10-29) there is another view of leverage effects which are seen when the projects are implemented. This involves factors that arise because of the new project. Some examples could be that new projects generate new jobs and new business can arise that has this project as a requirement for their own business, a good example is telecommunication. According to the World Bank (2004-12-02), new jobs in developing countries will generate poverty reduction. The new jobs will also generate economic growth which also helps reducing poverty.

- 78 By- Neeraj Kumar Singh (Roll No- 520751161)

6.6

How financial development may promote growth

- 79 By- Neeraj Kumar Singh (Roll No- 520751161)

6.7

The importance of telecommunication for economic growth

â&#x20AC;&#x153;A well spread out telecommunication network provides a great impetus to the economic growth in a country. Considering the significance of its contribution and also the need to integrate with the global economy, several policy initiatives have been taken by the government.â&#x20AC;? (Ministry of Finance, Govt. of India, 2004-11-26) The Indian economy is on the path of recovery. The gradual opening up of the economy ensured steady growth even at a time when other countries were in the grip of massive slowdown. Indiaâ&#x20AC;&#x2122;s move toward globalisation by progressive reforms, especially in the telecom sector which has been driven by transparent policies and better market conditions to attract foreign investments, is responsible for the economic growth in India (Proctor & Olivier, 2002). Guislain & Qiang (2003) argues that the telecommunication sector includes both the production and distribution of equipment and the delivery of services (see Figure 12). It is one of the key drivers of economic growth and plays a vital role in the competitiveness of modern economies. Furthermore, it is often among the first infrastructure sectors to allow private and foreign provision, and therefore, a trend setter for other sectors to open up and follow the path of reform.

- 80 By- Neeraj Kumar Singh (Roll No- 520751161)

A study by Contessi (2003) shows informal evidence, that there is positive correlation between GDP per capita of a country and its endowment of connections. Correlation between teledensity and GDP per-capita (178 countries)

An econometric study by Jacobsen (2003) analysed the relationship between telecommunication development and economic growth. The study showed that there seems to be larger growth effects from telecommunication development in developing countries than in developed countries, a result that contradicts earlier findings. The result stems from a larger indirect impact of telecommunications in other sectors.

- 81 By- Neeraj Kumar Singh (Roll No- 520751161)

- 82 By- Neeraj Kumar Singh (Roll No- 520751161)

The above figures show the correlations Jacobsen (2003) made. They show that in the period between 1990 and 1999, GDP is strongly correlated with main telephone lines. The relationship between GDP and personal computers and between GDP and telecommunications investment is also large, while cellular telephones seem to have somewhat lesser correspondence with GDP.

- 83 By- Neeraj Kumar Singh (Roll No- 520751161)

6.7.1 Successful developing countries In this section we will present the data we have collected on the developing countries that have been successful in developing and expanding communication. The data is gathered from the Internet, literature and articles. Financing ways developing countries prefer (42 developing countries)

Strategies developing countries prefer (42 developing countries)

- 84 By- Neeraj Kumar Singh (Roll No- 520751161)

Unit-7

B.S.N.L. as a Telecom Service Provider

BSNL has installed Quality Telecom Network in the country and now focusing on improving it, expanding the network, introducing new telecom services with ICT applications in villages and wining customer's confidence. BSNL is numero uno operator of India in all services in its license area. The company offers vide ranging & most transparent tariff schemes designed to suite every customer.

7.1

BSNL as an integrated telecom service provider

BSNL being the oldest telecom player, if we take the legacy of DoT before its formation, is a diverse telecom service provider. It is niche in all verticals of telecom fields and is serving the nation by being with the nation. All the services provided by the company can be broadly classified as:

Wire Line Services CDMA WLL Limited Mobility Services GSM & CDMA Based Full Mobility Services National Long Distance Services International Long Distance Services Leased Lines, D.S.P.T., & I.S.P. Services. IN Services viz. Prepaid calling card etc.

- 85 By- Neeraj Kumar Singh (Roll No- 520751161)

To fulfill the telecom service need of the nation, BSNL offers different kinds of products suiting the different kind of people with different kind of need. These various product offered by BSNL can be summarized as follows: 1. BSNL Landline: 1.1 1.2 1.3 1.4

Fixed Line Pre-paid (FLPP) BSNL PCO Phone plus services ISDN

2. BSNL Mobile: 2.1 2.2 2.3 2.4

Prepaid and Postpaid Unified Messaging WAP/ GPRS/ MMS 3G services

3. BSNL WLL: 3.1 3.2 3.3

Post-paid fixed mobility Post-paid and Pre-paid with full mobility BSNL data card, NIC and EVDO

4. BSNL Internet: 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 4.13

PSTN dial up access ISDN dial up access Leased line access Direct Internet Access (DIAS) Account free Internet dial up access based on CLI BROADBAND connection Wi-Fi SANCHARNET CARD Wi-Max WAP & GPRS Co-location service Web-hosting SMS & Bulk SMS

- 86 By- Neeraj Kumar Singh (Roll No- 520751161)

5. BSNL Managed Network Services 6. MPLS BASED VPN SERVICE 7. Leased Line : 7.1 7.2

Managed Leased Line Service(MLLN) Access link Services

8. Intelligent Network Services (IN) 9. Audio Conferencing 10. Video Conferencing 11. BSNL Web Conferencing 12. Fleet Management Solution 13. Inet 14. EPABX 15. Data Communication 15.1 15.2 15.3

HVNET RABMN INMARSAT

- 87 By- Neeraj Kumar Singh (Roll No- 520751161)

7.1.1 New Initiatives WiMAX: Tender Invited for 1000 BTS at Rural Block HQs covering 25000 village communities centers. IPTV: Launched in Three Cities viz. Bangalore, Pune & Kolkata. Agreement signed with Franchisees for another 50 Cities VOIP: EOI under consideration 3G Services: Have been launched in Feb-2009 in select cities and now pan India roll-out is on the card. New Generation N/W: Is being deployed to meet future technology compatibility. DTH Services: Planningâ&#x20AC;&#x2122;s to launch this service is on the card.

7.1.2 Developmental Plans (2008-09) Expansion of 13.5 m GSM lines. Expansion of 3m Broadband. Expansion of 2 m WLL (CDMA) lines Introduction of 200K IP Transit Switch. Addition of 1206 K TDM TAX Addition of 200 IDRs Satellite System for Inaccessible Stations. BSNL has set up a separate international business division to explore telecom opportunities abroad. Moving aggressively on its overseas expansion plans, BSNL chairman Mr Kuldeep Goyal had said the company would look at valuable buyout opportunities based on due diligence of the target company. The PSU had already received in-principle board approval to enter the global market and bidding for Tunisia was one such step. The North African Tunisian country is set to issue new licenses for fixed line and basic mobile services. The licences, initially for 15 years, include national and international longdistance services.

- 88 By- Neeraj Kumar Singh (Roll No- 520751161)

As per the records found from the company sources, the companyâ&#x20AC;&#x2122;s presence in different categories of services are as follows: Basic Telephone (Bfone) Total Number of connections

as on 30.09.08

3,01,22,269

as on 30.09.08

46,96,641

as on 30.09.08

5,22,120

as on 30.09.08

19,31,182

as on 30.09.08

33,206

WLL (Tarang) Total Number of connections Village Public Telephones Total Number of Telephones Public Telephones (Local, STD and Highway) Total Number of Public Telephones STD Stations Number of STD Stations Transmission Systems as on 30.09.08 Transmission Systems Digital (Route kms)

(Route kms)

Coaxial

6,024

Microwave

50,430

UHF

45,130

Optical Fiber

5,60,086

Satellite Based Services (as on 30.09.08) MCPC-VSATs

IDR Systems (2 Mb/ 8 Mb)

99/38

- 89 By- Neeraj Kumar Singh (Roll No- 520751161)

Mobile Services (As on 28.02.2009) 

Total number of connections

46,684,049



District Headquarters covered

618(All covered)



Total number of villages covered

2,90,975



Total number of Town/cities covered

19,971



National Highway covered (Km)

55,896(out of 60,519)



State Highway covered (Km)

74,930(out of 1,240,77)



Railway route covered (Km)

42,454(outof 54,731

- 90 By- Neeraj Kumar Singh (Roll No- 520751161)

Telex/Telegraph Offices Departmental Telegraph Offices

961

Telecom Centers

716

Combined Offices

44,754

Bureau-Fax Centers

1427

- 91 By- Neeraj Kumar Singh (Roll No- 520751161)

7.2

Growth Plan

BSNL's future plan include a fast expansion programme of increasing the present 34 million lines to twice that number by 2005 and some 120 million lines by 2010. The shift in demand from voice to data domination, and from wireline to wireless, has revolutionized the very nature of the network. BSNL has already set in place several measures that should enable it to evolve into a fully integrated multi-operator by 2005 and its incumbent status, size, infrastructure and human resource should certainly, give it a distinct advantage. Consolidation of the network and maintaining high quality of service comparable to International standards is the key aim of the Growth Plan. Objective of the plan are: The telephone connection shall be provided on demand and it shall be sustained. The Network shall be made fully digital. All the technologically obsolete analog exchanges will be replaced with digital exchanges. To provide digital transmission links up to all SDCAs. Digital connectivity shall be made available to all the exchanges by 2007. Extensive use of Optical fiber System in the local, Junction and long distance network so as to make available sufficient bandwidth for the spread of Internet and Information technology. ISDN services shall be extended to all the district headquarters, subject to demand. To provide Intelligent Network Services, progressively all over the country (major cities have already been covered). To set up Internet Nodes progressively up to District headquarters level. Upgrading existing STD/ISD PCOs to full fledged Public Tele-Info Centers (PTIC) for supporting Multi media capability and Internet Access. Replacement of life expired, analogue coaxial and radio systems. Introduction of Wireless technology (Supporting Internet Access) and optical fiber technology in subscriber loop. Introduction of latest telecom services like National directory enquiry, computerization etc.

- 92 By- Neeraj Kumar Singh (Roll No- 520751161)

Cellular Mobile Service 'Cell One' of BSNL was launched on 19th October 2002 . The scheme will cover 4 million customers in two phases. Phase-I will cover about 1.5 million customers covering about 1000 cities during 2002-03, which will be expanded to 4 million in phase-II.

BSNL has decided to lease out its passive infrastructure that includes towers mainly, to other telecom companies in semiurban areas in the country. BSNL has more towers in tier-II and -III cities, So it has decided to lease out those towers with unutilized capacity to the operators." The agreement would be on bilateral basis. Aimed at generating more revenue and fully utilizing the huge tower base, BSNL plans to cash in on its pan-India presence. It operates all over India, except Delhi and Mumbai. The PSU plans to lease out its Ground Based Towers in circles such as Andaman and Nicobar, Andhra Pradesh Assam, Bihar, Gujarat, Chhatisgarh, Haryana, Himachal Pradesh, Jammu & Kashmir, Jharkhand, Karnataka, Kerala, Maharashtra, Madhya Pradesh, North East, Orissa, Punjab, Rajasthan, Uttar Pradesh (East and West), Uttranchal and West Bengal. BSNL has over 60,000 towers and the most of them are in semiurban areas where private operators have small footprint. According to the industry analysts, erecting one cell site costs about Rs 30 lakh, which takes the most of the cost and time for any operator.

State-owned BSNL has floated a tender for 93 million lines. BSNL executives say the total value of the contract could be about Rs 40,000 crore. Off these, about 21 million lines are reserved for third generation (3G) services. The tender details have been sent to global network majors, including Ericsson, Nokia Siemens, Motorola, Nortel, Alcatel Lucent, Huawei and ZTE. The bids of all companies will be opened on July 16-2008. The BSNL contract is split into three parts of 25 million each for the North, South and West Zones and 18 million for the East Zone. The tender conditions also stipulate that one company cannot be awarded more than two zones; this implies that the maximum order than equipment major can bag is for 50 million lines. In a bid to infuse additional competition, BSNL has divided the tender into four components, 2G lines, 3G lines, infrastructure and operating and business support systems (OSS & BSS). This implies, companies can bid individually for any of the four components, or a single company can also bid for all the components. About 30% of the contract size, which is equivalent to 31 million lines, could be reserved for state-owned ITI. The reservation for ITI is likely to be outside this tender, if this be the case, the actual size of the orders could be 124 million lines

- 93 By- Neeraj Kumar Singh (Roll No- 520751161)

7.3

Projects Recently Implemented / Under Development             

National Internet Backbone of BSNL Voice over IP Broadband Services - ADSL & High Speed Internet Managed Leased Line Network (MLLN) Access Network - LMDS, DLCs, RLC etc. Internet Exchange Points - IXP & Internet Data Centers (IDC) E-Commerce

7.3.1 Information Technology With the convergence of technologies, catalyzed by the global IT revolution the world is witnessing change as never before in recorded history. In the realm of telecommunication, the change and the pace of it are more pronounced - from basic telephony to voice, video and data services, and from bandwidth on demand to virtual private networks, IT is making the entire plethora of BSNL's telecom services expand. And, being rapidly implemented as the backbone for running customer-friendly services.

FRS (Fault Repair System), DQ (Directory Enquiry), IVRS (Interactive Voice Response System) and accounting and billing systems are already operational at BSNL. DOTSOFT , an integrated commercial & FRS package being inducted countrywide, to provide single window convenience. Telephone Directory on CD ROM and on the internet. Infrastructure, technology and expertise for full service support to e-commerce enterprises.

- 94 By- Neeraj Kumar Singh (Roll No- 520751161)

7.4

Social Commitment

BSNL is committed to provide quality Telecom Services at affordable price to the citizens of the remotest part of the Country. BSNL is making all effort to ensure that the main objectives of the new Telecom Policy 1999 (salient points indicated below) are achieved. Access to telecommunications is of utmost importance for achievement of the country's social and economic goals. Availability of affordable and effective communications for the citizens is at the core of the vision and goal of the new Telecom policy 1999. Strive to provide a balance between the provision of universal service to all uncovered areas, including the rural areas, and the provision of high-level services capable of meeting the needs of the country's economy. Encourage development of telecommunication facilities in remote, hilly and tribal areas of the country; Transform in a time bound manner, the telecommunications sector to a greater competitive environment in both urban and rural areas providing equal opportunities and level playing field for all players.

- 95 By- Neeraj Kumar Singh (Roll No- 520751161)

7.5

Summary of financial statement

- 96 By- Neeraj Kumar Singh (Roll No- 520751161)

The BSNL board has cleared the companyâ&#x20AC;&#x2122;s proposed $10-billion listing. If BSNL does manage to raise Rs40,000 crore by selling a 10% stake, the telco would be valued at Rs4,00,000 crore (around $100 billion). This will catapult BSNL into the league of top telcos in the world in terms of market cap. Incidentally, the market valuation of Bharti Airtel is just around $37 billion. Industry analysts had estimated the BSNL to be valued at over Rs4,00,000 crore. The plan was to divest 10 per cent through the IPO. The valuation of India's largest telecom company was estimated by analysts to stand at over Rs4,00,000 crore, larger than the combined market capitalization of Bharti Airtel Rs1,16, 342 crore and Reliance Communications (RCom) at Rs1,19,125 respectively the second- and third largest telecom companies.

According to analysts, the $37-45 billion valuation is a fair one. BSNL has about 81 million subscribers, 10 million more than the countryâ&#x20AC;&#x2122;s largest private operator, Bharti Airtel, which is valued just over $38 billion. However, a top BSNL official said that this was only the book value of the company and did not include its asset value. "If we include the asset value, BSNL's valuation is much higher. In financial yerar 2008-09, the company would invest about Rs15,000 crore to expand its mobile and broadband networks. The company has also committed to invest about Rs60,000 crore by 2010 to expand its telecom infrastructure and operations

- 97 By- Neeraj Kumar Singh (Roll No- 520751161)

Unit-8 8.1

Telecom Trends and High Growth Drivers

General Outlook of communication services

Communication services between people will continue to evolve as per their growing needs Richer communication stimulates all three drivers for growth:- new subscribers, services & traffic In 2009 global data revenues will reach $189 billion of which 50% will be â&#x20AC;&#x2DC;richer communicationâ&#x20AC;&#x2122; services Price pressure on voice services accelerates need for new revenues

- 98 By- Neeraj Kumar Singh (Roll No- 520751161)

As voice becomes a commodity, service providers need new killer apps to boost ARPU and generate revenue across all customer segments. To deliver this, wireless operators need a well-balanced bundle of high-quality and attractive valueadded services, one of the keys to success in today's highly competitive telecommunications market.

- 99 By- Neeraj Kumar Singh (Roll No- 520751161)

han India is seeing phenomenal growth in wireless market and touching the 37% tele-density at the end of March-2009 on the basis of unprecedented growth in wireless customers. Now the wireless market is on the growth trajectories of the business cycle in India, and there is significant portion of the population is still not having the access to the service, the great growth is ahead in this sector.

- 100 By- Neeraj Kumar Singh (Roll No- 520751161)

2/3 of

the

Wo rld Population are not connecte 4G, Broadband Wireless and WiMAX technologies attracted nearly 1.5 million new subscribers last year, according to Maravedis, an analyst specializing in several sectors within telecoms. And quarter-onquarter growth reached a highly respectable 21%. "Total BWA/WiMAX revenues for 2008 totaled US$1.82 billion, compared with US$898.78 million in 2007 - a 102% annual revenue increase despite the economic downturn that began affecting operator revenues in Q308."

- 101 By- Neeraj Kumar Singh (Roll No- 520751161)

To say that India offers potential is a complete under-statement. Approximately 70% of Indian households have no access whatsoever to fixed lines. Enter wireless, enter broadband, enter WiMAX, to mention just a few to tap the untapped potential which is extra-ordinarily high.

- 102 By- Neeraj Kumar Singh (Roll No- 520751161)

The WiMAX network will enable BSNL to offer enterprise customers high- bandwidth data communications services such as MPLS, VPN, leased line, and Internet access, as well as VoIP, telemedicine, e-education, e-governance, and e-commerce in remote areas Internet access is still the big broadband driver in India, with wireless broadband becoming the clear option owing to economics and ease of deployment

- 103 By- Neeraj Kumar Singh (Roll No- 520751161)

Different access technologies are available for implementation but all needs project feasibility on revenue and profit terms. As India GDP will grow faster, per capita income will be increased and purchasing power of the Indian customer will be increased, and feasibility of high end premium product like fiber, VDSL2, LTE, HSPA, WCDMA, MBMS will be successfully launched which will change the pattern of Indian economy significantly. These technologies have tremendous potential to bring revolutionary effects. Now the companies are focusing on low cost services to access the customers in rural India, and implemented the access technologies like ADSL, ADSL2+, Fixed WiMAX, EDGE, GSM, CDMA2000, EVDO to access the broad rural market of India.

- 104 By- Neeraj Kumar Singh (Roll No- 520751161)

Unit-9 Cost Efficient Operations and Rural Telecom Infrastructure Convergence

Reaching and profitably serving low-income users is a big challenge for the mobile industry in emerging markets. â&#x20AC;&#x153;Service providers must focus on tight marketing-operational alignment, optimized network costs, flexible pricing and strong distribution networks.â&#x20AC;?

Consulting firm Ovum's latest report outlines three aspects that operators must consider in serving low ARPU users. A close connection between marketing and network operations is crucial to profitability in emerging markets, while different markets require different approaches and considerations. "A number of emerging market operators face significant operational challenges at least partly due to a disconnect between marketing and network operations. For example, several African operators are being warned by regulators to tone down their marketing, as the pace at which they are building network capacity cannot meet with the heavy flow of new customers," says Angel Dobardziev, Ovum's Emerging Markets Practice Leader.

In the more sparse rural areas, such disconnect is more likely to produce the opposite challenge, which is an under-utilised network as a result of poor choice of coverage or inept marketing: "Successful operators bring marketing and network operations close together in targeting rural areas. With 70% of India's population in rural areas, for instance, a profitable rollout strategy there should focus on covering the most attractive rural communities first. Only then can a service provider focus on driving up profitability through locally-focused promotions, public access phones and PCs to demonstrate the value of the services and aggregate demand," says Angel Dobardziev.

- 105 By- Neeraj Kumar Singh (Roll No- 520751161)

9.1

Optimized network operations

Service providers must pay particular focus on four key areas when it comes to optimizing their networks for low Average Revenue Per Users (ARPU). They are: network design and rollout; base station equipment and site costs; backhaul and transmission; operational/business support systems (OSS and BSS).

When designing network coverage for low ARPU areas, operators must take the opposite approach to what is happening in mature markets, where switching at the edge of the network is shifting towards the core, partly because backhaul is becoming cheap and plentiful.

In low ARPU markets, the first principle is to have as few cell sites as possible. Each additional site generates incremental costs for equipment, site, security, transmission and power. More importantly, service providers must adopt distributed network architectures, with base station clustering and local call switching.

- 106 By- Neeraj Kumar Singh (Roll No- 520751161)

Does “Best of Breed” OSS adequately address the challenges of OSS in emerging markets? The Yankee Group commented in “Unified OSS architecture is the critical underpinning for automating the telecom service delivery factory”, a commissioned work conducted by Yankee Group Research on behalf of Clarity International, that: "With carriers focusing more on reducing opex and capex, a unified OSS solution provides a compelling value proposition that ensures long-term viability. Unified OSS removes some of the bottlenecks associated with best-of-breed OSS solutions.

- 107 By- Neeraj Kumar Singh (Roll No- 520751161)

9.2

Price to optimize network utilization

Transparency and simplicity in pricing are essential for low ARPU users. Angel Dobardziev explains: "operators must price their services to ensure optimum network utilization and profitability, in the same way that budget airlines generate their profits by ensuring higher aircraft utilization."

The research suggests service providers should consider dealer commissions another key lever in optimizing subscriber acquisition and retention costs in order to ensure low ARPU customers remain profitable. "Some emerging market operators in Asia and Africa have managed to reduce their dealer commissions to US$1, and even to agree that commissions would not be paid if the subscriber left the network within a certain period. This is an approach that operators need to consider for the next wave of low ARPU users, particularly those based in remote rural areas," says Dobardziev.

9.3

Shared access is a bridge to personal connectivity

An effective local distribution network is one of the most critical components of a service provider's marketing efforts for low ARPU users. Carefully optimized selection, incentives and promotional support for the network of agents and airtime resellers are an essential element of an operator's marketing strategy. Typically, these users earn small sums of money frequently (often daily), and as a result top up their phones by small amounts more frequently.

To these users, getting the phone initially is less a challenge than topping it up regularly, locally and in small enough amounts that they can afford. If there isn't an agent nearby to serve rural users locally, operators will be missing out on significant revenues.

Meanwhile, service providers need to weave shared-access voice and data services into their marketing strategies, such as BSNLâ&#x20AC;&#x2122;s Village Public Telephone, Bharti Airtel's Public Call Offices and BSNLâ&#x20AC;&#x2122;s Rural broadband package to Common Service Centre.

- 108 By- Neeraj Kumar Singh (Roll No- 520751161)

Flexibility in design keeps the scope of improvement and expansion. The operator should innovate in their retail outlet to comprise the existing capability to serve the current services and if needed could adopt the future changes in service offerings, that reduces the cost and expedite the sales process of future services.

- 109 By- Neeraj Kumar Singh (Roll No- 520751161)

A comprehensive service delivery platform of B.S.N.L. to streamline and adopt the rapid changes in telecom operations.

Unified OSS focuses on simplification through pre-integration, consolidation of operational data and centralised workflow spanning end-to-end operational processes; from SLA management to field-force logistics. Frost and Sullivan in â&#x20AC;&#x153;Market Insight featuring OBCE Trendsâ&#x20AC;? agree that: "This pre-integrated approach streamlines the rollout of an OSS deployment and yields greater out-of-the-box functionality. It avoids costly one-off, technology dependent solutions."

- 110 By- Neeraj Kumar Singh (Roll No- 520751161)

Today, there is a strong need to accept the challenges of rural communication coverage in emerging markets and win those challenges by concrete efforts of intelligent solutions, lying in wireless technologies.

wireless networks can be deployed rapidly. A GSM network, for example, can be deployed and offering services within a matter of weeks, compared to the time needed to deploy a wireline network. And wireless is extremely cost effective. With the highly competitive nature of the global wireless market, particularly in GSM, infrastructure costs are very low. Handset and terminal costs are also low - and are likely to fall further. The Ultra Low Cost Handset initiative driven by the GSM Association is targeting the sub-US$20 handset, opening up the market to low-income users.

Personal computer penetration levels in India have to be around 15 million throughout the country. WiMAX is the key to mass communication. There is huge potential for broadband wireless Internet and Voice-over-Internet Protocol (VoIP) services in India because there are still more than 600,000 villages with no basic communication means. It has to be said that one major obstacle looms in the way of widespread WiMAX rollout.

Licence holders need to have at least 20 MHz of spectrum to support wide-scale deployments and to build profitable businesses, but most currently have 12 MHz or less. Urgent and radical measures are required. Government agencies are now in discussion with telecoms companies. If the national Department of Defence releases some of its spectrum to civilian operators, there could be more spectrum available.

9.4

India's WiMAX subscribers to top 13 million by 2013

Deployment of 3G and WiMAX streams will generate a reasonable user base over the next five-year period. While the global economy is lying dormant, demand for telecommunications services in India continues to fuel significant growth in the sector. According to research firms Maravedis and Tonse that in 2008, approximately 10,000 BWA/WiMAX base station sectors were deployed in total. Currently there are about 300,000 BWA/WiMAX subscribers already using these services.

- 111 By- Neeraj Kumar Singh (Roll No- 520751161)

â&#x20AC;&#x153;In the next six years India has the potential to become one of the top broadband wireless markets on the planet. The resulting ecosystem and opportunities will make India a dream destination for vendors and investors.â&#x20AC;? Tonse Telecom CEO, Sridhar Pai. For the severely under-served Indian broadband market, demand for wireless broadband connectivity continues across all sectors: retail, SOHO, SMEs and large enterprises alike. India is expected to see the world's lowest end-to-end cost for WiMAX services, with costs driven down faster than in any other market. Computer penetration is still very low and the Indian telecom sector operates in a volume-driven market and innovative business models such as public-private partnerships will emerge, together with low cost devices and a vibrant ecosystem.

B.S.N.L. was initially a wire line operator and later came into wireless market. Wire-line business is a capital intensive field with long break-even time. Its operational margins are being hit by higher cost of its operation. With the implementation of 4G, WiMax technology and by going wireless it can improve on margin front and expand its business rapidly. Prior presence in rural market, can give it an edge to launch its operations rapidly, using these new technology, and being a niche player in all front.

- 112 By- Neeraj Kumar Singh (Roll No- 520751161)

Unit-10 The Role of Public & Private Players in Indian Telecom Secotor

NTP-99 laid down a clear roadmap for future reforms, contemplating the opening up of all the segments of the telecom sector for private sector participation. It clearly recognized the need for strengthening the regulatory regime as well as restructuring the departmental telecom services to that of a public sector corporation so as to separate the licensing and policy functions of the Government from that of being an operator. In this process, B.S.N.L. formed from DoT being a public sector telecom operator. After this a number of private players have been emerged and invested heavily in the Indian telecom sector. We can name few major operators as Airtel, Vodafone, Reliance, Idea, Tata Teleservice. Both public and private players have contributed significantly in the Indian telecom growth.

Here we take the case of largest public sector telecom operator, B.S.N.L. and lagest private sector telecom operator, Airtel, for the comparison of their performance in telecom sector.

- 113 By- Neeraj Kumar Singh (Roll No- 520751161)

From the above graph we can see that private players are playing a significant role in the churning out the customer base in Indian wireless market. Airtel has largest subscriber among all players and B.S.N.L. is at the forth place in customer market share. Airtel has added 31.94m customer in 2008-09 in comparison to B.S.N.Lâ&#x20AC;&#x2122;s 12.3m, around 2.5 times more. Airtel being a private player is outpacing the public sector enterprises, and thus fulfilling the objectives of NTP-99. B.S.N.L. Customer Market Share percentage is shrinking year by year, due to private players aggressive growth.

- 114 By- Neeraj Kumar Singh (Roll No- 520751161)

10.1 Airtel as a private telecom service provider

- 115 By- Neeraj Kumar Singh (Roll No- 520751161)

10.1.1 Airtel Performance Indicator

- 116 By- Neeraj Kumar Singh (Roll No- 520751161)

10.1.2 Airtel Segment investment and contribution

- 117 By- Neeraj Kumar Singh (Roll No- 520751161)

The fierce competition between the operators in India is dragging the ARPU to the lower side which is affecting the bottom level of companies financial. To subsidize the effect, the operators have to churn out the customers rapidly. Airtel has maintained his financial growth despite lowering ARPU with increased volume of customers. Airtel is beating all the expectation and has been evolved as a strong player in Indian telecom arena. It is showing the example for the others to follow.

- 118 By- Neeraj Kumar Singh (Roll No- 520751161)

10.2

Performance parameters of BSNL

10.2.1

FINANCIAL PARAMETERS

1. Billed /Del/Month (Basic services)(upto March 2008) 2. Billed /Cell/Month (Cellular) (upto March 2008) 10.2.2

MARKET SHARE

: :

Rs.357.53 Rs.281.12

(Based on Figures of Private Operators provided by ERU Cell of DOT)

1. Fixed

(BSNL/(PSU+PVT.) = 31297816/39209432 ( 79.82%)

2. GSM

”

= 36683137/199182293 (18.41%)

3. WLL

”

=4579023/70117895

(6.53%)

4. OVERALL MARKET SHARE): (BSNL/(PSU+PVT.)) =72559976/308509620 (23.51%)

B.S.N.L. lowering ARPU is affecting the financials of the company and year on year its margins of profit is shrinking and very dismal growth in revenue front. All these are due to slow growth in customer addition, and poor operational efficiency.

- 119 By- Neeraj Kumar Singh (Roll No- 520751161)

Billed Amount (Pre-paid + Post-paid) Previous to previous Month

Previous Month

Current Month

900000

800000

700000

Rupees in thousands

600000

500000

400000

300000

200000

100000

) L aj K H uj P g B rs ih d N ol m j ) r - I - II P tk N rl P A K T K Chn Pn H a H P( E P(W UA R & M G M C h W O B h k A& K As N E NE J J U U

- 120 By- Neeraj Kumar Singh (Roll No- 520751161)

Outstanding Amount Previous to Previous Month

Previous Month

Current Month

900000

800000

700000

Rupees in thousands

600000

500000

400000

300000

200000

100000

0 P

ar H

) ) HP P(E (W P U U

L UA

aj R

hg C

B W

rs O

kd &N Jh A

l Ko Asm

- 121 By- Neeraj Kumar Singh (Roll No- 520751161)

-I

II EN

k Kt

l Kr

hn C

Outstanding per Postpaid Subscriber Previous to Previous Month

Previous Month

Current Month

12000

10000

Rupees

8000

6000

4000

2000

0 j Pn

r Ha

P H

) E) P( P(W U U

j Ra

P M

g Ch

rs O

d h N Bi Jhk A&

l m E-I -II Ko As N NE

- 122 By- Neeraj Kumar Singh (Roll No- 520751161)

P A

tk K

rl K

n Ch

ARPU (Pre-paid + Post-paid) Previous to previous Month

Previous Month

Current Month

450

400

350

250

200

150

100

- 123 By- Neeraj Kumar Singh (Roll No- 520751161)

Chn

Krl

Ktk

NE-II

NE-I

Asm

Kol

A&N

Jhkd

Bih

Ors

Chg

Guj

J&K

Raj

UAL

UP(W)

UP(E)

Har

Pnj

Rupees

300

Average Revenue per DEL per month (Rs.) February 2009 Achievement Name of the Unit A&N A.P. ASSAM BIHAR JHARKHAND GUJARAT HARYANA H.P. J. & K. KARNATAKA KERALA M.P. CHHATTISGARH MAHARASHTRA N.E.-I N.E.-II ORISSA PUNJAB RAJASTHAN TAMIL-NADU U.P.(EAST) U.P.(WEST) UTTRANCHAL WEST BENGAL CALCUTTA CHENNAI Total

Target Curr. Yr. 491 416 448 385 459 400 388 304 542 512 350 334 396 435 410 494 356 332 373 434 301 451 425 320 499 577 407

Current yr. 28.02.09 369.88 317.44 280.07 287.72 338.93 306.06 307.48 226.96 337.42 352.12 269.93 256.67 307.73 366.89 244.28 159.19 220.29 260.27 244.46 315.88 227.94 358.27 322.72 208.75 410.53 438.18 304.68

Last Yr. 28.02.08 439.75 372.01 376.41 380.86 390.94 349.08 349.00 266.74 423.19 438.51 326.06 292.15 344.88 397.75 361.38 399.32 275.89 300.20 316.76 402.95 230.96 412.18 372.19 267.03 449.48 531.76 361.00

Variation from last year (Rs.) -69.87 -54.57 -96.34 -93.14 -52.00 -43.02 -41.52 -39.78 -85.76 -86.39 -56.13 -35.47 -37.14 -30.86 -117.10 -240.13 -55.60 -39.93 -72.30 -87.07 -3.02 -53.91 -49.47 -58.28 -38.95 -93.57 -56.32

Variation from last year (%) -15.89 -14.67 -25.59 -24.45 -13.30 -12.32 -11.90 -14.91 -20.27 -19.70 -17.21 -12.14 -10.77 -7.76 -32.40 -60.14 -20.15 -13.30 -22.83 -21.61 -1.31 -13.08 -13.29 -21.83 -8.66 -17.60 -15.60

- 124 By- Neeraj Kumar Singh (Roll No- 520751161)

ARPU in Descending order CHENNAI CALCUTTA A&N MAHARASHTRA U.P.(WEST) KARNATAKA JHARKHAND J. & K. UTTRANCHAL A.P. TAMIL-NADU CHHATTISGARH HARYANA GUJARAT BIHAR ASSAM KERALA PUNJAB M.P. RAJASTHAN N.E.-I U.P.(EAST) H.P. ORISSA WEST BENGAL N.E.-II Total

438.18 410.53 369.88 366.89 358.27 352.12 338.93 337.42 322.72 317.44 315.88 307.73 307.48 306.06 287.72 280.07 269.93 260.27 256.67 244.46 244.28 227.94 226.96 220.29 208.75 159.19 304.68

Status of Collection Efficiency Descending Order as on February 2009 Target ---> 99.00%

Circle CHENNAI KERALA TAMIL-NADU KARNATAKA PUNJAB A.P. GUJARAT UTTRANCHAL RAJASTHAN H.P. MAHARASHTRA WEST BENGAL CALCUTTA J. & K. U.P.(WEST) HARYANA ORISSA M.P. A&N CHHATTISGARH U.P.(EAST) ASSAM JHARKHAND N.E.-I BIHAR N.E.-II Total

6th Month 98.79 98.74 96.62 96.45 96.39 95.84 95.13 94.66 94.04 93.42 93.30 92.75 92.61 91.49 91.47 90.90 90.43 89.77 89.28 87.92 84.31 84.17 81.77 72.21 64.71 60.42 93.62

Target ---> 97.00%

Circle N.E.-II CHENNAI KERALA GUJARAT PUNJAB TAMIL-NADU KARNATAKA A.P. MAHARASHTRA U.P.(WEST) CALCUTTA UTTRANCHAL HARYANA RAJASTHAN H.P. ORISSA J. & K. M.P. A&N WEST BENGAL CHHATTISGARH U.P.(EAST) N.E.-I ASSAM BIHAR JHARKHAND Total

3rd Month 154.08 97.42 96.97 96.26 94.92 94.58 94.57 93.82 93.48 93.28 92.57 91.33 89.67 88.45 88.03 87.89 85.10 84.89 84.71 83.50 81.96 76.73 70.67 69.06 68.07 63.55 91.36

Target ---> 90.00%

Circle CHENNAI GUJARAT KERALA TAMIL-NADU PUNJAB KARNATAKA CALCUTTA MAHARASHTRA A.P. RAJASTHAN H.P. UTTRANCHAL HARYANA U.P.(WEST) ORISSA A&N M.P. CHHATTISGARH WEST BENGAL U.P.(EAST) ASSAM J. & K. N.E.-I JHARKHAND N.E.-II BIHAR Total

- 125 By- Neeraj Kumar Singh (Roll No- 520751161)

2nd Month 96.57 95.37 94.88 92.39 91.52 91.43 91.35 91.19 91.08 90.88 90.46 88.85 86.03 85.75 83.58 81.77 81.71 81.27 77.71 73.75 73.36 73.35 59.02 56.59 40.76 27.79 88.69

Collection Efficiency of top 3 circles as on 28.2.2009 6th Month Target -> 99%

3rd Month

Target

2nd Month

-> 97%

Target-> 90%

CIRCLE

C.E. (%)

CIRCLE

C.E. (%)

CIRCLE

C.E. (%)

Chennai

98.79

Chennai

97.42

Chennai

96.57

Kerala

98.74

Kerala

96.97

Gujarat

95.37

Tamilnadu

96.62

Gujarat

96.26

Kerala

94.88

Collection Efficiency of lowest 3 circles as on 28.2.09 6th Month Target -> 99%

3rd Month

Target

2nd Month

-> 97%

Target-> 90%

CIRCLE

C.E. (%)

CIRCLE

C.E. (%)

CIRCLE

C.E. (%)

NE-I

72.21

Assam

69.06

Jharkhand

56.59

Bihar

64.71

Bihar

68.07

NE-II

40.76

NE-II

60.42

Jharkhand

63.55

Bihar

27.79

As per Auditor General of India report, the total arrears of revenue is over Rs4030.51 Crore at the end of June-2007 in respect of telephone and telegraph services which will have adverse impact on the financial health of commercial undertaking like B.S.N.L..

- 126 By- Neeraj Kumar Singh (Roll No- 520751161)

- 127 By- Neeraj Kumar Singh (Roll No- 520751161)

Indian Telecom market is a big cake and both public and private can share it. Both have to come forwarded to fulfill the aspiration of Indiaâ&#x20AC;&#x2122;s telecom services need and a great impact of this will lead India to the new sunny horizon of prosperity. Its financing need is too big that government canâ&#x20AC;&#x2122;t alone do the magic. Magic lies in public-private partnership, and this is evolving the better picture of India.

- 128 By- Neeraj Kumar Singh (Roll No- 520751161)

Unit-11

Telecom Investment opportunities and Potential In India

11.1 Opportunities India is the fifth largest Telecom services market in the world; US$23 billion revenues in FY 2007. Industry grew by about 22% in FY 2007 over FY 2006, 290 million subscribers - 39 million fixed lines and 251 million wireless - (February 2008). The telecom subscriber base has grown at about 40% p.a. over the last 4 years. Wireless segment subscriber base grew at 62% p.a. . The Indian telecom market has both public and private sector companies participating. Public sector has over 27% subscriber market share, down from over 90% in 2000 & Private companies have added subscribers at a CAGR of 80% since 2000. Mobile operators have deployed both CDMA (62 million users) and GSM (189 million users) wireless networks (February 2008). Value added service features constitute about 10% of revenue (2% in 2001).

In India 74% to 100% FDI is permitted for various telecom services. FIPB approval is required for foreign investment exceeding 49% in all telecom services. 100% FDI is permitted in telecom equipment manufacturing India has a telecom policy that aims to encourage private and foreign investment. Highlights are An independent regulator â&#x20AC;&#x201C; the Telecom Regulatory Authority of India (TRAI). Revenue-share model for licenses issued by the Government for telecom services in India. Unified access licenses are available for providing telecom services on a pan-India basis in both, GSM & CDMA technologies. Government has simplified NLD and ILD license norms and lowered entry barriers. New entrants given 3 years to set up infrastructure. Entry fee and net worth requirements have been reduced. Policy on Mobile Number Portability (MNP) & 3G to be announced shortly. Policy on Active Infrastructure Sharing to be announced shortly. Universal Access Service License (UASL) recently issued to 5 new players. - 129 By- Neeraj Kumar Singh (Roll No- 520751161)

India is expected to be among the fastest growing telecom markets in the world, projected growth of 27% p.a. to reach 500 million subscribers by March 2010. Over 8 million new users are added every month â&#x20AC;&#x201C; mostly in wireless

11.2 Potential Favourable demographics and socio-economic factors leading to high growth: Growth of disposable income combined with changes in lifestyle Increasing affordability - low tariffs, easy payment plans and low-cost handset Increased coverage and availability of mobile services

Investment opportunity of over US$76 billion across many areas: Network infrastructure to increase service coverage Roll-out of additional network for 2G, 3G, WIMAX etc. Applications/software for voice, data and broadcasting services Devices like the mobile handset, set top box, modem, gaming console, and consumer premise equipments etc. Nokia, Siemens, Alcatel, Lucent, Elcoteq, LG, Ericsson are all investing in India

- 130 By- Neeraj Kumar Singh (Roll No- 520751161)

11.3 Investment Facilitation Agencies 11.3.1 Foreign Investment Promotion Board (FIPB) The FIPB is a specially empowered board chaired by the Secretary, Ministry of Finance (MoF), set up specifically for expediting the approval process for foreign investment proposals. There are no prescribed application forms for applying to FIPB, except in the case of purely technical collaborations. Proposals for FDI may be sent to the FIPB unit, Department of Economic Affairs, Ministry of Finance or through any of India’s diplomatic missions abroad. The government has introduced a mailbox facility for accepting FDI proposals through the Internet and providing an acknowledgement number for these, with the condition that a hard copy should be received in original before the proposal is considered by the government.

11.3.2 Foreign Investment Implementation Authority (FIIA) The Government of India has set up FIIA in the Ministry of Industry and Commerce to facilitate quick translation of FDI approval and implementation. The organisation also provides a proactive one-stop, after-care service to foreign investors by helping them obtain the necessary approvals, sort out operational problems and meet various government agencies to find solutions to problems and maximize opportunities through the partnership approach. FIIA, in accordance with its mandate, assumes the following role: • U nderstands and addresses concerns of investors • U nderstands and addresses concerns of approving authorities • Initiates multi-agency consultation • Refers matters not resolved at the FIA level to higher levels on a quarterly basis, including cases of project slippage on account of implementation bottlenecks

11.3.3 Investment Comision (IC) The three-member Investment Commission, set up in the Ministry of Finance in December 2004 by the Government of India, has Mr. Ratan Tata as Chairman and Mr. Deepak Parekh and Dr. Ashok Ganguly as members. The Investment Commission advises the Government of India on changes in policy and procedures that will enhance investment in India, recommends projects and investment proposals that should be fast tracked/mentored and promotes India as an investment destination.

- 131 By- Neeraj Kumar Singh (Roll No- 520751161)

11.3.4 Secretariat for Industrial Assistance (SIA) The SIA, functioning with the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, acts as a gateway to industrial investment in India. It provides a single-window clearance for entrepreneurial assistance and facilitates the processing of investorsâ&#x20AC;&#x2122; applications requiring government approval.

11.3.5 India Brand Equity Foundation (IBEF) IBEF collects, collates and disseminates comprehensive information on India. The website, www.ibef.org has been developed as a single-window resource for in-depth information and insight on India. IBEF also produces a wide range of well-researched publications focused on Indiaâ&#x20AC;&#x2122;s economic and business advantages.

- 132 By- Neeraj Kumar Singh (Roll No- 520751161)

Unit-12

Methodology

This chapter will cover the methods we have used in this project. We will describe chosen methods, how the work has been carried out to answer our purpose, data collection methods. Additionally, methodology problems that have come up during the process will be presented. Motivations and justifications for all adopted methods will also be given.

12.1 The road to answering our purpose The problem formulation process has been iterative, from looking at one problem from a certain view to another. We began to look for the Indian telecom reforms for fulfilling the communication needs of Indian people, in the perspective of the vision seen by the government of India, and effect of these reforms on the socio-economic growth. We have found the relations that showed a connection between telecommunication and poverty reduction thus making it more interesting for us to investigate the relationship between telecommunication and how to finance it more innovative. To be able to do this we have searched for information in literature and articles that reflects this topic, which has helped us getting a theoretic foundation. The empirical material of this project consists of survey data collected by different research firms, World bank report, and government of India economic reports, have been taken into consideration as a secondary data to bring out some conclusions. The telecom vendorâ&#x20AC;&#x2122;s presentations on the growth trends and future turnings have been taken to analyze and find out the area of investment for complementing the purpose of financing. Public company, BSNL and private company Airtel, financials available in the public domain have been taken into consideration to analyze the success of public-private route of investment in India. How much the telecom investment opportunities in India is, to find out this, we have searched and analyze the government of Indiaâ&#x20AC;&#x2122;s public domain information and statistics. We have gone through many telecom manuals, telecom analyst â&#x20AC;&#x2DC;s views & consulting agencies papers in internet domain to collect the data related to telecom growth figures, estimate figures, future trend, financing trend, revenue figures, investment figures etc.

- 133 By- Neeraj Kumar Singh (Roll No- 520751161)

12.2 Data collection methods Data can be collected in different ways depending on if it is primary- or secondary data that is to be collected. To achieve the data necessary to accomplish the purpose of this project mainly secondary data has been collected through mainly internet domains, governmentâ&#x20AC;&#x2122;s reports and literature on the subject, articles in newspaper and magazines etc.

12.2.2 Secondary data Problems can however occur, as it can be difficult to find relevant material. It can also be difficult to value the quality and usefulness of the found material. Example of secondary data are information that are documented in books, articles, tape recordings and information that are available in other electronic forms, like internet. . The secondary data in this project are government of India telecom growth figures, investment estimate, social and economic indicators, estimates of consulting firms, World bank reports, companies financials, Telecom statistics of different research analysts.

12.3 Source critique When you are using secondary data it is important that you have a critical behavior to the literature. The main reason for this is that many articles are written by personal reflections. To avoid this kind of information our ambition is to have as much scientific literature as possible. But we have also used other sources to learn more about this subject.

- 134 By- Neeraj Kumar Singh (Roll No- 520751161)

Unit-13

Analysis

Access to modern communications is a basic requirement for economic growth and social harmony. As an example, so important are communications deemed that the Indian Government, in drawing up a list of the ten key goals for national growth, put communications on a par with water and energy in terms of importance. That access to communications is an essential precursor for economic activity and growth is not in dispute. In studies carried out by the International Telecommunications Union (ITU) it was found that just the simple provision of a public pay telephone box in a remote village which previously had no communications with the outside world stimulated economic activity, increased employment and created new wealth. Unfortunately, some twenty five years after the Maitland Report for the United Nations identified the importance of ensuring universal access to communications, the problem has remained largely unresolved. In many regions of the world, such as Africa, India, China and South America, there are still large numbers of people who do not have this access: indeed there are probably hundreds of millions of people who have not even seen or used a telephone. This gap between the telecommunications “haves” who have easy access to services such as the Internet and the telecommunications “have nots” who do not, has been dubbed the “digital divide” and until comparatively recently no viable solutions to bridging this divide presented themselves.

13.1 The benefits of wireless The reason that so many people remain unconnected to any kind of communications network is simple. The cost and effort required to deploy traditional copper or fibre cable networks to remote rural areas would be astronomical and would take many decades. The lack of existing infrastructure, particularly electrical power, makes such a task almost impossible. With wireless technology these problems are easily resolved. Wireless networks have the capability to cover large areas, regardless of the type of terrain, without the need to lay cables. Wireless base stations can be self-powered by a variety of methods. And there is no need to provide an individual wired connection to each household, anyone within the coverage area of the base station with a suitable terminal can gain access to modern digital voice and data communications services.

- 135 By- Neeraj Kumar Singh (Roll No- 520751161)

Most importantly, wireless networks can be deployed rapidly. A GSM network, for example, can be deployed and offering services within a matter of weeks, compared to the time needed to deploy a wireline network. And wireless is extremely cost effective. With the highly competitive nature of the global wireless market, particularly in GSM, infrastructure costs are very low. Handset and terminal costs are also low - and are likely to fall further. The Ultra Low Cost Handset initiative driven by the GSM Association is targeting the sub-US$20 handset, opening up the market to low-income users. Wireless has proved its case beyond doubt. In the 25 years since the first cellular phone call was made, the global cellular market has grown to almost three billion, representing around half of the world’s population. And growth continues apace. Developments in wireless technology have produced an evolution from analogue cellular, to digital cellular with the advent of GSM, and now the wireless world is moving towards IP (Internet Protocol).

13.2 Delivering service to customers A number of key elements need to be in place for operators to provide communications to the “havenots.” Most importantly, wireless services must be affordable as incomes are usually low in lesser developed markets. Low-cost handsets are essential and, as has already been indicated, this is being addressed by the global wireless industry through the Ultra Low Cost Handset initiative. Similarly, operators must be able to deploy their networks cost-effectively, and operational costs must be kept to a minimum. Often the business plans which work for operators in mature markets are not appropriate and considerable “thinking outside the box” is required. Operators such as Bharti Telecom in India, where average revenue per user (ARPU) is less than US$5 a month and falling, have set the pace with innovative ideas such as electronic topping up. And yet operators in lesser developed markets must also look to the future. In the early days of market growth, basic handsets offering simple voice and text messaging will meet the communications demands of their customers but very rapidly these demands will change. Subscribers will no longer be satisfied with basic communications: they will be looking for more advanced data and multimedia services. A further development will be the demand for personalisation, which is already occurring in mature markets. The mobile phone has become the world’s most ubiquitous personal item. Many people would rather leave home without their wallet than without phone. With such a strong connection it is inevitable that the owners of mobile phones want to personalise them for their own individual requirements, not just in regard to simple things such as ring tones and wallpaper, but beyond that with applications such as personal service menus which cover all the applications and services which they need to fit with their individual lifestyles.

- 136 By- Neeraj Kumar Singh (Roll No- 520751161)

Operators in mature markets are already responding to this shift in demand and are offering an increasing range of services and applications which the end user can adapt and modify to his or her requirements. The demand for personalisation will soon be a factor which operators in lesser developed markets will have to address. The big question for all operators is which wireless technology from the ever-growing range on offer is most appropriate for the delivery of advanced services and applications.

13.3 Technology choices The reality is that in order to meet the demands of their customers for an ever-widening range of advanced services, operators will need to deploy a mix of wireless technologies, each having its own specific applications. The most ubiquitous wireless technology is cellular radio which over the last fifteen years has undergone a transformation. From its introduction in 1991 GSM has evolved from delivering voice and basic text messaging through GPRS, which first introduced packet switching, to 3G/UMTS, which offers the first truly capable data communications capability. The next evolution will be to HSDPA and HSUPA which will deliver wire line data throughput speeds in both the uplink and downlink. Germany is one of the countries leading the evolution to High Speed Packet Access (HSPA), the term used to describe the implementation of both HSDPA and HSUPA. T-Mobile is deploying Siemens HSPA technology to deliver high speed data services to its customers in Germany and Austria. Vodafone in Germany is also introducing mobile broadband services at DSL speeds using Siemens HSPA solutions. The service, dubbed â&#x20AC;&#x153;UMTS Broadband,â&#x20AC;? will initially be offered in Dusseldorf, Frankfurt, Hanover and Munich. Both the T-Mobile and Vodafone services will deliver download speeds of 1.8mb/s, a significant improvement on the 384kb/s currently available. Cellular technologies offer many benefits to operators looking to deliver personalised services to their customers. Above all cellular provides the key benefit of mobility, that ability to make and receive calls wherever you are and whenever you want. Another key benefit is global roaming which extends mobility from the userâ&#x20AC;&#x2122;s home network to any other GSM/3G network worldwide. Today, for example, GSM users can use their phone in more than 130 countries. And, of course, the global market place behind GSM and the technologies that build on GSM ensure the availability of a massive range of costeffective mobile phones.

- 137 By- Neeraj Kumar Singh (Roll No- 520751161)

13.4 Enter WiMAX Cellular alone, however, may not be the answer to delivering the right service mix and operators need to look at other wireless technologies as well. The alternative wireless technology attracting the most interest these days is WiMAX (Worldwide Interoperability for Microwave Access). WiMAX is a standards-based wireless technology for providing high-speed, last-mile broadband connectivity to homes and businesses and for mobile wireless networks. WiMAX is based on the IEEE 802.16-2004 specification for wireless high-speed Internet access promoted by the WiMAX Forum. WiMAX offers a wireless alternative to cable and DSL broadband access. It can be deployed as a wireless “last mile” solution for fixed and mobile operators planning to deliver wireless DSL services to rural and remote areas where providing services by cable or fibre is difficult or uneconomic. The WiMAX specifications have now been evolved to support nomadic users and a new standard is being defined for mobile WiMAX users. Operators need to evaluate their technical options as the best solution will nearly always be a mix of different technologies which together deliver flexible solutions which meet user’s needs.

13.5 Looking to the future The global wireless industry is constantly looking to the future, working to develop the next generation of wireless technology. As developing a new radio interface can take up to ten years it is obvious that, even as 3G reaches maturity and alternative solutions such as WiMAX become more widely deployed, work is already ongoing to create the next generation. Although there is still much detailed R&D still to be carried out, the overall picture of what will come beyond 3G in the 2010/2012 timeframe is already clearly outlined. Within the next few years mobile networks will move away from having a core network accessed through a single air interface. Instead mobile networks will have multiple wireless accesses connected via a unified multimedia IP network. The access networks connected to the common core will include 3G, WLAN, WiMAX, GSM/GPRS/EDGE, as well as fixed networks such as ISDN and DSL. This flexible approach will enable operators to use combinations of different access technologies to deliver a service mix which will be unique for each customer. And all this without burdening the user with any details of the technologies involved – intelligence in the network and devices will hide these complexities from the consumer. Already operators are planning to use a mix of cellular and WiMAX technologies to deliver services and this trend will accelerate as the wireless world moves towards its future vision.

- 138 By- Neeraj Kumar Singh (Roll No- 520751161)

13.6 Streamlining Telco’s process efficiency Most operators in emerging markets must contend with comparatively low ARPU. The estimated ARPU in India is around US$8 per month; only slightly lower than Indonesia, the Philippines, Malaysia, Thailand and China and around a tenth that of some Western European operators. This low ARPU is offset by potential for customer growth. For operators in emerging markets the key is in accessing their large, often rural populations that typically have low tele-density, thus supporting business models based on rapid growth and high customer subscription. For example, India covers 3 million km2 and 70% of the 1.1 billion population lives in rural areas with tele-density of around 2%. While the opportunity for customer growth is clear, automation and intelligent management of manual activities, leading to operational efficiency, are critically important when maintaining services over such a geographical extent. Some operators in Asia are achieving ratios of staff to subscribers that are almost half that of counterparts in Western Europe and North America; one Indian operator is achieving a ratio of 1:1750. This is being achieved initially through rapid growth in subscribers but to sustain this and turn it into operational efficiency operators look to their OSS to automate and manage the end-to-end operational processes. Operators in Eastern Europe and CIS are challenging their legacy platforms as they experience demand for broadband services. OSS Observer (Emerging Markets Outlook, February 2008) forecasts that residential broadband will grow faster than revenue, at a CAGR of 27%, as the service is still relatively new, and ARPUs are low. Simply put, the legacy OSS cannot efficiently, rapidly and reliably deliver the order-to-cash process, despite network availability and a consumer base demanding higher value services. Many operators are replacing legacy with new OSS, often delivering many functions simultaneously. Operators in emerging markets are using Unified OSS to achieve end-to-end process efficiency and automation without facing the costs and time-scales of “Best of Breed” OSS.

13.7 Growing pains In emerging markets, an OSS must take the strain of a rapidly expanding customer base, as this off-sets low ARPU. Expansion can be extremely rapid; some operators in emerging markets achieve tens of millions of subscribers within a few years, monthly growth of one million subscribers being fairly common. Where the subscriber base already exists, as in Eastern Europe, the OSS must support consumer demands to rapidly transition from low to high revenue services.

Operators in emerging markets need OSS that helps them “go live” with services quickly and manage the transition from low to high revenue services. This rapid increase in subscriber numbers or service revenue is often essential for the business plan. This is doubly important because operators in emerging - 139 By- Neeraj Kumar Singh (Roll No- 520751161)

markets have often invested heavily in infrastructure and strive for high utilization through customer growth to balance costs. One emerging market operator estimates that the right choice of OSS saved around US$200 million in life-time integration costs and delivered sophisticated OSS functionality two years earlier, when compared to “Best of Breed” OSS. Within seven months of starting up, they were the country’s largest mobile operator. Subscribers in emerging markets are technology-literate and competition is relentless, throughout this intense growth period. Once again taking this February's OSS Observer as the source, competition is a major reason why India has some of the lowest mobile rates in the world, at two cents per minute. The need to defend market share and capture new subscribers drives innovation in service offerings. In addition to coping with demands of growth, the OSS for emerging markets must reduce time-tomarket for new products. Demands for 12-15 new products and features per year for mobile service providers in emerging markets are not unheard of and are being supported by Unified OSS today.

13.8 Next-generation technologies For many developing countries, next-generation technologies are not a long-term aim, but a starting point, since they can solve many problems facing operators. Various operators in emerging markets are building broadband optic fibre networks, completely bypassing the copper lines still used in many developed countries. In just a few years, India-based Reliance Communications has become the world’s largest IP-enabled optic fibre-cable network with 230,000 km now laid. Compared to copper cable, optical fibre provides far more bandwidth, while being cost comparable and less subject to theft. Instead of deploying copper or fibre, many countries are deploying wireless coverage to provide an instant broadband service. Wireless broadband is an excellent means of reaching rural or transient populations and coverage “black spots”. Unlike copper cable, wireless broadband equipment can be secured against theft and removes much of the cost of laying and maintaining hundreds of kilometres of infrastructure. One shared characteristic of most emerging markets is that they are a hive of innovation and experimentation. In India 3G and CDMA2000 are currently capturing public interest, but this may be challenged by WiMAX and technologies such as PLC which continue to exploit niche opportunities.

Operators in emerging markets should be wary of equipment vendors "giving away" their equipment and technology-aligned management solutions. Instead they should consider longer term use of flexible, multi-technology and multi-vendor OSS platforms, providing holistic network management, futureproofing for evolution and customer centric perspectives, as is provided by Unified OSS.

- 140 By- Neeraj Kumar Singh (Roll No- 520751161)

13.9 Public-Private Investment India has had the most success attracting more private investment in infrastructure in 2006 than any other developing country. Long-standing policies in most other South Asian countries are beginning to bear fruit as well. Nevertheless, delivering the infrastructure services needed to sustain and accelerate growth in South Asia remains a major challenge. Estimates suggest that closing the gap in service provision and meeting future needs will require infrastructure investment in the range of 7–8 percent of GDP a year. The private sector can do more to help close the region’s infrastructure service deficit. But first, the region’s governments will need to close the infrastructure policy deficit, manifested in many sectors in distorted pricing, poor governance and accountability, and weak financial and operational performance. Telecommunications accounted for 64 percent of investment commitments to infrastructure projects with private participation in South Asia in 2001–06, a big increase over its 39 percent share in 1996– 2000. This large and growing role of telecommunications is much like the overall trend for developing countries. But the trend in South Asia is somewhat more extreme. India has seen the most dramatic growth in private investment in telecommunications.

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India has attracted most of the investment commitments to infrastructure projects with private participation in the region. This is not surprising, as India is by far the regionâ&#x20AC;&#x2122;s largest economy. But it has also made the broadest and most sustained efforts to attract investment. Thanks to the success of its reforms in transport and telecommunications, India attracted more investment commitments to infrastructure projects with private participation in 2006 than any other developing country. Indeed, commitments in India were nearly twice those in its nearest rival, Brazil, and well ahead of those in China.

Estimates from a World Bank study suggest that annual GDP growth of 7.5 percent would lead to annual investment needs of about 5 percent of GDP to meet the increased demand for infrastructure services along with another 2 percent of GDP for capital replacement. India is in the global arena for increased foreign investment - both through the Equity markets - termed Foreign Institutional Investment (FII) and Foreign Direct Investment (FDI). While its size and growth potential make India attractive as a market, the most compelling reason for investors to be in India is that it provides a high return on investment. India is a free-market democracy with a legal and regulatory framework that rewards free enterprise, entrepreneurship and risk taking. Over 300 million Indians (63 million households) are expected to have a household income of over US$6,000 by 2015 (over US$30,000 in PPP* terms). India is experiencing a rapid growth in consumer spending. The economic reforms since the early nineties have unleashed a new entrepreneurial spirit creating a vibrant economy supported by rising per capita income. Fast-growing disposable incomes, increased availability and use of consumer finance and credit cards complement the keenness of the average Indian to adapt to and assimilate global trends. This has led to the creation of a rapidly growing

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consumer base and one of the worldâ&#x20AC;&#x2122;s largest markets for manufactured goods and services. Growth in key sectors like infrastructure, services and manufacturing continues at about 10-12% p.a.

13.10 World telecoms and IT outlook FROM THE ECONOMIST INTELLIGENCE UNIT

Global IT spending will continue to outpace global economic growth over the five years to 2011 as companies continue to upgrade their corporate networks worldwide. Primary drivers will include the increased demand from small and medium-sized enterprises, particularly in Asia; continued network equipment and service upgrades across the business sector; and steady demand from both the corporate sector and consumers for innovative, converged electronic devices with Internet access. Sales growth of the PC will slow over the forecast period. From strong double-digit figures of the past few years, global PC shipments will grow by just 4.3% per annum between 2007 and 2011, according to IDC, the US IT consultancy. This growth will be driven by emerging markets and Western Europe where penetration levels are lower. Purchasing and owning a mobile phone will continue to be a worldwide obsession, but the rate of growth will moderate from nearly 10% this year to 5% in 2010, according to Pyramid Research, a US telecom consultancy. Average revenue per subscriber will decline in the period, as operators compete more aggressively for customers on price. Worldwide demand for broadband internet connections will grow in double-digits the next five years for the worldâ&#x20AC;&#x2122;s sixty largest economies to 585m subscribers by 2011. Revenues from broadband services will leap from US$137bn this year to US$207bn in 2011, accounting for nearly 40% of total fixed line revenue worldwide, according to Pyramid.

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Price competition will remain keen in the years ahead. The sector’s ability to keep costs low through global sourcing as well as ruthless attention to supply-chain efficiencies and economies of scale should, however, stem severe profit erosion for the most efficient players. On the demand side, the increased popularity of on-demand, online services —as opposed to traditional software with its endless upgrades – will offer continued opportunities for innovative start-ups. Web 2.0 initiatives, which create a platform for collaborative, online work environments, will gain traction in a wider circle of industries. The IT and telecom sectors’ drive to innovate will continue to be backed by its strong commitment to research and development (R&D). As a result, companies will continue to launch tempting new products for both the business and consumer market. Some will be tied to global issues, such as the environment. Rising concerns about the impact of air travel, for example, will convince more managers to trade in their carry-on luggage for the latest video conferencing systems. The vast majority will be web-linked products and services, ranging from internet radios to Internet Protocol TV (IPTV) and mobile phones equipped for banking, TV and social networking. Sales of these goods will dampen the growth in demand for the traditional PC, as traditional PC-based tasks move to smaller, net-enabled devices. At the same time, there will be increased reliance on network availability and dependability. The mobile phone – and its uses – will be transformed by the higher capabilities of the latest handsets which are now rolling out around the world. Third generation (3G) phones, which have high-speed internet connections, already outnumber conventional handsets in Japan and are growing quickly in other developed economies. By early 2007, the Japanese were more likely to be using their phone than their PC to connect to the internet. According to Pyramid Research, sales of 3G phones or phones with high-speed net connections will account for 35% of all the world’s mobile phone subscriptions by 2011, from about 11% in 2006. The growth in revenues from data downloads (video, music included) for mobiles, according to Pyramid, will be more than three times that of mobile voice revenue over the forecast period, and is expected to hit US$224bn in 2011. This growth will be driven by more than the purchase of the latest music video. According to Celent, a US-based consulting firm, 35% of online banking households will be using mobile banking in 2010, up from 1% now. Forecasts for mobile TV are varied, but telecom service providers are taking the plunge nonetheless. In the first quarter of 2007, Sprint Nextel, the third largest US mobile service provider, signed a deal with ABC to offer full episodes of major prime-time shows streamed directly to subscribers mobile phones. Customers opting for a US$20/month data plan will be able to watch the four most recent episodes of their favourite shows for free. Deals like these underline the rapidly changing environment for telecom service operators. Fixed-line telecoms revenue, according to Pyramid, will remain flat over the next five years, with income from broadband and other internet services making up for the rapidly declining sales of fixed line voice service. This will drop from US$339bn this year to US$273bn in 2011 as more customers move to mobile phone use only – even inside their house – or internet telephony.

- 144 By- Neeraj Kumar Singh (Roll No- 520751161)

By contrast, global mobile phone service revenues, according to Pyramid, will jump from US$734bn to US$875bn in the same period, with mobile phone revenues outstripping fixed-line voice revenues by more than 320% in 2011. In addition to the sheer convenience of the mobile phone for customers in wealthy nations, the handset has taken on a surprisingly strong role in the developing world. That is because the fixed-line infrastructure in many poorer countries remains woefully undeveloped due to inefficiency, under-investment, high levels of government regulation or all three. Given the relative ease of setting up a mobile phone network, developing countries will continue to show the fastest growth rates of mobile phone subscriptions globally. Africa, for example, recorded a 46% increase in mobile customers in 2006, according to Wireless, a telecoms consultancy, and growth is expected to remain in double digits for the next two years. The Economist Intelligence Unit forecasts that India will see the number of mobile subscriptions rise by an annual average of 27.5% over the next five years to reach 390m by 2011. Even so, our forecasts show that India’s penetration will still be just 33% by the end of the forecast period, well below that of other major emerging markets such as China (46%) Brazil (69%) and Russia (111%). The research shows clear digital divide between rich and poor will remain for the next five years at least. Even with the strong growth rates forecast, the penetration of mobile phones in the Middle East and Africa will reach only 54% by the end of the forecast period, and 39% for Asia, excluding Japan. However, the main risks to this forecast are on the upside. The number of subscribers could rise faster as economic growth accelerates, competition continues to drive down prices and new service packages are offered. In South Africa, this scenario is already playing out – three players MTN, Vodacom and Cell C battled so hard for customers that mobile penetration hit 75% in 2006. The leading economies of the developed world – Japan, Europe and North America – will account for the lion’s share of IT spending globally over the next five years, but there will be some reduction in their domination of the sector. According to the EIU forecasts, these two regions and Japan will account for 83% of IT spending in 2007 but this will slip to 79% in 2011. The buoyant economies of India and China will be the major reason for this erosion. Asia, excluding Japan, will handsomely outpace the developed world in IT spending over the next five years. We forecast that growth in purchases of IT equipment, software and services in Asia, excluding Japan, will run at about 8-9%, well above the rate of worldwide growth for the forecast period. China and India alone will account for more than 55% of the IT spending in the region.

- 145 By- Neeraj Kumar Singh (Roll No- 520751161)

Unit-14

Findings, Conclusions, and Recommendations

Access to modern communications is a basic requirement for economic growth and social harmony. The reason that so many people remain unconnected to any kind of communications network is simple. The cost and effort required to deploy traditional copper or fibre cable networks to remote rural areas would be astronomical and would take many decades. The lack of existing infrastructure, particularly electrical power, makes such a task almost impossible. Wireless is extremely cost effective. With the highly competitive nature of the global wireless market, particularly in GSM, infrastructure costs are very low.

Despite the ubiquity of GSM and other cellular technologies, there remain many millions of people who do not have access to communications. Wireless offers a solution to this problem, and over the next few years access to communications will become the norm rather than the exception. Those communications will initially be basic voice but, driven by demand from customers, operators will rapidly evolve their service offerings to deliver a true, personalised, communications experience to customers worldwide.

Operators need to evaluate their technical options as the best solution will nearly always be a mix of different technologies which together deliver flexible solutions which meet userâ&#x20AC;&#x2122;s needs.

Unified OSS can deploy faster and with lower risk than â&#x20AC;&#x153;Best of Breedâ&#x20AC;? OSS solutions, avoiding integration and data synchronization costs. It helps operators in emerging markets achieve RoI on their infrastructure investments sooner and, through simplicity and flexibility, allows operators to engage their subscribers with innovative products over evolving networks. Its single data-model exploits relationships between network, service, customer, SLA and field-engineer in managing the customer experience. Unified OSS is proven to help operators in emerging markets enjoy business benefits of sophisticated OSS solutions.

The most innovative way a country or company can finance telecommunication is to find the right combination of financing ways and strategies, to have the knowledge of which ways to choose from is a key in finding the optimal combination for a country or company. The main advantage by using a combination of strategies and financing ways, instead of onesingle way, is that the risks will be reduced, which is an innovative way of financing telecommunication. This will attract more investors, because they will get better security on their investments, this is very important. A crucial factor for the country is to lower all possible risks, like political risk, currency risk and inflation which will reduce the risks for the investors even more.

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It is also important that the developing countries try to finance locally, which will, for example reduce the currency risk, and also involve the private sector. By involving the private sector together with the public sector, the risks reduce and make the telecommunication projects safer to invest in. Research shows that increased FDI leads to increased economic growth. FDI does not only contribute to capital accumulation, but it also seems to act as a vehicle for technology transfers and hence to foster growth by increasing total factor productivity.

Traditional ways to finance telecommunication might not be the most efficient way to reduce poverty because of the risk that traditional ways stand for. Instead, by using innovative ways the risks will be reduced which leads to poverty reduction. In India, public-private partnership has been proved boon for the telecom industry, and government should focus on this with creating the conducing environment of investment. The companies should focus on the future technology like NGN, WiMax, GSM, CDMA etc. rather than wire line, providing voice services, enhancing value added services, concentrating to volume growth despite lowering ARPU, expanding rapidly and keeping the project costs low with increased operating efficiency using unified OSS.

- 147 By- Neeraj Kumar Singh (Roll No- 520751161)

Unit-15

References

15.1 Internet BSNL Corporate site: http://bsnl.co.in National Portal of India: http://india.gov.in The Parliament of India: http://www.parliamentofindia.nic.in Ministry of Communications and Information Technology: http://www.moc.gov.in Department of Telecommunication: http://www.dot.gov.in Private Investment Promotion in Indian Telecom: http://www.dot.gov.in/osp/osp.htm Telecom Regulatory Authority of India: http://www.trai.gov.in Telecom Engineering Center: http://www.tec.gov.in Wireless Planning & Coordination Wing : http://www.wpc.dot.gov.in Telecommunications Consultants of India Limited : http://www.tcil-india.com Directory of Indian Ministries and Departments : http://www.nic.in Ministry of Information Technology : http://www.mit.gov.in Ministry of Finance : http://www.finmin.nic.in Secretariat of Industrial Assistance : http://www.indmin.nic.in Department of Commerce : http://www.commin.nic.in Ministry of External Affairs : http://www.meadev.nic.in Reserve Bank of India : http://www.rbi.org.in Securities and Exchange Board of India : http://www.sebi.gov.in Confederation of Indian Industry : http://www.ciionline.org Associated Chambers of Commerce : http://www.assocham.org Federation of Indian Chambers of Commerce and Industry : http://www.bisnetindia.com Asia-Pacific Telecommunity (APT) : http://www.aptsec.org Ameritrade Education Centre: http://www.ameritrade.com Asia-Pacific Economic Cooperation: http://www1.apecsec.org.sg Asia Trade Hub: http://www.asiatradehub.com Bashir, Abdel-Hameed M. (1999), "Foreign Direct Investment and Economic Growth In Some MENA Countries": http://www.sba.luc.edu/orgs/meea/volume1/bashir.html Bond, Patrik (1997), “Privatisation, participation and protest in the restructuring of municipal services”: http://www.thewaterpage.com/ppp_debate1.htm Bond, Patrik (1998), “Development aspects of municipal infrastructure delivery”: http://www.local.gov.za/DCD/policydocs/whitepaper/cl2pat.htm Burr, Chandler (2000), "Grameen Village Phone, Its Current Status and Future Prospects": http://www.ilo.org/public/english/employment/ent/papers/grameen.htm Economist: http://www.economist.com Ericsson: http://www.ericsson.com European Commission: http://europa.eu.int. Eurotunnel: http://www.eurotunnel.com - 148 By- Neeraj Kumar Singh (Roll No- 520751161)

International Association of Financial Engineers: http://www.iafe.org International Finance Corporation: http://www.ifc.org International Labour Organisation: http://www.ilo.org International Telecommunication Union: http://www.itu.org Investorwords: http://www.investorwords.com Kuritzkes, Andy: http://fic.wharton.upenn.edu/fic/0402.pdf Methods and Data - Quantlets: http://www.quantlet.com LOCREGIS: http://www.locregis.net Millenium Development Goals, http://www.developmentgoals.org Ministry of Communication - Science and Technology: http://www.mcst.gov.mv Ministry of Finance, Govt. of India: http://indiabudget.nic.in/es2001-02/chapt2002/chap94.pdf Montgomery Research: http://www.utilitiesproject.com OECD: http://www.oecd.org OECD(2002),"Measuring the Information economy": http://www.oecd.org/dataoecd/16/14/1835738.pdf Pacific Telecommunications Council: http://web.ptc.org Telecomweb: http://www.telecomweb.com The Handbook of World Stocks, Derivative & Commodity Exchanges: http://www.exchange-handbook.co.uk. The World Bank Institute: http://www.worldbank.org/wbi The World Bank Group: http://www.worldbank.org UNDP (2001), "Creating a Development Dynamic. Final Report of the Digital Opportunity Initiative": http://www.opt-init.org/framework/pages/es.html UN, http://www.un.org World Bank: http://www.worldbank.org World Bank (2000a), "Internet Economic Toolkit for African Policy Makers": http://www.infodev.org/projects/internet/010toolkit/afpt1.pdf

- 149 By- Neeraj Kumar Singh (Roll No- 520751161)

15.2 Articles TRAI (March 20, 2006), Recommendations on Issues relating to Broadcasting and Distribution of TV channels. Economic Survey, Annual Reports of the Department of Telecommunications, Ministry of Communications and Technology and the Telecom Regulatory Authority of India (TRAI)–various issues. Business Standard: August 22, 2007 Panagariya, Arvind (2004). "India in the 1980s and 1990s: A Triumph of Reforms". "That old Gandhi magic", The Economist, November 27, 1997. Ahluwalia, MS. 2001, "State level performance under economic reforms in India" Working Paper No. 96, Center for Research on Economic Development and Policy Reform, Stanford University Department of Telecommunications, Annual Report 2002-2003, Ministry of Communication and Information Technology, New Delhi Department of Telecommunications "Indian Telecommunication Statistics: Policy Framework, Status and Trends", Economic Research Unit (Statistics Wing), Ministry of Communications, New Delhi.

Bell, Clive & Rich, Robert (1994), "Rural poverty and agricultural performance in post-independence India", Oxford Bulletin of Economics and Statistics. Berthelemy, Jean-Claude & Varoudakis, Aristomene (1996), "Economic Growth, Convergence Clubs and the Role of Financial Development", Oxford Economic Papers. Bosworth, Barry P. & Collins, Susan M. (1999), "Capital Flows to DevelopingEconomies: Implications for Saving and Investment", Brookings Institution. Carkovic, Maria & Levine, Ross (2002), "Does Foreign Direct Investment Accelerate Economic Growth?", University of Minnesota. Gerald, Joe (1998), “Defining Financial Engineering”, Financial Engineering News. Ernst, M. & Ngoc-Nga Pham, N. (1994), Financing infrastructure in developing economies: Benefits", East Asian Executive Reports. - 150 By- Neeraj Kumar Singh (Roll No- 520751161)

Isaksson, Anders & Levin, Jรถrgen (1999), "Financial Development, Economic Growth and Poverty Eradication", Swedish International Development Cooperation Agency (SIDA). Jacobsen, Karen F. (2003), "Telecommunications Development and Economic Growth in Developing Countries", Chr. Michelsen Institute. Levine, Ross (1997), "Financial Development and Economic Growth: Views and Agenda", The Journal of Finance.

Pedrelli, Maurizio et al (2001), "Developing countries and the ICT revolution", European Parliament - Directorate General for Research. Sridhar, Kala S. & Sridhar, Varadharajan (2004), "Telecommunications Infrastructure and Economic Growth: Evidence from Developing Countries", National Institute of Public Finance and Policy: India.

- 151 By- Neeraj Kumar Singh (Roll No- 520751161)

15.4 Literature Ferreira, David & Khatami, Kamran (1996). Financing Private Infrastructure in Developing Countries, Washington DC: World Bank. Kayani, Rogati & Dymond, Andrew (1997), Options for Rural Telecommunications Development, Washington DC: World Bank. Merna, Tony & Njiru, Cyrus (2002), Financing Infrastructure Projects, Bodmin: Thomas Telford Limited. Neftci, Salih N (2004), Principles of Financial Engineering, London: Elsevier Inc.

Qiang, Christine Z.-W. (2003), Contribution of Information and Communication Technologies to Growth, Herndon: World Bank. United Nations Development Programme (2000), Human Development Report, New York: Oxford University Press.

Dossani, R. (Ed.) 2002, Telecommunications reform in India. Quorom Books.

- 152 By- Neeraj Kumar Singh (Roll No- 520751161)

Unit-16

Explanation Of Words

In this chapter we will try and explain words that we have used during this project.

3G 3G is the third generation of telecommunication hardware standards and general technology for mobile networking, superseding 2.5G. It is based on the International Telecommunication Union (ITU) family of standards under the IMT-2000.

ADC (Access Deficit Charges) Access Deficit Charge (ADC), is the amount payable by the service provider at the caller's end to the service provider at the receiving end for accessing services rendered by the latter in domestic long distance telephony. This would be the means to subsidize the below cost tariffs, i.e. rental/local call charges.

ADSL (Asymmetric Digital Subscriber Lines) Is a form of DSL, a data communications technology that enables faster data transmission over copper telephone lines than a conventional voiceband modem can provide. The distinguishing characteristic of ADSL over other forms of DSL is that the volume of data flow is greater in one direction than the other, i.e. it is asymmetric.

AGR (Adjusted Gross Revenue) The amount of annual income that a person or company has after various adjustments for income or corporation tax purposes.

ARPU (Average Revenue Per User) Average revenue per user (sometimes average revenue per unit) usually abbreviated to ARPU is a measure used primarily by consumer communications and networking companies, it is the total revenue divided by the number of subscribers.

Basic Telephone Service Mean the collection, carriage, transmission and delivery of voice or non-voice messages over the Licenseeâ&#x20AC;&#x2122;s Public Switched Telephone Network (PSTN) and includes provision of all types of services except those which require separate licence. - 153 By- Neeraj Kumar Singh (Roll No- 520751161)

Bharat Nirman Bharat Nirman will be a time-bound business plan for action in rural infrastructure for the next four years. Under Bharat Nirman, action is proposed in the areas of irrigation, road, rural housing, rural water supply, rural electrification and rural telecommunication connectivity.

BTS (Base Transceiver System) A base transceiver station (BTS) is a piece of equipment that facilitates wireless communication between user equipment (UE) and a network. UEs are devices like mobile phones (handsets), WLL phones, computers with wireless internet connectivity, WiFi and WiMAX gadgets etc. The network can be that of any of the wireless communication technologies like GSM, CDMA, WLL, WAN, WiFi, WiMAX etc. BTS is also referred to as the radio base station (RBS), node B (in 3G Networks) or, simply, the base station (BS). For discussion of the LTE standard the abbreviation eNB for enhanced node B is widely used.

BWA (Broadband Wireless Access) Broadband Wireless Access (BWA) systems utilize base stations to provide broadband voice, data, and video to businesses or homes. It offers an alternative to the wired "last-mile" access links. Broadband Wireless Access (BWA) technologies provide broadband data access bay wireless means to consumer and business markets. The most common example of BWA is wireless LAN, but efforts are intensively continuing to deliver ubiquitous broadband network access by deploying adequate radio technologies like Metropolitan Area Networks, 3G and wireless LAN which can even be combined in one single device to ensure seamless operation.

CAGR Compounded Annual Growth Rate: is the average annual growth rate calculated over a period (either forecast or historical)

CDMA (Code division multiple access) Code division multiple access (CDMA) is a channel access method utilized by various radio communication technologies. It should not be confused with the mobile phone standards called cdmaOne and CDMA2000 (which are often referred to as simply "CDMA"), which use CDMA as an underlying channel access method.

- 154 By- Neeraj Kumar Singh (Roll No- 520751161)

CEWiT (Centre of Excellence in Wireless Technology) Centre of Excellence in Wireless Technology is public-private initiative to develop indigenous worldclass Next Generation wireless technology in India. It is a research organisation established by the Indian governmentâ&#x20AC;&#x2122;s Dept. of Information Technology in partnership with the Indian telecom industry. The Telecommunication Network research group at IIT Madras is playing a key role in incubating CEWiT.

CII The Confederation of Indian Industry: Founded in 1895, CII is an Indian business association, with a direct membership of over 5,300 companies from the private as well as public sectors, including SMEs and MNCs and indirect membership of over 80,000 companies from around 300 national and regional sectoral associations.

CMIE The Centre for Monitoring Indian Economy: is an independent economic organization which specializes in monitoring and researching the Indian economy

CMTS (Cellular Mobile Telephone Service) Means Telecommunication Service provided by means of a telecommunication system for the conveyance of messages through the agency of wireless telegraphy where every message that is conveyed thereby has been, or is to be, conveyed by means of a telecommunication system which is designed or adapted to be capable of being used while in motion. The Cellular Mobile Telephone Service refers to transmission of voice or non-voice messages over licenseeâ&#x20AC;&#x2122;s network in real time only. This Service does not cover broadcasting of any messages voice or non-voice; however, Cell Broadcast is permitted only to the subscribers of the service.

CPP (Calling Party Pay) Calling Party Pays (CPP) is the arrangement in which the mobile subscriber does not pay for incoming calls. Instead, the calling party pays for those calls.

Creative financing Is where the seller provides the financing for the purchase of a property. It is the use of one of several methods that enable a seller to dispose the good quickly without requiring the buyer to qualify for and obtain financing at a lending institution. A part of creative financing is microfinance.

- 155 By- Neeraj Kumar Singh (Roll No- 520751161)

CUG (Closed User Group) Closed User Groups are groups of mobile telephone subscribers who can only make calls and receive calls from members within the group. Any other calls would be rejected.

Dark Fiber In fiber optic communications, dark fiber or unlit fiber (or fibre) refers to unused fibers, available for use.

DEL (Direct Exchange Line) Means a telephone connection between the subscriberâ&#x20AC;&#x2122;s terminal equipment and the terminal exchange.E1 level means a primary PCM bandwidth of 2.048 Mb/s.

DOT (Department of Telecom) The Department of Telecommunications is part of the Ministry of Communications and Information Technology in the executive branch of the Government of India.

DTH (Direct to Home) DTH is defined as the reception of satellite programmes with a personal dish in an individual home.

DTS (Department of Telecommunication Services) The service-providing sector of DoT was split up and called Department of Telecom Services (DTS). DTS was later corporatized and renamed Bharat Sanchar Nigam Limited (BSNL).

Emerging markets It is a financial market of a developing country, usually a small market with short operating history.

Factory outlet Also called an outlet shop, is a shop supposedly selling goods direct from the factory at a discount.

- 156 By- Neeraj Kumar Singh (Roll No- 520751161)

FBG (Financial Bank Guarantee) An indemnity letter in which the bank commits itself to pay a certain sum if a third party fails to perform or if any other form of default occurs. One use is when a bank wants a carrier to release a shipment which it has financed but the original bills of lading are not yet available for surrender to the carrier.

FDI (Foreign Direct Investment ) in its classic form is defined as a company from one country making a physical investment into building a factory in another country. It is the establishment of an enterprise by a foreigner.

FICCI Federation of Indian Chambers of Commerce and Industry: Set up in 1927, it is a business association with over 1,500 corporate members

Financial engineering Is a process by which quantitative methods are used to design financial transactions and the financial structure of an organization in order to maximize the organizationâ&#x20AC;&#x2122;s effectiveness. FIPB (FOREIGN INVESTMENT PROMOTION BOARD ) Has been set up by the government of India in order to increase the flow of foreign direct investments into the country. By doing this, Foreign Investment Promotion Board (FIPB) has been able to give a major boost to the Indian economy.

GDP (Gross Domestic Product) Is the total market value of all goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports.

GNI (Gross national income) Gross national income (GNI) comprises the total value produced within a country (i.e. its gross domestic product), together with its income received from other countries (notably interest and dividends), less similar payments made to other countries.

- 157 By- Neeraj Kumar Singh (Roll No- 520751161)

GNP (Gross national product) Is the value of all final goods and services produced within a nation in a given year, plus income earned by its citizens abroad, minus income earned by foreigners from domestic production.

GSM (Groupe SpĂŠcial Mobile) GSM (Global System for Mobile communications: originally from Groupe SpĂŠcial Mobile) is the most popular standard for mobile phones in the world.

GSS (Gramin Sanchar Sewak Scheme ) The Grameen Sanchar Sewak (GSS) scheme, an ambitious pilot project to introduce rural mobile services kick started by Bharat Sanchar Nigam Lmited (BSNL) and the Department of Posts in 2002, is ready to be regularized and go national, after a resounding triumph in the Indian state West Bengal.

HDI (Human Development Index) Is a summary composite index that measures a country's average achievements in three basic aspects of human development: longevity, knowledge, and a decent standard of living. Longevity is measured by life expectancy at birth; knowledge is measured by a combination of the adult literacy rate and the combined primary, secondary, and tertiary gross enrolment ratio; and standard of living by GDP per capita (PPP USD).

HPI-1 (Human Poverty Index) Poverty has traditionally been measured as a lack of income, but this is far too narrow a definition. Human poverty is a concept that captures the many dimensions of poverty that exists in both poor and rich countries; it is the denial of choices and opportunities for living a life one has reason to value. The HPI-1, human poverty index for developing countries, measures human deprivations in the same three aspects of human development as the HDI (longevity, knowledge and a decent standard of living).

ICT Information and Communications Technology - or technologies (ICT) is an umbrella term that includes all technologies for the manipulation and communication of information.

ILD (International Long Distance) Access to the outside of the country by a service provider.

- 158 By- Neeraj Kumar Singh (Roll No- 520751161)

Infrastructure Provider (S) Means a person or persons providing inactive elements of the telecom network including dark fibers, right of way, duct space, towers, etc. as well as those who provide end to end bandwidth to other service providers

IN Services The Intelligent Network, typically stated as its acronym IN, is a network architecture intended both for fixed as well as mobile telecom networks. It allows operators to differentiate themselves by providing value-added services in addition to the standard telecom services such as PSTN, ISDN and GSM services on mobile phones. In IN, the intelligence is provided by network nodes owned by telecom operators, as opposed to solutions based on intelligence in the telephone equipment, or in Internet servers provided by any part. IN is based on the Signaling System #7 (SS7) protocol between telephone network switching centers and other network nodes owned by network operators.

International Long Distance Telecommunication Service Means telecommunication services originating within India and terminating outside India and vice versa.

Internet Broadband Broadband Internet access, often shortened to just broadband, is high data rate Internet accessâ&#x20AC;&#x201D;typically contrasted with dial-up access over a 56k modem. Although various minimum bandwidths have been used in definitions of broadband, ranging up from 64 kbit/s up to 1.0 Mbit/s, the 2006 OECD report is typical by defining broadband as having download data transfer rates equal to or faster than 256 kbit/s, while the United States FCC, as of 2008, defines broadband as anything above 768 kbit/s. The trend is to raise the threshold of the broadband definition as the marketplace rolls out faster services. Data rates are defined in terms of maximum download because several common consumer broadband technologies such as ADSL are "asymmetric"â&#x20AC;&#x201D;supporting much slower maximum upload data rate than download.

- 159 By- Neeraj Kumar Singh (Roll No- 520751161)

IPTV An IPTV (Internet Protocol Television) service (or technology) is the new convergence service ( or technology) of the telecommunications and broadcasting through QoS controlled Broadband Convergence IP Network including wire and wireless for the managed, controlled and secured delivery of a considerable number of multimedia contents such as Video, Audio, data and applications processed by platform to a customer via Television, PDA, Cellular, and Mobile TV terminal with STB module or similar device.

ISD (International Subscriber Dialing) Means facility for direct connectivity between an end user in India with another end user in another country by means of direct dialing through licensed networks.

ISP (Internet Service Providers) An Internet service provider (ISP, also called Internet access provider, or IAP) is a company that offers its customers access to the Internet. The ISP connects to its customers using a data transmission technology appropriate for delivering Internet Protocol datagrams, such as dial-up, DSL, cable modem or dedicated high-speed interconnects.

ISUP Means Integrated Service Digital Network (ISDN) User Part

ITES Given the proximity of BPO to the information technology industry, it is also categorized as an information technology enabled service or ITES. Business process outsourcing (BPO) is a form of outsourcing that involves the contracting of the operations and responsibilities of a specific business functions (or processes) to a third-party service provider.

ITU The International Telecommunication Union is the second-oldest international organization still in existence (the oldest being the Rhine Commission), established to standardize and regulate international radio and telecommunications. It was founded as the International Telegraph Union in Paris on 17 May 1865. Its main tasks include standardization, allocation of the radio spectrum, and organizing interconnection arrangements between different countries to allow international phone calls â&#x20AC;&#x201D; in which regard it performs for telecommunications a similar function to what the UPU performs for postal services. It is one of the specialized agencies of the United Nations, and has its headquarters in Geneva, Switzerland, next to the main United Nations campus. - 160 By- Neeraj Kumar Singh (Roll No- 520751161)

IUC (Interconnection Usage Charges) It is the charge levied by the telecom company to whom a call is being terminated to.

Local component Is a factor that you can find locally in an area. For example, in a certain city you can find more capital, people that has a higher education, more labor and so on. It is what you can find as local condition and make it to your advantage.

Leased Circuits Means telecommunication facilities leased to subscribers or service providers to provide for technology transparent transmission capacity between network termination points which the user can control as part of the leased circuit provision.

MARR (Multi Access Radio Relay) Access technology used to provide V.P.T. in rural India.

Microfinance Is the provision of a broad range of financial services such as deposits, loans, payment services, money transfers, and insurance to poor and low-income households and their micro enterprises.

MPLS-VPN MPLS VPN is a family of methods for harnessing the power of Multiprotocol Label Switching (MPLS) to create Virtual Private Networks (VPNs). MPLS is well suited to the task as it provides traffic isolation and differentiation without substantial overhead.

National Long Distance National Long Distance Service means picking up, carriage and delivery of switched bearer telecommunication service over a long distance network i.e., a network connecting different Short Distance Charging Areas (SDCAs).

- 161 By- Neeraj Kumar Singh (Roll No- 520751161)

NGN (Next Generation Networking) Iis a broad term to describe some key architectural evolutions in telecommunication core and access networks that will be deployed over the next 5â&#x20AC;&#x201C;10 years. The general idea behind NGN is that one network transports all information and services (voice, data, and all sorts of media such as video) by encapsulating these into packets, like it is on the Internet. NGNs are commonly built around the Internet Protocol, and therefore the term "all-IP" is also sometimes used to describe the transformation towards NGN.

NII (National Information Infrastructure) The National Information Infrastructure (NII) was the product of the High Performance Computing and Communication Act of 1991. It was a telecommunications policy buzzword, which was popularized during the Clinton Administration under the leadership of Vice-President Al Gore. It was a proposed, advanced, seamless web of public and private communications networks, interactive services, interoperable hardware and software, computers, databases, and consumer electronics to put vast amounts of information at users' fingertips. NII includes more than just the physical facilities (more than the cameras, scanners, keyboards, telephones, fax machines, computers, switches, compact disks, video and audio tape, cable, wire, satellites, optical fiber transmission lines, microwave nets, switches, televisions, monitors, and printers) used to transmit, store, process, and display voice, data, and images; it encompasses a wide range of interactive functions, user-tailored services, and multimedia databases that are interconnected in a technology-neutral manner that will favor no one industry over any other.

NIXI (National Internet Exchange of India) The National Internet Exchange of India is the neutral meeting point of the ISPs in India. Its main purpose is to facilitate exchange of domestic Internet traffic between the peering ISP members. This enables more efficient use of international bandwidth, saving foreign exchange. It also improves the Quality of Services for the customers of member ISPs, by avoiding multiple international hops and thus reducing latency.

NLDO (National Long Distance Operator) means the telecom operator providing the required digital capacity to carry long distance telecommunication service within the scope of LICENSE for National Long Distance Service, which may include various types of tele services defined by ITU, such as voice, data, fax, text, video, and multi media etc.

- 162 By- Neeraj Kumar Singh (Roll No- 520751161)

NRI- Non Resident Indian A non-resident Indian (NRI) is an Indian citizen who has migrated to another country, a person of Indian origin who is born outside India, or a person of Indian origin who resides outside India. Other terms with the same meaning are overseas Indian and expatriate Indian. In common usage, this often includes Indian born individuals (and also people of other nations with Indian blood) who have taken the citizenship of other countries

NTP 1999 The New Telecom Policy, 1999 (NTP-99) was approved on 26th March, 1999, to become effective from 1st April, 1999. NTP-99 laid down a clear roadmap for future reforms, contemplating the opening up of all the segments of the telecom sector for private sector participation.

OECD The Organisation for Economic Co-operation and Development (OECD) (in French: Organisation de coopération et de développement économiques, OCDE) is an international organisation of 30 countries that accept the principles of representative democracy and free-market economy. Most OECD members are high-income economies with a high HDI and are regarded as developed countries. It originated in 1948 as the Organisation for European Economic Co-operation (OEEC), led by Robert Marjolin of France, to help administer the Marshall Plan for the reconstruction of Europe after World War II. Later, its membership was extended to non-European states. In 1961, it was reformed into the Organisation for Economic Co-operation and Development by the Convention on the Organisation for Economic Co-operation and Development.

OFC (Optical fiber cable) An optical fiber cable is a cable containing one or more optical fibers. The optical fiber elements are typically individually coated with plastic layers and contained in a protective tube suitable for the environment where the cable will be deployed.

Open Network Architecture (ONA) Open network architecture (ONA) is the overall design of a communication carrier's basic network facilities and services to permit all users of the basic network to interconnect to specific basic network functions and interfaces on an unbundled, equal-access basis. The ONA concept consists of three integral components: >Basic serving arrangements (BSAs) >Basic service elements (BSEs) >Complementary network services - 163 By- Neeraj Kumar Singh (Roll No- 520751161)

PCO A Public call office (PCO) is a telephone facility located in a public place in India.

Point of Presence (PoP) A point-of-presence (POP) is an artificial demarcation point or interface point between communications entities. A point of presence was a location where a long-distance carrier could terminate services and provide connections into a local telephone network. An Internet point of presence is an access point to the Internet. It is a physical location that houses servers, routers, ATM switches and digital/analog call aggregators. It may be either part of the facilities of a telecommunications provider that the Internet service provider (ISP) rents or a location separate from the telecommunications provider. ISPs typically have multiple POPs, sometimes numbering in the thousands. POPs are also located at Internet exchange points and colocation centres.

Point of Presence (POP) (as applicable to BSO) Means setting up of switching centre and transmission centre of appropriate capacity by Basic Telephone Service Provider at the SDCA level to provide, on demand, service of prescribed quality and grade of service in a non-discriminatory manner.

Point of Presence (POP) (as applicable to NLDO) Means setting up of switching center and transmission center of appropriate capacities by National Long Distance Service Provider at the LDCC level to provide on demand inter-circle long distance services of prescribed quality and grade of service in a non-discriminatory manner.

Point of Presence (POP) (as applicable to ILDO) Means setting up of switching center and transmission center of appropriate capacity by the Licensee to provide on demand, service of prescribed quality and grade of service in a non-discriminatory manner.

Point of Interconnection (POI) Means a mutually agreed upon point of demarcation (based on TRAI determinations/regulations) where the exchange of traffic between the two Parties takes place.

Pre-Paid Phone Card Is a card you purchase in advance (for a set price) and use to make short or long distance phone calls. These cards are usually sold in USD amounts or by number of minutes. - 164 By- Neeraj Kumar Singh (Roll No- 520751161)

Private Sector Company Means a company in which 51% or more of the subscribed and paid up equity is owned and controlled by a private entity.

Pro-poor growth Compares changes in the incomes of poor people with respect to changes in the incomes of the nonpoor. Growth is "pro-poor" if the incomes of poor people grow faster than those of the population as a whole, i.e. inequality declines.

PPP Public-private partnership (PPP) describes a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. These schemes are sometimes referred to as PPP or P3.

PSTN Means the Public Switched Telephone Network.

Public Sector Company (PSU) Public Sector Undertaking a company (majority) owned, managed and run by the Government of India.

QOS Means Quality of Service.

R&D The phrase research and development (also R and D or, more often, R&D), according to the Organization for Economic Co-operation and Development, refers to "creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications.

SACFA (Standing Advisory Committee on Radio Frequency Allocation) SACFA makes the recommendations on major frequency allocation 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, citing clearance of all wireless installations in the country etc. - 165 By- Neeraj Kumar Singh (Roll No- 520751161)

SEZ A Special Economic Zone (SEZ) is a geographical region that has economic laws that are more liberal than a country's typical economic laws.

Steady State Growth Is traditional economic theory that growth rates of different countries would converge towards a natural rate.

TDSAT (Telecommunications Dispute Settlement and Appellate Tribunal ) By the Amendment Act an Appellate Tribunal known as the “Telecom Disputes Settlement & Appellate Tribunal” has been set up under Section 14 of the Telecom Regulatory Authority of India Act, 1997 by 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.

Tele-density Is main lines per 100 inhabitants.

Telecommunication Tariff Order (TTO) 1999 The Telecommunication Tariff Order, 1999 (TTO ’99) envisaged rebalancing of tariffs wherein an increase in the rentals was coupled with a reduction in call charges for STD and ISD. The increase in rentals and the reduction in STD/ ISD call charges required for a rebalancing of tariffs were found to be too sharp to be implemented in one phase. Therefore, the implementation of tariff re-balancing was specified in three phases. The first phase was implemented on 1st April, 1999. The second phase was scheduled to be implemented with effect from 1st April, 2000.

TRAI (Telecom Regulatory Authority of India) The Telecommunications Regulatory Authority of India (Hindi: भारतीय दरसं ू चार विनमयक ािधकरण) or TRAI (established 1997) is the independent regulator established by the Government of India to regulate the telecommunications business in India.

- 166 By- Neeraj Kumar Singh (Roll No- 520751161)

UAS (Unified Access Services ) TRAI issued its “Consultation Paper on Unified Access Services Licensing (UASL)” for basic and cellular services on 16 July 2003. On 27 October 2003, it produced a blueprint for a UASL regime that called for a single licence for “basic service operators” BSO and cellular carriers. On 11 November 2003, the government endorsed this plan. As a result, both BSO and cellular carriers gained the freedom to offer basic and/or cellular mobile services using any technology.

UN The United Nations (UN) is an international organization whose stated aims are to facilitate cooperation in international law, international security, economic development, social progress, human rights, and achieving world peace. The UN was founded in 1945 after World War II to replace the League of Nations, to stop wars between countries, and to provide a platform for dialogue. There are currently 192 member states, including nearly every recognized independent state in the world. From its headquarters on international territory in New York City, the UN and its specialized agencies decide on substantive and administrative issues in regular meetings held throughout the year.

UNDP The United Nations Development Programme (UNDP) is the United Nations' global development network. The UNDP is an executive board within the United Nations General Assembly. The UNDP Administrator is the third highest ranking member of the United Nations after the United Nations Secretary-General and Deputy Secretary-General. Headquartered in New York City, the UNDP is funded entirely by voluntary contributions from member nations. The organization has country offices in 166 countries, where it works with local governments to meet development challenges and develop local capacity. Additionally, the UNDP works internationally to help countries achieve the Millennium Development Goals (MDGs).

USAID The United States Agency for International Development (USAID) is the United States federal government organization responsible for most non-military foreign aid. An independent federal agency, it receives overall foreign policy guidance from the United States Secretary of State and seeks to "extend a helping hand to those people overseas struggling to make a better life, recover from a disaster or striving to live in a free and democratic country. USAID advances U.S. foreign policy objectives by supporting economic growth, agriculture and trade; health; democracy, conflict prevention, and humanitarian assistance. It provides assistance in SubSaharan Africa; Asia and the Near East, Latin America and the Caribbean, Europe, and Eurasia. USAID - 167 By- Neeraj Kumar Singh (Roll No- 520751161)

is organized around three main pillars: Economic Growth, Agriculture, and Trade; Global Health; Democracy, Conflict, and Humanitarian Assistance.

USL (Universal Service Levy ) Universal Service Levy (USL), is a percentage of the revenue earned by the operators under various licenses.

USOF (Universal Service Obligation Fund ) The Indian Telegraph (Amendment) Act, 2003 giving statutory status to the Universal Service Obligation Fund (USOF) was passed in December 2003. The Fund is to be utilized exclusively for meeting the Universal Service Obligation by providing access to telegraph services to people in the rural and remote areas at affordable and reasonable prices. The USO Fund was established with the fundamental objective of providing access to â&#x20AC;&#x2DC;basicâ&#x20AC;&#x2122; telegraph services. Subsequently, an Act has been passed on 29.12.2006 as the Indian Telegraph (Amendment) Act 2006 to amend the Indian Telegraph Act, 1885 to enable provision of all types of telegraph services.

VAS(Value-Added Services) Means such services as may be available over a Telecommunications System in addition to Voice Telephony or Data Services, and specifically those services listed as "Value-Added Services" in the Regulations or Orders.

VoIP Voice over Internet Protocol (VoIP) is a general term for a family of transmission technologies for delivery of voice communications over IP networks such as the Internet or other packet-switched networks. Other terms frequently encountered and synonymous with VoIP are IP telephony, Internet telephony, voice over broadband (VoBB), broadband telephony, and broadband phone.

VSAT (A Very Small Aperture Terminal) Is a two-way satellite ground station with a dish antenna that is smaller than 3 meters. Most VSAT antennas range from 75 cm to 1.2 m. Data rates typically range from narrowband[vague] up to 4 Mbit/s. VSATs access satellites in geosynchronous orbit to relay data from small remote earth stations (terminals) to other terminals (in mesh configurations) or master earth station "hubs" (in star configurations). g VSATs are most commonly used to transmit narrowband data (point of sale transactions such as credit card, polling or RFID data; or SCADA), or broadband data (for the provision of Satellite Internet access to remote locations, VoIP or video). VSATs are also used for transportable, on-the-move (utilising phased array antennas) or mobile maritime communications. - 168 By- Neeraj Kumar Singh (Roll No- 520751161)

VPT(Village Public Telephone) Telephone connections provided in rural villages.

Wire-line In the United States, the pair of wires from the central switch office to a subscriber's home is called a subscriber loop. It is typically powered by -48V direct current (DC) and backed up by a large bank of batteries (connected in series) in the central office, resulting in continuation of service during most commercial power outages. The services provided on this pair of wire are called wire-line services.

WiMax WiMAX, meaning â&#x20AC;&#x2DC;Worldwide Interoperability for Microwave Accessâ&#x20AC;&#x2122;, is a telecommunications technology that provides wireless transmission of data using a variety of transmission modes, from point-to-multipoint links to portable and fully mobile internet access. The technology provides up to 3 Mbit/s broadband speeds without the need for cables. The technology is based on the IEEE 802.16 standard (also called Broadband Wireless Access). The name "WiMAX" was created by the WiMAX Forum, which was formed in June 2001 to promote conformity and interoperability of the standard. The forum describes WiMAX as "a standards-based technology enabling the delivery of last mile wireless broadband access as an alternative to cable and DSL".

WLL(Wireless in Local Loop) WLL-M is a communication system that connects customers to the landline network using radio frequency signals instead of conventional copper wires, for the full or part connection between the subscriber and the exchange

WPC ( Wireless Planning & Co-ordination (WPC) Wing) 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. WPC is divided into major sections like Licensing and Regulation (LR), New Technology Group (NTG) and Standing Advisory Committee on Radio Frequency Allocation (SACFA).

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Unit-17 Appendix 17.1 Basic Information of Indian economy and social structure

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17.2 Financial Statement of BSNL

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17.3 Financial Performance of Airtel

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17.4

World telecoms and technology industry 2002

2003

Telephone main lines (m)

931.4

980.7

per 100 people

19.5

20.4

Mobile subscribers (m)

2004

2005

2006

2007

2008

2009

2010

2011

1,028.6 1,073.0 1,114.1 1,150.1 1,174.5 1,186.7 1,200.4 1,217.0

21.1

21.8

22.5

23.0

23.2

23.3

23.5

1,071.2 1,289.0 1,587.6 1,954.1 2,247.3 2,482.6 2,668.0 2,824.8 2,970.1 3,113.9

per 100 people

22.5

26.8

32.6

39.8

45.3

49.6

52.8

55.4

57.8

60.0

Internet users (m)

543.1

648.5

762.8

841.1

926.2

per 100 people

11.4

13.5

15.7

17.1

18.7

20.6

22.6

24.7

26.8

29.0

Broadband subscriber lines

68.5

107.8

159.9

217.1

284.3

351.3

415.0

475.3

532.6

585.9

per 100 people

1.4

2.2

3.3

4.4

5.7

7.0

8.2

9.3

10.4

11.3

Personal computers (per 1000 people)

126.2

144.4

159.5

175.1

198.3

212.1

225.7

239.5

252.9

265.7

1,030.6 1,143.1 1,258.2 1,376.8 1,503.0

(a) 60 countries covered by the Economist Intelligence Unitâ&#x20AC;&#x2122;s industry service. Source: Economist Intelligence Unit.

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17.5 Tele-density Picture In India

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17.6 Economic and social indicators of India

Demography Unit

Value

Population

(Million)

1,065

Urban population

(% to total)

Birth rate

(Per 1,000)

Death rate

(Per 1,000)

Infant mortality rate

(Per 1,000 live births)

Life expectancy

(Years)

65.4

Labor force

(Million)

427

Unit

Value

(US$ Bn)

652

Agriculture

(%)

Industry

(%)

Manufacturing

(%)

Services

(%)

(US$ Bn)

579

Per capita NNP

(US$)

530

Per capita PPP

(US$)

2,880

Gross Domestic Savings

(% to GDP)

National Income

Gross Domestic Product (GDP) Share in GDP

Net National Product

Gross Domestic Capital formation

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Agriculture Unit

Value

Foodgrains

(Mn tonnes)

206.4

Rice

(Mn tonnes)

Wheat

(Mn tonnes)

Sugar*

(Mn tonnes)

Tea

(Mn tonnes)

0.8

Tobacco

(Mn tonnes)

Oilseed

(Mn tonnes)

Cotton

(Mn tonnes)

Fruits

(Mn tonnes)

Vegetables

(Mn tonnes)

(kg.)

Unit

Value

Electricity production

(Bn kwh)

587

Electricity consumption Per capita

(kwh)

538

Rail route

(km)

63,140

Air passengers carried

(Mn)

22.3

Motor vehicles

(per 1,000 people) 10

TV sets

(per 1,000 people) 83

Telephone main lines

(per 1,000 people) 41

Cellular Mobile subscribers

(per 1,000 people) 55

Personal computers

(per 1,000 people) 7

Internet Users

(per 1,000 people) 16

Researchers in R & D

(per Mn people)

120

R & D Expenditure

(% to GDP)

0.85

Production

Fertiliser Consumption per hectare of arable land

*Centrifugal sugar expressed in raw value

Infrastructure & communications

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External Sector & Exchange rate Unit

Value

Exports

($ Bn)

As % of world exports

(%)

0.8

Exports of commercial services

($ Bn

Imports

($ Bn)

107

Forex reserves†

($ Bn)

143

Exchange rate†

(Rs./ per US$)

44.00

Unit

Value

(Ave. % ’04-05)

3.8

(% to GDP)

Lending rate

(%)

10.5

Total Insurance density

($)

Total Insurance penetration

(% to GDP)

FDI inflows

($ Bn)

5.5

Listed domestic companies

(No.)

5,644

Market capitalisation

($ Bn on 28/7/05)

450

Unit

Value

Total Debt outstanding

($ Bn)

113.6

Debt service ratio

(%)

18.3

† Pertains to September 30, 2005

Inflation, Banking & Capital market

Consumer prices Domestic credit by Banking sector Commercial bank

External debt

- 182 By- Neeraj Kumar Singh (Roll No- 520751161)

Social sector indicators Unit

Value

Gross enrolment ratio in primary schools

(%)

Adult literacy

(%)

Labour cost per worker in manufacturing

($ per year)

1,800

Education expenditure (Public)

( % to GDP)

3.7

Physicians

(per 1,000 population)

0.5

Health expenditure (Public)

(% to GDP)

1.5

Health expenditure per capita

($)

Conventional contraceptive users

(Mn)

16.5

Overall pill users

(Mn)

8.2

Unit

Value

(%)

26.1

Poverty

Population below poverty line Note: Data generally relate to the latest available period, 2004-05

Source: Statistical Outline of India 2004-05, Economic Survey of India 04-05, CMIE, TSMG.

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17.7 Sector Distribution of Investment Commitments to Infrastructure Projects

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17.8

Auditor General of India Report on Outstanding Billed Amount in Telecom

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Declaration

I here by declare that the project report entitled â&#x20AC;&#x153;Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India.â&#x20AC;? submitted in partial fulfillment of the requirements for the degree of Masters of business Administration to Sikkim-Manipal University, India, is my original work and not submitted for the award of any other degree, diploma, fellowship, or any other similar title or prizes.

Place:

(Neeraj Kumar Singh)

Date:

Reg. No:520751161

- 193 By- Neeraj Kumar Singh (Roll No- 520751161)

Examiner’s Certification

The project report of Mr Neeraj Kumar Singh, titled “Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India.” is approved and is acceptable in quality and form.

Internal Examiner

External Examiners

(Srikanta Ghosh) M.B.A. (Finance & Marketing)

- 194 By- Neeraj Kumar Singh (Roll No- 520751161)

University study centre certificate

This is to certify that the project entitled “Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India.” submitted in partial fulfillment of the requirements for the degree of ‘Masters of Business Administration’ of Sikkim-Manipal University of Health, Medical and technological sciences by Mr. Neeraj Kumar Singh, has been worked under my supervision and guidance and that no part of this report has been submitted for the award of any other degree, diploma, fellowship or other similar titles or prizes and that the work has not been published in any journal or Magazine.

Reg.No.:520751161

Certified

(Srikanta Ghosh) M.B.A.( Finance & Marketing )

- 195 By- Neeraj Kumar Singh (Roll No- 520751161)

Project Examination Marks Statement for MBA IV Semester (Revised) University: Sikkim Manipal University Status:

Neeraj Kumar Singh

520751161

Date of Examination: Roll. Name Internal Evaluator No.

Learning Centre Code:0249 External Evaluator

Synopsis

Methodology

Analysis + Findings

Project Report

VIVA

05 marks IE1

10 marks

25 marks IE3

25 marks IE4

35 marks IE5

IE2

Total internal evaluatorâ&#x20AC;&#x2122;s marks 100 marks IE= IE1+ IE2 + IE3 + IE4 + IE5

Synopsis

Methodology

Analysis + Findings

Project Report

VIVA

05 marks EE1

10 marks

25 marks EE3

25 marks EE4

35 marks EE5

EE2

Grand Total Marks Total external evaluatorâ&#x20AC;&#x2122;s marks 100 marks

200 Marks

EE= EE1+ EE2 +EE3 + EE4 + EE5

We here by certify that the project examination has been conducted on the date as indicated above and the information given above has been verified and found correct. 1) Internal Examination Signature with Date

2) External Examiner Signature with Date

Name: Srikanta Ghosh

Name:

Centre In Charge stamp with signature - 196 By- Neeraj Kumar Singh (Roll No- 520751161)