Telecom Sector in India

INDIAN TELECOM SECTOR: AN OVERVIEW
At 110.01 million connections ' Indian Telecom Industry' is the fifth largest and fastest growing in the world. The subscriber base has grown by 40% in 2005 and is expected to reach 250 million in 2007. Over the last 3 years, two out of every three new telephone connections were wireless. Consequently, wireless now accounts for 54.6% of the total telephone subscriber base, as compared to only 40% in 2003. Wireless subscriber growth is expected to grow at 2.5 million new subscribers every month in 2007. The wireless subscriber base skyrocketed from 33.69 million in 2004 to 62.57 million in FY 2004 -2005. The wireless technologies currently in use ' Indian Telecom Industry ' are Global System for Mobile Communications (GSM) and Code Division Multiple Access (CDMA). There are primarily 9 GSM and 5 CDMA operators providing mobile services in 19 telecommunication circles and 4 metro cities, covering more than 2000 towns across the country. And the numbers are still growing for ' Indian Telecom Industry '. ‘Telecom Industry in India ' is regulated by 'Telecom Regulatory Authority of India' (TRAI). It has earned good reputation for transparency and competence. Three types of players exists in ' Telecom Industry India ' community - State owned companies like - BSNL and MTNL.

Private Indian owned companies like - Reliance Infocomm and Tata Teleservices. Foreign invested companies like – Hutchison-Essar, Bharti Tele-Ventures, Escotel, Idea Cellular, BPL Mobile, Spice Communications etc. The ‘ Indian Telecom Industry ‘ services are not confined to basic telephone but it also extends to internet, broadband (both wireless and fixed), cable TV, SMS, IPTV, soft switches etc. Special characteristics of telecom* sector*:

The main characteristics of telecom sector are as follows: Barriers to entry Telecom sector generally has high entry barriers due to huge investment involved. Service providers need to invest huge capital to build or hire necessary infrastructure. Because of high cost of capital involved in most countries government owned telecom services enjoys monopoly. Cartel formation: Cartel formation is a unique phenomenon that is evident in telecom sector. A cartel is a formal (explicit) agreement among firms. It is a formal organization of producers that agree to coordinate prices and production. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products. Cartel members may agree on such matters as price fixing, total industry output, market shares, allocation of customers, allocation of territories, bid rigging, establishment of common sales agencies, and the division of profits or combination of these. The aim of such collusion is to increase individual members' profits by reducing competition. However in current scenario due to entry of many players in the market cartel formation cease to exist. Due to many players entering the market customers are having plenty of available options. They can bargain for best service and best price in a buyer’s market .They can easily switch from one player to another without incurring any switching cost. Customers are highly quality conscious and demand supplementary services Competition: The intangible, inseparable and heterogeneous nature of telecom services poses difficulty in attracting new customers. It also makes it difficult for the existing players to retain their customers. Therefore, players attempt to convince customer by offering various supplementary services. The market of telecom industry can be divided into following segments: Normal household Normal household or individual customers form an important segment .In India people earlier have paid very high prices for telephone services but due to entry of foreign players market has become more competitive . Corporate customer...