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Introduction to Telecom Industry

Telecom Industry is an achievement of Late 20th century that has revolutionized the way in which human beings, communicate with each other. Its purpose is to provide universal connectivity without restricting mobility. Cellular phones have become very popular in everyday life due to the convenience of keeping in touch with friends, family and business associates as well as being beneficial for urgent and emergency situations. Cellular technology was introduced about fifty years back when it was invented in AT & T's Bell laboratories. The Concept of mobile communication was born in the Bell laboratories of the USA in the late 1960's. In 1970's AT & T's Bell Labs demonstrated what came to be known as Cellular system was opened in the Nordic countries- Sweden, Denmark, Norway, and Finished in early 1980's. Less than two years late cellular services were launched in the United States using AMPS (Advanced Mobile Phone Service) technology. In just 15 years the global subscriber base for cellular technology had arisen from zero to over 50 million spread than a100 countries which is about one tenth of the wired telephone lines, while the latter are growing at about five percent annually. Mobile communication is no longer state of the art technology instead it is a part of daily utilities. In India cellular service were made available to the public after liberalization of telecom policy way back in1994. Since then ever operator in the cellular services sector has been vying to after of range of a new services. Each operator offers a variety of calling plans both pre-paid as well as post-paid to suit varying needs and requirements. Various service levels as well as coverage areas, quality of network coverage pertaining to three factors viz. network access, quality of network coverage pertaining to three factors viz. network access, call retentions and call quality make the job of service provides very challenging. In addition to this various charges in from of activation fees, monthly access charges, number, of included minutes, surcharge for extra minutes, contract periods, etc. Have almost miraculously transformed cellular service industry from a slovenly run state owned monopoly into an increasingly competitive industry. An intense cutthroat competition is being witnessed between private operators on charges (pulse duration), roaming charges, SMSA facility, etc.

Evolution of the industry-Important Milestone

Year 1851
First operational land lines were laid by the government near Calcutta (seat of British power)

1881

Telephone service introduced in India

1883

Merger with the postal system

1923

Formation of Indian Radio Telegraph Company (IRT)

1932

Merger of ETC and IRT into the Indian Radio and Cable Communication Company (IRCC)

1947

Nationalization of all foreign telecommunication companies to form the Posts, Telephone and Telegraph (PTT), a monopoly run by the government's Ministry of Communications

1985

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

1986

Conversion of DOT into two wholly government-owned companies: the Videsh Sanchar Nigam Limited (VSNL) for international

telecommunications and Mahanagar Telephone Nigam Limited (MTNL) for service in Metropolitan areas.

1997

Telecom Regulatory Authority of India created.

1999

Cellular Services are launched in India. New National Telecom Policy is adopted.

2000

DOT becomes a corporation, BSNL

A large population, low telephony penetration levels, and a rise in consumers' income and spending owing to strong economic growth have helped make India the fastest-growing telecom market in the world. The first and largest operator is the state-owned incumbent BSNL, which is also the 7th largest telecom company in the world in terms of its number of subscribers. BSNL was created by corporatization. While DTS (Department of Telecommunication Services), a government unit responsible for provision of telephony services. Subsequently, after the telecommunication policies were revised to allow private operators, companies such as Bharti Telecom, TATA Indicom, Vodafone, MTNL, Idea, Vodafone and BPL have entered the space. Major operators in India. However, rural India still lacks strong infrastructure. The total number of telephones in the country crossed the 300 million mark on June 18 2008The overall tele-density has increased to 36.98% in March 2009 .In the wireless segment, 15.87 million subscribers have been added in March 2009. The total wireless subscribers (GSM, CDMA & WLL (F)) base is more than 391.76 million now. The wire

line segment subscriber base stood at 38.22 million with a decline of 0.13 million in October 2008.

Market Share of Public and Private Industry


The fixed line and mobile segments serve the basic needs of local calls, long distance calls and the international calls, with the provision of broadband services in the fixed line segment and GPRS in the mobile arena. Traditional telephones have been replaced by the codeless and the wireless instruments. Mobile phone providers have also come up with GPRS-enabled multimedia messaging, Internet surfing, and mobile-commerce.The muchawaited 3G mobile technology is soon going to enter the Indian telecom market. The GSM, CDMA, WLL service providers are all upgrading them to provide 3G mobile services. Along with improvement in telecom services, there is also an improvement in manufacturing. In the beginning, there were only the Siemens handsets in India but now a whole series of new handsets, such as Nokia's latest N-series, Sony Ericsson's W-series, Motorola's PDA phones, etc. have come up. Touch screen and advanced technological handsets are gaining popularity. Radio services have also been incorporated in the mobile handsets, along with other applications like high storage memory, multimedia applications, multimedia games, MP3 Players, video generators, Camera's, etc. The value added services provided by the mobile service operators contribute more than 10% of the total revenue.

The Global Cellular Mobile Industry


GLOBAL TELECOM SECTOR Earnings visibility

Earnings growth is being driven by improving pricing conditions, stabilizing operating trends, aggressive cost cutting initiatives, a positive regulatory environment, strong wireless growth, and new market opportunities. This has translated into greater visibility of forward earnings as evidenced by recent increased analyst upgrades within the sector.

Merger synergies
Given the substantial amount of excess capital available in the sector and in private equity we expect to see additional merger and acquisition activity, albeit at a slower pace than recently witnessed. Global telecom M&A deals over the past two years have reflected market expansion but have also had a positive effect on the buyers balance sheets. Partnering companies have begun realizing their synergies through cost reductions and economies of scale. In the US, the largest three companies now account for over 70% of the sector market cap; this compares to 34% in 1990. Trends in bundled services are also paving the way for additional M&A activity. Sector consolidation will further increase the importance of stock selection. Growth While cost-cutting has been a major source of earnings growth, we have seen top-line pressures decreasing which will help revenues become a larger driver of earnings growth again. We see growth within the sector coming from a number of areas including: broadband, 3G (third generation) technology, expansion in emerging markets. Broadband penetration has been accelerating as internet customers are seeking faster downloads for audio and video files. 3G services, which facilitate the simultaneous transfer of both voice and non-voice (i.e. video, downloads, SMS, etc.) data are providing mobile users with a much more robust communication platform and should finally begin to realize their growth potential in 2007. Emerging market companies benefit from low penetration rates and also tend to have lower leverage, higher margins and higher growth than most developed markets telecom companies. Global opportunities It has become less difficult to find attractive telecom investment opportunities globally than it was a year ago. As the fog has lifted from the sector, there are increased opportunities within both the growth and value spaces.

Definition of Cellular/Mobile phone


The Cellular telephone (commonly "mobile phone" or "cell phone" or "hand phone") is a long-range, portable electronic device used for mobile communication. In addition to the standard voice function of a telephone,

The Global Cellular Mobile Industry:


The global mobile phone industry is based on many different manufacturers and

operators. The industry is based on advanced technology and many of the manufacturers are operating in different industries, where they use their technological skills, distribution network, market knowledge and brand name. Four large manufacturers of mobile phones are today dominating the global mobile phone industry & networks; Nokia, Sony Ericson, Samsung and Motorola. Airtel, Bsnl , Tata Docomo ,Vodafone, reliance, Idea and others. In addition to these companies there are many manufacturers that operate globally and locally.

Telecom Industry in India


The telecom industry is one of the fastest growing industries in India. India has nearly200 million telephone lines making it the third largest network in the world after China and USA.

With a growth rate of 45%, Indian telecom industry has the highest growth rate in the8world. Much of the growth in Asia Pacific Wireless Telecommunication Market is spurred by the growth in demand in countries like India and China. Indias mobile phone subscriber base is growing at a rate of 82.2%. China is the biggest market in Asia Pacific with a subscriber base of 48% of the total subscribers in Asia Pacific. Compared to that Indias share in Asia Pacific Mobile Phone market is 6.4%. Considering the fact that India and China have almost comparable populations, India slow mobile penetration offers huge scope for growth.

History of Indian Telecommunications


It was Started in 1851, when the first operational land lines were laid by the government near Calcutta (seat of British power). Telephone services were introduced in India in 1881. In 1883 telephone services were emerged with the postal system. Indian Radio Telegraph Company (IRT) was formed in 1923. After independence in 1947, all the foreign telecommunication companies were nationalized to form the Posts, Telephone and Telegraph (PTT), a monopoly run by the government's Ministry. Telecom sector was considered as a strategic service and the government considered it best to bring under state's control. The first wind of reforms in telecommunications sector began to flow in 1980s when the private sector was allowed in telecommunications equipment manufacturing. In 1985, Department of Telecommunications (DOT) was established. It was an exclusive provider of domestic and long distance service that would be its own regulator (separate from the postal system). In 1986, two wholly government-owned companies were created: the Videsh Sanchar Nigam Limited (VSNL) for international telecommunications and Mahanagar Telephone Nigam Limited (MTNL) for service in metropolitan areas. In 1990s, telecommunications sector benefited from the general opening up of the economy. Also, examples of telecom revolution in many other countries, which resulted in better quality of service and lower tariffs, led Indian policy makers to initiate a change process finally resulting in opening up of telecom services sector for the

private sector. National Telecom Policy (NTP) 1994 was the first attempt to give a comprehensive roadmap for the Indian telecommunications sector. In 1997, Telecom Regulatory Authority of India (TRAI) was created. TRAI was formed to act as a regulator to facilitate the growth of the telecom sector.. Telecommunication sector in India can be divided into two segments: Fixed Service Provider (FSPs), and Cellular Services. Fixed line services consist of basic services, national or domestic long distance and international long distance services. The state operators (BSNL and MTNL), account for almost 90 per cent of revenues from basic services. Private sector services are presently available in selective urban areas, and collectively account .Global System for Mobile Communications (GSM) and Code Division Multiple Access (CDMA). The GSM sector is dominated by Airtel, VodfoneEssar, and Idea Cellular, while the CDMA sector is dominated by Reliance and Tata Indicom. Opening up of international and domestic long distance telephony services are the major growth drivers for cellular industry. Cellular he tariffs on airtime, which along with rental was the main source of revenue. The reduction in tariffs for airtime, national long distance, international long distance, and handset prices has driven demand.

Classification of Telecommunication services


1. Basic services 2. Cellular services 3. Internet Service Provider (ISP)

LITERATURE REVIEW
1. Seth et al (2008), in their study titled Managing the Customer Perceived

Service Quality for Cellular Mobile Telephone: an Empirical Investigation

analyzed that there is relative importance of service quality attributes and showed that responsiveness is the most importance dimension followed by reliability, customer perceived network quality, assurance, convenience, empathy and tangibles. This would enable the service providers to focus their resources in the areas of importance. The research resulted in the development of a reliable and valid instrument for assessing customer perceived service quality for cellular mobile services.
2.

Szu-Yuan Sun, Teresa L. Ju, Chao-Fan Su (2006) did comparative value-added mobile services in Finland and Taiwan. The purpose of this study was to understand the characteristics and current situations of services provided in Taiwan, as well as what areas need improvement. They compared the results with Anckar and D'Incau's research to determine the key differences between Taiwan and Finland. Mobile commerce or e-commerce over mobile devices, has become a major interest for the IS research community. They surveyed the three largest cell phone service providers in Taiwan and sorted these providers' value-added services using the eight categories of BAL Subramanian Et Al. and Clarke's fourvalue propositions for m-commerce to examine each value-added service's characteristics.

3. Kalpana and Chinnadurai , in their study titled Promotional Strategies of

Cellular Services: A Customer Perspective analyzed that the increasing competition and changing taste and preferences of the customers all over the world are forcing companies to change their targeting strategies. The study revealed the customer attitude and their satisfaction towards the cellular services in Coimbatore city. It was found that advertisement play a dominant role in influencing the customers customer oriented.
4. Bismut, in his study titled Competition in European Telecom Markets

but most of the customers are of opinion that

promotional strategies of cellular companies are more sale oriented rather than

analyzed that in recent years the European telecommunications market has witnessed major developments, with rapid expansion in access to

telecommunications networks and a surge in the number of available services and applications. While many factors have contributed to the transformation of the telecommunications industry, competition has played a key role in driving telecom players to invest in new technologies, to innovate and to offer new services
5. Fernandez, in their study titled Understanding Dynamics in an Evolving

Industry: Case of Mobile VAS in India analyzed that Mobile Value Added Services (VAS) is a rising star in the fast growing wireless business. In the paper, attempt is made at understanding the strategic dynamics of the evolving environment within which the Indian players are operating, the challenges and structure of the same. Our literature and industry review indicates that - while the value chain of industry is complicated yet one can observe the bipolar nature of bargaining powers between mobile network operators and content aggregators.
6. Kalavani, in their study analyzed that majority of the respondents have given

favorable opinion towards the services but some problems exist that deserve the attention of the service providers. They need to bridge the gap between the services promised and services offered. The overall customers attitude towards cell phone services is that they are satisfied with the existing services but still they want more services to be provided.
7. Jha , in his study analyzed that it is the youth which is the real growth driver of the

telecom industry in India. Considering this fact, the paper is an attempt to give a snapshot of how frequently young people use their mobile phones for several embodied functions of the cell phones. Data was collected from a sample of 208 mobile phone owners, aged between 20 and 29. The study sheds light on how gender, monthly voucher amount and years of owning mobile phones influence the usage pattern of this device. Findings of the study would be helpful for the telecom service providers and handset manufacturers to formulate a marketing strategy for different market segments.

8. Shailaja VR (May 15, 2007) studied the GSM-based cellular industry has added

over 41 lakh subscribers in April with Bharti Airtel capturing 30.97 per cent of the market share. With this, the all-India GSM subscriber base has touched 12.55 crore at the end of April 2007 compared to 12.14 crore at the end of March 2007, reflecting a growth rate of 3.40 per cent, the Cellular Operators Association of India (COAI) said in a statement. CDMA mobile figures are yet to be out. In April, the cellular subscriber base of Bharti touched 3.88 crore with additions of 17.51 lakh users, followed by BSNL at 2.77 crore with a market share of 22.10 per cent and additions of 3.26 lakh subscribers. Hutch-Essar has 2.77 crore subscribers, taking its market share to 22.06 per cent and Idea with a market share of 11.60 per cent has 1.45 crore subscribers in April. Hutch-Essar added 12.61 lakh subscribers in the month of April, while Idea added 5.52 lakh mobile users in the same month. MTNL's GSM subscriber base in Delhi and Mumbai touched 24.83 lakh, while Spice Telecom has over 28 lakh subscribers. Aircel's user base in April stood at 59.27 lakh, followed by Reliance Telecom's 43.47 lakh subscribers.

9. Chris has analyzed Telecom advertising in print media. This research attempted

to investigate why Telecom theme are used in advertisement, and the motives that lead companies and advertisers to use sport celebrities and sport concept in advertisements. From study it has been revealed that the appearance of sport celebrities in advertising endorsement occurred more often in Telecom magazines than in other magazines, because their target group is more acquainted with athletes. The sport celebrities that dominated each printed media are related with their target group characteristics.
10. Kumar (2008), in their study titled Customer Satisfaction and Discontentment

vis-a-vis BSNL Landline Service: A Study analyzed that at present, services marketing plays a major role in the national economy. In the service sector, telecom industry is the most active and attractive. Though the telecom industry is growing rapidly, India's telecom density is less than the world's average telecom

density as most of India's market is yet to be covered. This attracts private operators to enter into the Indian telecom industry, which makes the Bharat Sanchar Nigam Limited (BSNL) more alert to run its business and survive in the market.
11.Tobias Kollmann (2004) did a research, attitude, adoption or acceptance measuring the market success of telecommunication and multimedia technology. Frequently, the term acceptance" has been used in consumer marketing for an evaluation of the sales/ market success of products. On the basis of reflections considering the market success of telecommunication and multimedia systems (TC/MM-systems), a clearer distinction of the term is evaluated and an alternative construct of acceptance presented. On this basis, it is intended to empirically demonstrate an improved measurement and prognosis of the success of TC/MM-systems, using a comparative structure model.

OBJECTIVES OF THE STUDY The present study is being undertaken with the following objectives To find out the satisfaction level of the Vodafone customers regarding different

services with there on going connection.

To identify whether there is any similarity/difference between current network

services with desired set of services. Which dimensions of service qualities are customer satisfied and dissatisfied.
What is the switching intention among customer?

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