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May, 2010

The Indian telecommunications industry is one of the fastest growing in the world. According to the Telecom Regulatory Authority of India (TRAI), the number of telecom subscribers in the country reached 621.28 million as on March 31, 2010, an increase of 3.38 per cent from 600.98 million in February 2010. With this the overall teledensity (telephones per 100 people) has touched 52.74.

The wireless subscriber base has increased to 584.32 million at the end of March 2010 from 564.02 million in February 2010, registering a growth of 3.6 per cent.

Value-Added Services (VAS) Market

Mobile value added services include text or SMS, menu-based services, downloading of music or ring tones, mobile TV, videos and sophisticated m-commerce applications. According to the Economic Survey 2009-10, prior to 2008 a majority of VAS revenue was attributed to SMS. But with greater penetration of new services, availability of relatively inexpensive, feature-rich handsets and consumer education, value-added services other than SMS are gaining importance. It is expected that over the next few years non-SMS services will become a dominant contributor to VAS revenue.

Major Investments

The booming domestic telecom market has been attracting huge amounts of investment which is likely to accelerate with the entry of new players and launch of new services.

According to the Department of Industrial Policy and Promotion (DIPP), the telecommunications sector which includes radio paging, mobile services and basic telephone services attracted foreign direct investment (FDI) worth US$ 2,495 million during April to February 2010. The cumulative flow of FDI in the sector during April 2000 and February 2010 is US$ 8,872 million.

  • Norway-based telecom operator Telenor has bought a further 7 per cent in Unitech Wireless for a little over US$ 431.3 million. Telenor now has 67.25 per cent hold of the company. Telenor has now completed its four-stage stake buy and has invested a total of US$ 1.32 billion in Unitech Wireless as agreed on with the latter last year
  • The government has approved the foreign direct investment (FDI) proposal of the Federal Agency for State Property Management of the Russian Federation to buy 20 per cent stake in telecom service provider Sistema-Shyam for US$ 660.1 million

Going Global

In March 2010, Bharti Airtel bought the African operations of Kuwait-based Zain Telecom for US$ 10.7 billion, driving the Indian player into the league of top ten telecom players globally.

The Reserve Bank has liberalised the investment norms for Indian telecom companies by allowing them to invest in international submarine cable consortia through the automatic route. In April 2010, RBI issued a notification stating "As a measure of further liberalisation, it has now been decided... to allow Indian companies to participate in a consortium with other international operators to construct and maintain submarine cable systems on co-ownership basis under the automatic route." The notification further added, "Accordingly, banks may allow remittances by Indian companies for overseas direct investment."

3G Services

The Department of Telecom has taken the pioneering decision of launching of 3G services by BSNL and MTNL and initiation of process for auction of spectrum for 3G services to private operators. Allocation of spectrum for third-generation (3G), and broadband wireless access (BWA) services was done through a controlled simultaneous, ascending e-auction process.

All the 71 blocks that were put up for auction across the 22 service areas in the country were sold, leaving no unsold lots. Auction for 3G spectrum ended on May 19, 2010 after 183 rounds of intense bidding over a span of 34 days. The Government is expected to morph revenue worth US$ 14.6 billion. All the available slots across 22 circles have been sold to seven different operators.

A pan-India bid for third generation spectrum stood at US$ 3.6 billion. The Anil Ambani-led Reliance Communication bagged the highest number of 13 circles at a cost of US$ 1.9 billion, followed by Bharti Airtel in 12, Idea in 11 and Vodafone and the Tatas in nine circles each, according to the Department of Telecommunications.

MTNL and BSNL will have to pay US$ 1.42 billion and US$ 2.2 billion respectively.


The Indian telecom industry manufactures a vast range of telecom equipment using state-of-the-art technology.

According to the Economic Survey 2009-10, the production of telecom equipment in value terms has increased from US$ 9 billion in 2007-08 to US$ 10.53 billion in 2008-09 and is expected to be US$ 12.4 billion in 2009-10.

Exports have increased from US$ 86.74 million in 2002-03 to US$ 23.7 billion in 2008-09, accounting for 21 per cent of the equipment produced in the country.