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INTRODUCTION TO TELECOM INSUSTRY OF INDIA The Indian telecom sector can be broadly classified into Fixed Line Telephony and mobile telephony. The major players of the telecom sector are experiencing a fierce competition in both the segments. The major players like BSNL, MTNL, VSNL in the fixed line and Airtel, Hutch, Idea, Tata, Reliance in the mobile segment are coming up with new tariffs and discount schemes to gain the competitive advantage. The Public Players and the Private Players share the fixed line and the mobile segments. Currently the Public Players have more than 60% of the market share. Indian Telecom sector, like any other industrial sector in the country, has gone through many phases of growth and diversification. Starting from telegraphic and telephonic systems in the 19th century, the field of telephonic communication has now expanded to make use of advanced technologies like GSM, CDMA, and WLL to the great 3G Technology in mobile phones. Day by day, both the Public Players and the Private Players are putting in their resources and efforts to improve the telecommunication technology so as to give the maximum to their customers.

India's total telecom subscriber base touched 429.72 million for the

quarter ending March taking the teledensity up to 36.98 This is against 384.79 million for the quarter ending December 2008, 11.68% increase. Wireless subscribers increased to 391.76 million (346.89 million) while wire line subscribers increased to 37.96 million (37.90 million). Rural wire line subscribers decreased by 0.93% to 10.58 million (10.68 million) while in contrast, rural wireless subscribers grew 17.77% to 109.71 million (93.15 million). The number of Public Call Offices (PCOs) also increased by 3.68% to 6.20 million (5.98 million). In the GSM segment, the all India blended ARPU per month decreased 6.82% from Rs 220 in December 2008 to Rs 205 in March 2009. ARPU for postpaid services declined 2.8% to Rs 543 (Rs 559) and 6% for prepaid services to Rs 181 (Rs 192). For CDMA, the all India monthly blended ARPU dropped to Rs 99 (Rs 111). The huge difference between postpaid and prepaid ARPU noticed in the last quarter remains valid for the current quarter as well in the CDMA market. Postpaid ARPU was 5 times that of prepaid ARPU, which could be attributed to declining importance of processing fee on recharge coupon/voucher purchased by prepaid subscribers. Internet subscribers grew 5.30% to 13.54 million (12.85 million) while broadband subscribers (with a download speed of 256 Kbps or more) grew 12.68% to

Evolution of the industry-Important Milestones History of Indian Telecommunications 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

Major Players There are three types of players in telecom services: • -State owned companies (BSNL and MTNL) • -Private Indian owned companies (Reliance Infocomm, Tata Teleservices,) • -Foreign invested companies (Hutchison-Essar, Bharti TeleVentures, Escotel, Idea Cellular, BPL Mobile, Spice Communications)

BSNL On October 1, 2000 the Department of Telecom Operations, Government of India became a corporation and was renamed Bharat Sanchar Nigam Limited (BSNL). BSNL is now India’s leading Telecommunications Company and the largest public sector undertaking. It has a network of over 45 million lines covering 5000 towns with over 35 million telephone connections. The state-controlled BSNL operates basic, cellular (GSM and CDMA) mobile, Internet and long distance services throughout India (except Delhi and Mumbai). BSNL will be expanding the network in line with the Tenth Five-Year Plan (1992-97).

The aim is to provide a telephone density of 9.9 per hundred by March 2007. BSNL, which became the third operator of GSM mobile services in most circles, is now planning to overtake Bharti to become the largest GSM operator in the country. BSNL is also the largest operator in the Internet market, with a share of 21 per cent of the entire subscriber base

BHARTI Established in 1985, Bharti has been a pioneering force in the telecom sector with many firsts and innovations to its credit, ranging from being the first mobile service in Delhi, first private basic telephone service provider in the country, first Indian company to provide comprehensive telecom services outside India in Seychelles and first private sector service provider to launch National Long Distance Services in India. Bharti Tele-Ventures Limited was incorporated on July 7, 1995 for promoting investments in telecommunications services. Its subsidiaries operate telecom services across India. Bharti’s operations are broadly handled by two companies: the Mobility group, which handles the mobile services in 16 circles out of a total 23 circles across the country; and the Infotel group, which handles the NLD, ILD, fixed line, broadband, data, and satellite-based services. Together they have so far deployed around 23,000 km of optical fiber cables across the country, coupled with approximately 1,500 nodes, and presence in around 200 locations. The group has a total customer base of 6.45 million, of which 5.86 million are mobile and 588,000 fixed line customers, as of January 31, 2004. In mobile, Bharti’s footprint extends across 15 circles.

Bharti Tele-Ventures' strategic objective is “to capitalize on the growth opportunities the company believes are available in the Indian telecommunications market and consolidate its position to be the leading integrated telecommunications services provider in key markets in India, with a focus on providing mobile services”.

MTNL MTNL was set up on 1st April 1986 by the Government of India to upgrade the quality of telecom services, expand the telecom network, and introduce new services and to raise revenue for telecom development needs of India’s key metros – Delhi, the political capital, and Mumbai, the business capital. In the past 17 years, the company has taken rapid strides to emerge as India’s leading and one of Asia’s largest telecom operating companies. The company has also been in the forefront of technology induction by converting 100% of its telephone exchange network into the state-of-the-art digital mode. The Govt. of India currently holds 56.25% stake in the company. In the year 2003-04, the company's focus would be not only consolidating the gains but also to focus on new areas of enterprise such as joint ventures for projects outside India, entering into national long distance operation, widening the cellular and CDMA-based WLL customer base, setting up internet and allied services on an all India basis. MTNL has over 5 million subscribers and 329,374 mobile subscribers. While the market for fixed wire line phones is stagnating, MTNL faces intense competition from the private players—Bharti, Hutchison and Idea Cellular, Reliance

Infocomm—in mobile services. MTNL recorded sales of Rs. 60.2 billion ($1.38 billion) in the year

2002-03, a decline of 5.8 per cent over the previous year’s annual turnover of Rs. 63.92 billion.

RELIANCE INFOCOMM Reliance is a $16 billion integrated oil exploration to refinery to power and textiles conglomerate. It is also an integrated telecom service provider with licenses for mobile, fixed, domestic long distance and international services. Reliance Infocomm offers a complete range of telecom Services, covering mobile and fixed line telephony including broadband, national and International long distance services, data services and a wide range of value added Services and applications. Reliance India Mobile, the first of Infocomm's initiatives was launched on December 28, 2002. This marked the beginning of Reliance's vision of ushering in a digital revolution in India by becoming a major catalyst in improving quality of life and changing the face of India. Reliance Infocomm plans to extend its efforts beyond the traditional value chain to develop and deploy telecom solutions for India's farmers, businesses, hospitals, government and public sector organizations. Until recently, Reliance was permitted to provide only “limited mobility” services through its basic services license. However, it has now acquired a unified access license for 18 circles that permits it to provide the full range of mobile services. It has rolled out its CDMA mobile network and enrolled more than 6 million subscribers in one year to become the country’s largest mobile operator.It now wants

to increase its market share and has recently launched prepaid services. Having captured the voice market, it intends to attack the broadband market.

VODAFONE Hutch’s presence in India dates back to late 1992, when they worked with local partners to establish a company licensed to provide mobile telecommunications services in Mumbai. Commercial operations began in November 1995. Between 2000 and March 2004, Hutch acquired further operator equity interests or operating licenses. With the completion of the acquisition of BPL Mobile Cellular Limited in January 2006, it now provides mobile services in 16 of the 23 defined license areas cross the country. Hutch India has benefited from rapid and profitable growth in recent years. it had ver 17.5 million customers by the end of June 2006.

IDEA Indian regional operator IDEA Cellular Ltd. has a new ownership structure and grand esigns to become a national player, but in doing so is likely to become a thorn in he side of Reliance Communications Ltd. IDEA operates in eight telecom “circles,” or egions, in Western India, and has received additional GSM licenses to expand its network circles in Eastern India -- the first phase of a major expansion lan that it intends to fund through an IPO, according to parent company Aditya Birla Group.

ABOUT RELIANCE COMMUNICATION Reliance Communications is the flagship company of the Anil Dhirubhai Ambani Group (ADAG) of companies. Listed on the National Stock Exchange and the Bombay Stock Exchange, it is India’s leading integrated telecommunication company with over 85 million customers. Their business encompasses a complete range of telecom services covering mobile and fixed line telephony. It includes broadband, national and international long distance services and data services along with an exhaustive range of value-added services and applications. Our constant Endeavour is to achieve customer delight by enhancing the productivity of the enterprises and individuals we serve. Reliance Mobile (formerly Reliance India Mobile), launched on 28 December 2002, coinciding with the joyous occasion of the late Dhirubhai Ambani’s 70th birthday, was among the initial initiatives of Reliance Communications. It marked the auspicious beginning of Dhirubhai’s dream of ushering in a digital revolution in India. Today, we can proudly claim that we were instrumental in harnessing the true power of information and communication, by bestowing it in the hands of the common man at affordable rates. We Endeavour to further extend our efforts beyond the traditional value chain by developing and deploying complete telecom solutions for the entire spectrum of society.

Reliance Communications has a reliable, high-capacity, integrated (both wireless and wire line) and convergent (voice, data and video) digital network. It is capable of delivering a range of services spanning the entire infocomm (information and communication) value chain, including infrastructure and services — for enterprises as well as individuals, applications, and consulting. Today, Reliance Communications is revolutionizing the way India communicates and networks, truly bringing about a new way of life.

COMPANY PROFILE OF RELIANCE COMMUNICATION Chairman’s profile Reliance Communications Limited founded by the late Shri. Dhirubhai H Ambani (1932-2002) is the flagship company of the Reliance Anil Dhirubhai Ambani Group. It is India's foremost truly integrated telecommunications service provider. With a customer base of over 36 million including close to one million individual overseas retail customers, Reliance Communications ranks among the top ten Asian Telecom companies. Its corporate clientele includes 600 Indian, 250 multinational corporations and over 200 global carriers and owns and operates the world's largest next generation, IP enabled connectivity infrastructure, comprising over 150,000 kilometers of fiber optic cable systems in India, USA, Europe, Middle East and the Asia Pacific region. Regarded as one of the foremost corporate leaders of contemporary India, Shri Anil D Ambani, 48, is the chairman of all listed companies of the Reliance ADA Group, namely, Reliance Communications, Reliance Capital, Reliance Energy and Reliance Natural Resources. He is also the president of the Dhirubhai Ambani Institute of Information and Communications Technology, Gandhinagar An MBA from the Wharton School of the University of Pennsylvania, Shri Ambani is credited with pioneering several financial innovations in the Indian capital markets. He spearheaded the country’s first

forays into overseas capital markets with international public offerings of global depositary receipts, convertibles and bonds.

Under his chairmanship, the constituent companies of the Reliance ADA group have raised nearly US$ 3 billion from global financial markets in a period of less than 15 months. Shri Ambani has been associated with a number of prestigious academic institutions in India and abroad. He is currently a member of: • Wharton Board of Overseers, The Wharton School, USA • Board of Governors, Indian Institute of Management (IIM), Ahmedabad • Board of Governors, Indian Institute of Technology (IIT), Kanpur • Executive Board, Indian School of Business (ISB), Hyderabad

CONCEPT OF RELIANCE COMMUNICATION Anil Ambani: Telecom person of the year 2007 His marketing strategy has made millions of Indians happy, they got the best mobile tariffs in the world-local call costs at 15 paisa/minute, and STD call at 40 paisa/minute NEW DELHI, INDIA: When the VOICE&DATA jury, comprising eminent professionals from the telecom field, met in Delhi in June to choose the Telecom Person of the Year 2007, the five-hour selection process was steamy. The reason was obvious: The telecom sector is growing faster than any other segment and naturally their CEOs have a lot to crow about. The jury had to select one from three CEOs, who had made it to the final list through nominations from the industry and the initial scrutiny. Among the three, one of the main contenders was a young CEO. The jury decided that he should come back next year to try and win the coveted award. The list now had two names-both CEOs of two wellknown companies. The pivotal difference between the two: one is an entrepreneur and the other is not so popular, as his credit is shared among a number of his big daddies. Following a five-hour closely held, hotly debated discussion, the name was announced: Anil Dhirubhai Ambani, chairman of Reliance Communications. Anil Ambani joined Reliance Industries (currently promoted by his brother Mukesh Ambani, following their split) in 1983 as co-chief executive officer. Forbes ranked him number 104 among

the World's Richest People in 2006. The Ambani family faced criticism when it announced its ambitious plans to build a countrywide telecom network, as its prior expertise lay in commodities-textiles and petrochemicals-business only. Apart from that telecom needs a service-oriented mindset, critics felt. What they did not remember was how the family had served its millions of shareholders.

Policies in India are made in line with Ambani's vision, says an industry expert. His business acumen and closeness to politicians assisted him in making it to the Rajya Sabha in June 2004, as an independent member. Ambani chose to resign voluntarily on March 25, 2006. The same association with politicos gave him negative returns too when the Mayawati Government in Uttar Pradesh put a spanner on his ambitious plans to build a 1,200-acre SEZ. Media sees his aggression when he announces financial results for the Reliance ADA group of companies, and when he attends the annual general meetings and faces questions from shareholders. When he meets the press, he has answers to all their questions. He also remembers to call select journalists by name. To merchant bankers he, who has already contributed immensely to the financial reforms of the country, is one of the financial wizards of the world. May be because of his expertise, he gave up in the race to grab Hutchison Essar stake, after indirectly jacking up the valuation. His negotiations with the Qualcomm chief are also a folk theory now. How did Ambani become the VOICE&DATA Telecom Person of the Year 2007? What are his personal and organizational achievements in the recent past? .

Achiever's Pride • • • • • • • • • • • • •

Undertook financial restructuring of Reliance communications To spend Rs 16,000 crore to expand and strengthen network coverage After expansion, Reliance Communications will have the single largest wireless network in the world Launched the lowest-cost classic brand handset at Rs 777 Subscriber base grew to over 28 mn during last fiscal, registering 60% growth Total Revenue shot up to Rs 14,468 crore, an increase of 34% Net Profit rises to Rs 3,163 crore, an increase of over 600%

Revenues of the wireless business increased by 46% to Rs 10,728 crore Broadband achieved revenue growth of 123% to Rs 1,144 crore Market capitalization crossed Rs 100,000 crore Will add 23,000 more towers Telecom services will be available in over 23,000 towns and 600,000 villages Next generation DTH network will be launched before end of the year

Reliance Communications' wireless subscriber base grew to over 28 mn last fiscal, registering a 60% growth. This makes it one of the top two wireless operators in India. "Economic growth in the future will be indexed to connectivity of millions of enterprise and individual customers. Over the next few years, we will have over 100 million customers, making us one of the top 5 telecom players in the world. In four years, we put up a total of 14,000 towers across the country. This year alone we will add 23,000 more towers. Our wireless network is currently available in 10,000 towns. By the end of this year, it will be available in over 23,000 towns and 600,000 villages," Anil Ambani said at the first annual general meeting of Reliance Communications since the re-organization of the Reliance Group in June 2005. "In four years of operations, we invested around Rs 32,000 crore. This year alone we will invest over Rs 20,000 crore. At the end of this year, we will have covered over 90% of our population. If Version 1.0 of the Indian telecom story was all about affordability, Version 2.0 will be about reach. Our Network expansion will give us the power to drive the market and stay ahead of the curve," Ambani adds. According to Ambani, the financial restructuring of Reliance Communications is the biggest turnaround story in the history of corporate India. The inherited ownership structure of Reliance Communications was complex. The reorganization has yielded a simple, fair, and transparent ownership structure, and given Reliance Communications 100% ownership of all operational and associate companies. Reliance Communications is now among the three most valuable private sector companies in India, and the five most valuable telecom companies in Asia. In the current

Fiscal, Reliance Communications will spend Rs 16,000 crore to further expand and strengthen its network coverage across India and the rest of the world.

In addition to organic growth, Reliance Communications will leverage the advantages derived from this impressive financial platform to explore and pursue any significant opportunities available in the telecommunications sector. "We are currently evaluating a number of inorganic opportunities in select international markets to further expand our footprint," Ambani said. Reliance Communication’s One India, One Tariff plan allowed millions to connect across India at just one rupee a minute. The company was the first one to break the Rs 1,000 entry-barrier with the launch of the lowest-cost classic brand handset at Rs 777. As per its expansion plan, Reliance Communications will have the single largest wireless network in the world, covering over 900 mn Indians or more than 15% of the global population. It will cover 23,000 towns or every single Indian habitation with a population of over 1,000. Reliance Communications will cover almost 100% of all rail routes, providing seamless voice, video, radio, and Internet connectivity to 14 mn commuters every day. It will also cover almost 100% of all national highways, and 84% of all state highways, giving millions of users the power to talk, text, surf, play, chat or simply stay in touch across nearly the entire length of India's 2,00,000-km-long road network. Having achieved tremendous growth, the main challenge for Reliance Communications is to improve quality of service and ARPU. Its enterprise business is also not in a position to compete with the global majors. Stock market valuations may boost the fortunes of an entrepreneur, but Ambani needs to address the issues faced by the growing mobile customer base, especially in India, where bureaucracy takes pride in checking the businessman.

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