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India - Market Intelligence Report
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Market Intelligence Reports provide an invaluable mix of vital market data and background information, including telecoms regulation. India's telecommunications market began to be liberalised in 1992, when the value-added services and metropolitan paging services markets were opened to competition. Since then, additional markets have been liberalised and the sector is now fully-open to competition. Nevertheless, the state-owned domestic fixed-line and domestic and international long-distance carriers have managed to maintain their dominance of the sector, partly due to their entrenched position, partly because they have been able to draw on vast amounts of finance, but mostly due to the complex regulatory regime and the ineffectiveness of the supposedly independent regulator to get tough with the incumbents. Until recently, India's volatile economic and political climates had also mitigated against many of the new entrants' success, but it should be noted that a number of Indian conglomerates are the driving forces behind most of the private operators that have been able to make headway. Arguably, it was the liberalisation of the cellular and basic fixed-line services markets that provided the crucible from which the new Indian telecommunications market has been forged. Successful cellular operators are those which have also been able to make progress in offering basic fixed-line services, and these have naturally evolved to the point where they have comfortably entered the domestic and international long-distance markets. The liberalisation of the Internet access market has also provided much of the impetus for change in recent years. The Indian government controls the sector's largest operators, owning 100% of Bharat Sanchar Nigam Ltd (BSNL), the operating arm of the Department of Telecommunications (DoT) that was corporatised in 2000 and established as a stand-alone, but state-controlled company. BSNL offers fixed-line and wireless telecommunications services on a local and long-distance basis throughout India, except in the cities of New Delhi and Mumbai, where 56.25% state-owned Mahanagar Telephone Nigam Ltd (MTNL) is the incumbent. Shares, global depositary receipts, and American depositary shares of MTNL have been traded on local and international stock exchanges for many years, but listing on the US stock market did not occur until 2002. Between them, BSNL and MTNL served 37.46 million active telephone lines at the end of March 2007. Plans to merge these two companies are believed to have been put forward, but there can be no certainty that such a merger will receive approval from the higher authorities. The state also has a minority stake in Videsh Sanchar Nigam Ltd (VSNL), India's incumbent international long-distance carrier and the sole provider of Internet services until 2000. VSNL's shares have been publicly-traded for many years, but 2002 saw the government sell a controlling stake of 45% to the Tata group. The Tata companies have been actively involved in the telecommunications sector for many years, having been among the first to set up privately-owned cellular and local fixed-network businesses when these sectors were liberalised. With VSNL forming a key part of their telecommunications portfolio, the Tata group is one of the most potent competitors to BSNL and MTNL. Another Indian conglomerate with a significant presence is the Bharti group, which served more than 37.01 million fixed-line and cellular subscribers at the end of March 2007. Foreign investors in the Indian market are now few and far between, with all but a handful of the European and US telecommunications companies that flocked to capitalise on liberalisation in the mid-1990s still holding on. Hutchison Whampoa of Hong Kong controlled a number of cellular operators in partnership with others, but sold out to Vodafone of the UK in 2007. Singapore Telecom holds a 16% stake in Bharti's telecommunications holding company. Meanwhile, Malaysian operators Maxis and Telekom Malaysia have been investing in several smaller mobile operators. The national long-distance services market was opened up to competition in November 2001, with the first private licensee announced as Bharti Telesonic (latterly part of Bharti Airtel); this company was already co-operating with Singapore Telecom on the construction of an international submarine cable system, i2i. The international long-distance market was opened to competition in April 2002, ending VSNL's monopoly in that market; among the new licensees are Bharti Airtel and Reliance Infocomm. More recently, global operators AT&T and BT have entered this market. Internet telephony has also been enabled by the opening-up of the international long-distance market. In addition, fixed-line basic services operators have been allowed to deploy wireless local loop (WLL) technology to offer "limited mobility" services, much to the chagrin of the cellular operators. Increased competition is now leading to consolidation: the Bharti group has made a number of acquisitions of rivals and increased its minority ownership of certain operations to 100% over the last five years; Hutchison purchased cellular operators in areas where it was not already active; and, VSNL acquired successful Internet service provider Dishnet DSL as well as global operator Teleglobe.
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