Impact of 3g on Mobile Vas in India

The Indian Telecom Industry is a highly competitive market offering huge growth potential. At the end of financial year 2009-2010, it had registered a 44.57% growth in subscriber base compared to the previous year (Trai, 2010) . The market is cluttered with a large number of players, both big and small, such as Bharti Airtel, Reliance Communication, BSNL, MTNL, Aircel, Idea, Tata Docomo and Uninor. Fierce competition between the players on pricing, quality of service and value added services has resulted in high churn rate. The launch of 3G services and the implementation of Mobile Number Portability (MNP) has further intensified the competition and increased the churn rate. The industry operates on a low price-high volume strategy as a result of which, despite the high growth of 30% in subscriber base, the annual revenue in FY10 increased by only 3.7%. The huge untapped rural and semi-rural Indian market has shifted the focus of service providers to improve network coverage in these areas. This has given a boost to the Indian infrastructure industry. The government has increased FDI from 49% to 72%, thus making the industry more attractive to foreign investors. This will in turn help the operators meet their capital requirements.

Bharat Sanchar Nigam Limited (BSNL) is the 4th largest service provider and the largest wireline provider in the country. After a drop in its financial performance in 2009, it has restructured its organization into four new verticals to shed its bureaucratic image. Since it is a state-owned service provider, it is forced to operate in rural India- the primary cause for its losses. However, with the backing of the Department of Telecom, BSNL will have access to several multi-crore telecom projects which it can use to consolidate its financial position.

Bharti Airtel is the leading service provider in the industry but with the telecom industry getting saturated it is looking for new avenues to grow. With a significant drop in its CAGR it is looking to expand internationally and also reduce its costs. Some of its major recent initiatives include acquisition of Zain telecom to establish itself in the untapped African market; and a joint venture with Idea and Vodafone to create Indus towers which will help reduce its fixed costs by outsourcing its infrastructure requirements. The Indus joint venture is of extreme significance as it can be seen as a strategic move by Bharti Airtel to compete with BSNL. Bharti has tried to rebrand itself as an international brand by changing its logo, its signature tune and outlook.