When the government announced the launch of mobile phone services, and simultaneously threw the business open to private players 10 years ago, some 18 Indian companies ventured into the business. There were big industrial groups like the Tatas, the Birlas, the Ambanis, the Nandas and the Modis. There were second-tier business groups such as BPL, the Jhawars of Usha Martin, the Thapars of Ballarpur Industries and Analjit Singh of Max India. And there were a string of small telecom equipment makers like Rajiv Mehrotra of Shyam Telecom, C. Sivasankaran of Dishnet, Mahendra Nahata of HFCL and Sunil Mittal of Bharti Telecom (it's another matter that Mittal is the biggest private sector telecom operator now).

Circa 2005: only half of the original entrants continue to exist in the highly competitive-and lucrative-telecom services industry. In fact, there are only six entities (including public sector Bharat Sanchar Nigam Ltd or BSNL and Mahanagar Telephone Nigam Ltd or MTNL) that have pan-India presence (see Staying Put) and are likely to remain in the business in the long term.

STAYING PUT
BSNL CMD A.K. Sinha: Hopes to add 20 million subscribers every year	MTNL's R.S.P. Sinha: A merger with BSNL is on the cards	Reliance Infocomm's Anil Ambani: Riding on both CDMA and GSM		Tata Teleservices' Ratan Tata: A late entrant into CDMA, but pushing hard
Idea Cellular's Vikram Mehmi: Holding a brief for both the Tatas and the Birlas	Hutch's Asim Ghosh: The only foreign operator to stay put from 1995 till now	Essar's Shashi (L) and Ravi Ruia: Acquiring firms like BPL; will merge with Hutch		Bharti's Mittal: The largest mobile operator with 12.7 million subscribers

The industry has gone through a series of ups and downs: regulatory uncertainties, policy upheavals, technology disruptions, and accompanying legal wrangles. "However," says Rajeev Chandrasekhar, who recently sold BPL Communications to Essar Group in the country's largest-ever telecom deal (Rs 4,400 crore), "telecom is the only private sector success story in the infrastructure sector." From a few thousand subscribers in 1995 and less than a million in 1998, the industry now serves 60 million, and adds 2.5 million subscribers every month. Ten years ago, mobile phones in India cost Rs 20,000; today, phones are available for as low as Rs 2,500. The cost of talk time has come down from Rs 14.5 a minute a decade ago to 40 paise currently. And teledensity has shot up from 0.8 per cent in 1994 to about 10 per cent now.

VALUE BUYS Another round of consolidation could see four more operators exiting.
Develop a business, build value and sell out: (From left to right) Sterling Infotech's C. Sivasankaran, Spice Communications' B.K. Modi and HFCL Infotel's Mahendra Nahata
Telecom has been a great arbitrage opportunity for most early entrants (see And Those Who Hung Up). With the market being carved up between five or six large national players, there are a few smaller entities ripe for a takeover. Take the case of B.K. Modi whose Spice Communications has a presence only in Karnataka and Punjab. Recently, the Essar Group tried to acquire foreign partner Distacom's 49 per cent stake in Spice, resulting in a legal row between Modi and the foreign partner. However, once the shareholder issues are resolved, it's anybody's guess when Spice will sell out. C. Sivasankaran of Sterling Infotech is the most opportunistic player in the business. His strategy has been to develop a business, build value and then cash out. Sivasankaran, who had attempted to sell his Chennai and Tamil Nadu (Aircel) circle operations to Hutchison Essar last year, has picked up licences for six more circles in the eastern region, which include North-East, Assam, West Bengal, Orissa, Bihar at virtually zero cost. His plan is to build viable businesses in these under-penetrated areas (teledensity: 1.4 per cent) cheap, and then cash out at a later stage. Shyam Telelink (present only in basic and CDMA services in Rajasthan) and HFCL Infotel (Punjab) are others who may look for an opportunistic exit anytime soon. There's no shortage of buyers.

The inflection point came in 2002, when Reliance Infocomm entered the mobile telephony business offering limited mobility using Code Division Multiple Access (CDMA) technology at rock-bottom rates. The protests by the existing operators using the GSM standard went unheeded, and in 2003 the government made licences technology-neutral by introducing a unified service access licence. Reliance offered mobile phones for as little as Rs 500 (via a buy-now-pay-later scheme) and introduced tariffs as low as a postcard (40 paise). The result: an all round tariff reduction, and an explosion of subscriber base. From 6.6 million in 2002-03, the subscriber base expanded five-fold to 33.3 million in March 2004.

"Regulatory constraints have been eased in response to unrelenting market pressures, and this has created ideal conditions for growth opportunity, investment and consolidation in the telecom sector," says Kobita Desai, Telecom Analyst, Gartner. Now, the industry is clearly divided between GSM and CDMA operators although the former accounts for 80 per cent of the 60-million subscriber base. Bharti, Hutchison Essar and BSNL are driving the GSM business, while Reliance and Tata Teleservices remain the only two significant players in the CDMA space.

So where is the market headed? Cellular services have become affordable with declining service costs and the advent of low-cost phones (Philips is developing a phone that costs Rs 1,000). This will take the Indian market, according to Gartner, to cellular penetration levels of 30 per cent, or 300 million connections, by 2009 (Rs 1,00,000 crore in terms of revenues). The government, for its part, has set a target of 250 million telecom subscribers by end 2007.

That means the next level of growth will come from the low income users residing in the hinterland (in metros, the penetration of mobile phones has already overtaken that of fixed lines). "In the coming years, the capability and capacity to invest in penetrating semi-urban and rural markets will be important determinants for increasing market share," says Gartner's Desai. Says Kishore Chaukar, Managing Director of Tata Industries and the man who pioneered the group's telecom initiatives, "This is a business where you can't be a small player."

AND THOSE WHO HUNG UP The Indian telecom landscape doesn't look the same with more than half the original pack exiting.
The arbitrageurs: (From left to right) For Max India's Analjit Singh, it's now insurance and healthcare; BPL Communications' Rajeev Chandrasekhar cashed out to Essar; Escorts' Rajan Nanda used the money from selling Escotel to Idea to restructure the group; and RPG Cellular's Harsh Goenka is now into retail and music
Four of the eight original licencees for the metro circles-Delhi, Mumbai, Chennai and Kolkata-do not figure in the current landscape of the mobile telephony market. Nor do half the original 14 companies that operated in 18 non-metro circles. The most recent to log out from the industry was Rajeev Chandrasekhar, who sold his stake in BPL Communications to the Essar Group (the total value of the deal is Rs 4,400 crore) in July this year. Chandrasekhar was one of the first to enter the mobile services business by procuring the licence for the Mumbai circle in November 1994 (he was the highest bidder). However, with piles of cash in hand, he is not retiring. "Now my primary aim is to develop another franchise. It can be from any of the areas-technology, telecom and infrastructure," says the techie-turned-entrepreneur. One of the first companies to move out of the telecom business was Analjit Singh's Max India, which made a cool Rs 450 crore after selling its majority stake in the Mumbai circle operations to partner Hutchison way back in 1999. "I don't regret getting out then," says Singh. "We have used that cash to enter new areas like life insurance (Max New York Life) and healthcare (Max Healthcare Ltd)." The Delhi-based Escorts Group had looked like a serious telecom player till two or three years ago. However, after it failed to rope in a strategic investor and with its companies in other businesses weighed down by debt, the group sold off its telecom business (Escotel; present in Uttar Pradesh West, Haryana and Kerala) to Idea Cellular for Rs 275 crore. The Goenkas of the RPG Group, who exited their Chennai circle in favour of C. Sivasankaran of Sterling Infotech in December 2003, are now focussed on retail and music businesses. The Jhawars of Usha Martin, one of the largest manufacturers of steel ropes in the world, sold their Kolkata circle operations to Hutchison Essar and are now back to their core business. The early exits: (From left to right) Koshika Telecom's Vinay Rai squatted on licences till DoT evicted him; Usha Martin's B.M. Jhawar is back to making steel ropes; JT Mobile's Raja Mohan Rao exited very early; Fascel's A.P. Hinduja is now merely an investor in Hutch; and Skycell's L.M. Thapar sold out to Bharti The Hindujas sold their 30 per cent stake in Fascel (Gujarat circle) to Hutch two years ago, the Thapars of Crompton Greaves divested their stake in Skycell (Chennai) in 2000 to Bharti, which also acquired the Andhra Pradesh and Punjab licences of JT Mobile around the same time. The only company that is out of business and couldn't get acquired was Vinay Rai's Koshika. It had licences for UP East, Bihar and Orissa circles, but these were terminated in 2002 by the Department of Telecommunications (DoT) for non-payment of dues.

The Tatas recently upped their stake in Idea Cellular (operating in 11 circles) to 48 per cent, and have expanded their CDMA services (Tata Teleservices) to 20 circles. Reliance Infocomm, which is aiming to go to more than 5,000 towns by the end of the year, is also pushing the GSM services in the eastern region through Reliance Telecom. The state-owned BSNL, which entered cellular telephony only in 2002, is emerging a leader in the hinterland and plans to be present in every town with a population over 5,000 (there are 18,000 such). "We will be adding 20 million customers a year for the next three years," says A.K. Sinha, Chairman and Managing Director, BSNL. Similarly, Bharti, the largest private sector operator, is present in all 23 circles. Adds Chaukar, "The game is getting bigger. Five or six years down the line, 50-60 million customers per operator will not be unusual." Indian telcos have arrived.