Airtel - Positioning (And Repositioning)

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EXHIBIT I
A NOTE ON THE INDIAN CELLULAR TELEPHONY INDUSTRY

The basic concept of cellular phones originated in 1947 in the US, when researchers at Bell Laboratories got the idea of cellular communications from the mobile car phone technology used by the police department of the country. However, it took over three decades for the first cellular communication system to evolve. The public trials of the first cellular system began in Chicago during the late 1970s and the first commercial cellular telephone system was launched in Tokyo. The cellular telephone services were introduced in the US in the early 1980s, and gained popularity in a short span of time. By the late 1980s, cellular services had become popular in many developed countries across the world. Over the years, there was an improvement in both the number and quality of services offered on account of dynamic technological advancements.

There were mainly two types of cellular services offered by operators – post-paid and prepaid. Post paid cellular services, also called billing card services, require the customers to pay for the cellular services utilized by them at the end of a specific period (generally every month). These services also include fixed rental charges for the services provided. Prepaid cellular services require the customers to pay in advance for the services they are to use. These cards were available in different denominations, and the customer could choose one, keeping in mind his/her call requirements and budget. The services were withdrawn when the customers exhausted the call time they were entitled to.

Since its emergence in 1992, Indian cellular telephony industry was fragmented. The Cellular Operator's Association of India (COAI) became a representative of cellular operators in the country. Under the government policies regarding private licensees, the license ownership was fragmented, which disallowed many operators from operating in more regions.

However, with analysts forecasting high potential for cellular market in India, many national and international companies entered the cellular services market in India during the late 1990s. During this period, the major players focused on acquiring or merging with other existing players (license holders). Many players entered into alliances or agreements following which they gained access to other regions. Such alliances and agreements between the players helped the players extend the reach of their services across multiple regions. Technological advancements in the sector also enabled the companies to reach across larger distances. According to analysts, consolidation amongst players led to the creation of an extensive regional and near national coverage and increased ability to offer advanced technology based cellular services.

During the late-1990s, the cellular phone services began gaining popularity, especially in metros across the country. In 1999, pre-paid cards were also launched in the country to further increase the penetration of cellular phones in the market.

In the early 2000s, almost all leading players focused on their marketing, positioning, advertising and promotional strategies to expand their reach. Hence, competition became severe. In late-2002, the competition in the cellular market intensified (further) with the state-owned BSNL launching its cellular services. In an attempt to survive competition from BSNL (which had an extensive reach, well laid infrastructure and strong financial muscle) and increase their market shares, almost all the major players were seen entering into strategic partnerships or agreements with other players.

Source: ICMR

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