Telecom Industry Insights in India
Telecom Industry Insights in India
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Kunal S Badade 1 and Jaideep Jadhav 2,“WHITE PAPER ON TELECOM INDUSTRY IN INDIA” Tactful Management Research
Journal | Volume 3 | Issue 6 | March 2015 , Online & Print
1
.WHITE PAPER ON TELECOM INDUSTRY IN INDIA
Market Dynamics:
India could emerge as a low-cost hub for testing security-sensitive IT products used in telephone and other
critical infrastructure networks, with the country being recently given the 'authorizing member nation' status in the
Common Criteria Recognition Arrangement (CCRA). Laboratories in India could offer testing services at much
lower costs compared to other CCRA labs in Western markets, highlighted Mr. Rajan Mathews, Director General,
and COAI – the industry body representing GSM operators.
India has over 50 % mobile-only internet users, possibly the world’s highest compared to 20–25 % across
developed countries, according to Avendus Capital. More so, gaining impetus from the increasing penetration of
smartphones and a whole host of mobile-only content, the Indian mobile advertising market is estimated to reach Rs.
2,800 crore (US$ 457.52 million) by 2016 from the current Rs. 180 crore (US$ 29.41 million).
Increasing demand for smart phones and availability of high speed networks, such as 3G and 4G services,
has resulted in the rapid growth of the Indian market, besides offering immense opportunities to players involved in
the business. The RNCOS’ research study, ‘Indian Mobile Gaming Market Forecast to 2017’ estimated the market to
reach Rest. 18.5 billion (US$ 302.28 million) in 2017 and grow at a CAGR of nearly 24 % during the period
2013–2017.
Worldwide, India is currently the second-largest telecommunication market and has the third highest
number of internet users, India’s telephone subscriber base expanded at a CAGR of 26.8 % to 895.5 million during
2007-12, teledensity (defined as the number of telephone connections for every hundred individuals) increased from
23.9 in 2007 to 73.3 in 2012, In March 2013, the total telephone subscription was 898 million, while teledensity was
73.3.
Indian telecom sector’s revenue grew by 13.4 % to USD64.1 billion in FY12. Wireless and wireline
revenue increased at a CAGR of 11.9 % to USD40.8 billion over FY07-12. Revenues from the telecom equipment
segment in FY12 stood at USD23.5 billion as compared to USD23.4 billion in FY11 For 9M’13, the telecom sector’s
revenue grew to USD30.6 billion.
[Link] (wireless):
Comprises establishments operating and maintaining switching and transmission facilities to provide
direct communications via airwaves
Consists of companies that operate and maintain switching and transmission facilities to provide direct
communications through landlines, microwave or a combination of landlines and satellite link-ups
[Link] service:
Includes internet service providers (ISPs) that offer broadband internet connections through consumer and
corporate channels
5.2.5 Source: Telecom Regulatory Authority of India ,notes: 2013* - data as of March 2013
India’s telephone subscriber base reached 898 million in March 2013. The wireless segment (96.6% of total
telephone subscriptions) dominates the market, while the wireline segment accounts for the rest. Urban regions
account for 61.1 % of telecom subscriptions, while rural areas constitute the remaining. Wireless subscriptions have
shown robust growth over the years.
During 2006–12, wireless subscriptions increased at a CAGR of 34.0 % to 864.7 million. In 2013, while
urban wireless teledensity stood at 140.7, rural teledensity stood at 40.2 the subscriber base declined slightly due to
disconnection of inactive mobile subscribers.
Source: Telecom Regulatory Authority of India, notes: Teledensity - The number of telephone lines for every 100
people in a country, GSM - Global System for Mobile Communications, 2013* - data as of March 2013
The mobile segment’s teledensity surged 5.3x from 13.5 % in 2006 to 70.9 % in 2013. GSM services
continue to dominate the wireless market with an 88.1 % share (June 2012); CDMA accounts for the remaining 10.9
%
Bharti Airtel is the market leader, with a 21.7 % share of total subscription; Vodafone follows with a 17.6 %
share market share .The top five players – Bharti Airtel, Vodafone, Reliance, Idea, and BSNL – account for over 79 %
of the total subscribers
Total fixed line subscription stood at 30.2 million, while teledensity reached 2.5 % due to wide usability of
wireless segment in 2013
BSNL is the market leader with a 67.7 % share followed by MTNL with 11.5 % market share. BSNL,
MTNL, and Bharti together account for 90 % of the total fixed-line market.
The number of Internet subscribers increased at a CAGR of 19.7 % to 25.3 million in 2012 from 8.6 million
in 2006. By 2016, internet subscriptions are expected to rise to 215.0 million, with a penetration rate of 16.2 %. Total
internet service provider’s revenues stood at USD2.2 billion in 2012, CAGR of 12.2 % over 2009-12.
Broadband subscription increased at a CAGR of 38.8 % during 2006–12. Growth is set to pick up pace even
further; the market is set to post a CAGR of 72.1 % during 2011–15, with subscriptions increasing to 117.6 million
by end-2015. Broadband subscription was 15.1 million as of March 2013. BSNL has the largest share (66.0 %) of the
total broadband market. Bharti Airtel has the second-largest share (9.3 %) of the total broadband market
Bharat Sanchar Nigam Government (100 %) Fixed line and mobile telephony (GSM –
Ltd (BSNL) outside Delhi and Mumbai), data and
internet in 22 circles
Reliance ADAG Group (approximately Mobile (CDMA) and Broadband
communications 67.9 %)
Bharti Airtel Bharti Group(45.7), Pastel Ltd Broadband and mobile (GSM) in 22
(15.57 %), LIC India (4.3 %) circles
Vodafone Essar Vodafone (74 %), Telecom Broadband and mobile (GSM) in 22
Investment India (19.5 %) circles
•The green telecom concept aims at reducing the carbon footprint of the telecom industry through reduced energy
consumption.
•TRAI initiated a consultation process in May 2010, requesting inputs from firms across the telecom value chain to
provide recommendations on green telecom’s framework and implementation
•There are over 62,443 uncovered villages in India; these would be provided with village telephone facility with
subsidy support from the government’s Universal Service Obligation Fund (thereby increasing rural teledensity)
•In February 2013, the rural subscriber base accounted for 38.9 % of the total subscriber base, thereby fuelling the
sector’s growth
•BWA technologies such as WiMAX have been among the most significant recent developments in wireless
communication
•WiMAX is expected to have attracted around 8 to 10 million subscribers and account for around USD1–1.5 billion
in 2012.
•The Telecom Commission (TC) is likely to set up a Telecom Finance Corporation (TFC) for channeling funding for
telecom projects at competitive rates in order to facilitate investment in the sector
•To boost local research and manufacturing of telecom products, the government has proposed an investment of
USD32.2 billion in three phases: i) USD9.2 billion to the Telecom Research and Development Fund, ii) USD4.6
billion for the Telecom Entrepreneurship Promotion Fund, and iii) USD18.4 billion to the Telecom Manufacturing
Promotion Fund during the 12th Five Year Plan
•As part of the recent outsourcing trend, operators have outsourced functions such as network maintenance, IT
operations, and customer service
•During November 2012, 4.7 million mobile banking transactions were reported, up 6.4 % from a year ago
•Availability of affordable smartphones is expected to boost the growth of various transactions conducted via phones
Notes: FDI - Foreign Direct Investment; MOU - Minutes of Use per month and per subscriber; M&A - Mergers
and Acquisitions
Rising incomes has been a key determinant of demand growth in the telecommunication sector in India.
Nominal per capita income is estimated (IMF) to have recorded a CAGR of 11.2 % over 2000–12 (USD1491.9).
Strong income growth is set to continue; IMF forecasts indicate a CAGR of 7.0 % during 2012-17 (to USD2,095.1)
Source: IMF
The emergence of an affluent middle class is triggering demand for the mobile and internet segments. A
young and growing population is aiding this trend (especially demand for smart phones)
The MVAS industry is expected to expand to USD5.4 billion by 2013 from USD2.0 billion in 2011,
representing a CAGR of 27.2 %. The share of non-voice revenues, which currently stand at around 10 % of telecom
operators’ revenues, is estimated to rise to over 30 % in the next five to seven years. A decline in smartphone prices
and data subscription rates is likely to drive the demand for MVAS. Minutes of usage of dial-up internet access
increased to 411 in 2010 from 205 in 2006, a CAGR of 19 %
•The Government of India plans to cut license fees up to 33 % for operators that cover services for over 95 % of the
residential areas in a calling circle
•The issuance of several international and national long-distance licenses has created opportunities and attracted
new companies into the market
•During May 2012, the Union Cabinet declared to abolish roaming charges and allow mobile number portability
even outside designated circles (without having to pay extra charges)
•This policy is expected to become effective from October 2013
•FDI of up to 74 % is allowed in basic and cellular, unified access, national/international long distance, and V-Sat
services as well as public mobile radio trucked services
•FDI of up to 100 % is permitted for infrastructure providers offering dark fiber, electronic mail and voice mail
•In August 2008, the Department of Telecommunication ( DoT) allowed operators to use WiMAX networks as an
alternative to cable and DSL to offer voice services
•This would enable faster delivery of wireless broadband services
•The Department of Information Technology intends to set up over 1 million internet-enabled common service
centers across India as per the National e-Governance Plan
•The USOF identified 5,000 villages, and is in the process of developing a scheme to connect through wireless
broadband
•It also intends to provide 888,832 broadband connections in rural areas by 2014
•The USOF also has plans to strengthen the OFC network in rural and remote areas
•The USOF is expected to extend financial support to operators providing service in rural areas and encourage active
infrastructure sharing among the operators
•An increase in the prescribed limit on spectrum from 6.2MHz to 2x8 MHz (paired spectrum) for GSM technology
in all areas other than Delhi and Mumbai where it will be 2x10MHz (paired spectrum)
•Telecom players can however obtain additional frequency; there will be an auction of spectrum subject to the limits
prescribed for merger of licenses
•The government has recommend a liberal norm of up to 35 % market share for the resultant entity as "safe harbor"
for the mergers and acquisition in the Indian telecom sector subject to the presence of 12 or more service providers in
that circle
•If the spectrum held by the combined entity exceeds the prescribed limit after the merger, the excess spectrum must
be surrendered within a year of the merger being permitted
Department of Industrial Policy & Promotion, Note: FY13* - Data mentioned is from April 2012 - January 2013
Cumulative FDI inflows into the telecom sector over FY01-FY13 amounted to USD287 billion. During
this period, FDI into the sector accounted for an 6.6 per cent share of total FDI inflows into the country FDI inflow
stood at USD93 million for April 2012-February 2013 and is expected to touch USD100 million by Fy13.
•ZTE Telecom India, the wholly owned subsidiary of China’s ZTE Corp, entered into an exclusive agreement with
Pune-based Calyx Group to market and distribute its products across India
•ZTE plans to enter the Indian smartphone market with five models priced at USD107–275
•It also plans to introduce tablet PCs in the Indian market after the smartphone launch
•To tap the growth in broadband technologies and infrastructure expansion, Reliance Jio Infocomm and Vodafone
entered into an agreement to build and maintain an 8,000 km submarine telecom and data cable system
•The system is expected to be operational by 2014 and would connect six countries through landing points in Oman,
UAE, India (Mumbai and Chennai), Sri Lanka, Malaysia and Singapore
•Vodafone India and ICICI Bank launched M-Pesa, a service for mobile money transfer and payment
•The service would allow customers to transfer money to any mobile phone in India, debit and deposit funds,
withdraw cash from designated outlets, pay bills, and shop at select merchant establishments. M-Pesa would be
available across India in the next 12–18 months
•Vodafone India, the local arm of UK's Vodafone Group Plc., plans to spend around Rest. 7,000 crore (US$ 1.14
billion) in the country, in addition to its annual capex of Rs. 5,000 crore (US$ 817 million) over the next few years, to
expand its data network and coverage, said Mr Marten Pieters, CEO, Managing Director, Vodafone India.
•ZTE Corp is targeting US$ 800 million revenue from India next year. The company expects a significant portion of
the revenue growth to come from its handset business. In addition, ZTE has bagged a deal to manage Airtel’s 4G
network in Kolkata and Punjab.
•The Chennai-based mobile phone retailers, UniverCell will double its retail footprint to 1,000 outlets by the end of
March 2015 from the present 500.
•Viom Networks is looking to add between 1,500 and 2,000 mobile towers by this fiscal end. The company is
expected to invest approximately Rs. 150 crore (US$ 24.51 million).
•Micromax will start assembling phones at its Rudrapur plant by the first quarter of 2014. The facility employs over
400 people.
Government Initiatives
An empowered group of ministers (EGoM) has cleared the mergers and acquisitions (M&A) guidelines for
the telecommunication sector, in order to encourage consolidation in the sector.
The Telecom Commission has ratified the Rs. 5,000 crore (US$ 817 million) government proposal to give
The DoT will encourage telecom service providers to share their infrastructure, according to Mr. M F
Farooqui, Telecomm Secretary, and Government of India. The telecom industry and the Government need to work
together to attract investments and exploit advances in technology. With the success in voice-connectivity being
carried forward to data and emerging technologies including cloud computing, the government is targeting
broadband connectivity from 15 million currently to over 600 million in 2020.
On the back of the ongoing investments into infrastructure, the country is projected to witness high
penetration of internet, broadband, and mobile subscribers in the near future. Various policy initiatives by the Indian
government have led to a complete transformation of the industry in the last decade. It has achieved a phenomenal
growth during the last few years and is poised to grow further.
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