Indian Telecom Industry

Content

Sectors in Indian Telecommunication

Telephony

Telephone Subscribers (Total) 915.19 million

Fixed Lines 28.89 million

Mobile phones 886.3 million

Teledensity 74.02%

Internet Access

Percent household access 10.2% of households (137 million)

Internet Service Providers 155

Country code top-level domain .in

Broadcasting

Television broadcast stations 1400

Radio broadcast stations 800

Contribution to GDP

Evolution

TRAI

Industry

Competitors

PVT : 89.11%

Financial Year '14

After the fall in mobile subscriber base in FY13 due to the cancellation of spectrum licenses of some of the operators in February 2012, the sector bounced back by adding about 60 m wireless subscribers in FY14. At the end of march 2014, the country’s total telecom subscriber base (fixed plus mobile) stood at about 931.95 m. The tele-density level stood at about 75.23% by the end of the fiscal.

In February 2014, the government concluded the auction process for 900 and 1,800 MHz spectrum. Out of the 431.2 MHz that was put up for auction, 353.2 MHz was sold for a consideration of Rs 611.622 billion.

During fy14, the Indian government issued new merger and acquisition (M&A) norms as well as fixed the uniform license fee at 8% of adjusted gross revenue (aggregate) for all tele-companies for the unified license.

CONTRIBUTION

Contribution to GDP of the country as of present – 3% Present employment scenario – Gives employment to over 400,000 people. According to a recent study by Price water house Coopers (PwC), the

telecom sector will provide about 2,800,000 direct jobs and around 7,000,000 indirect jobs by end of 2015.

Revenue generation – Rs.429087cr annual revenue 2013-2014 Telecom has also been crucial in attracting large amount of FDI in India. The

sector alone is responsible for more than 10% FDI flows in the country. In the period April 2000 to January 2014, the telecom industry has got in

foreign direct investments (FDI) of about US$ 59,796 million, which is an increase of 6 per cent to the total FDI inflows in terms of US$, as per report published by Department of Industrial Policy and Promotion (DIPP).

India’s global system for mobile (GSM) operators had 4.14 million rural subscribers as of January 2014, bringing the total to 285.35 million.

SWOT ANALYSIS :::::

Huge Customer potential : Tele-density still being 48% and rural Tele-density 21%. The broadband subscribers grew from 0.18 million in 2005 to6.2 million as on 30

April 2009 and about 7.98 million, at the end of the December 2013. High Growth Rate :

Wireless subscribers growing at a CAGR of 60 per cent per annum since 2004. Allowed FDI limit ranging from 74% to 100% High return on Investment :

Easier to create economies of scale thereby increasing return on investment Liberalization efforts by Govt. :

The share of private sector in total telephone connections is now 82.33% as per the latest statistics available for June 2014 as against a meager 5% in 1999.

Lower capital expenditure : The Indian telecom market is a high density area, which means more population

per tower. This means lower capital expenditure cost.

STRENGTHS

WEAKNESS

• Poor Telecommunication Infrastructure

▫ Result : Large number of call drops.

• Late adopters of New Technology

▫ India will be among the last countries in the world to get access to 3G technology. Some estimates suggest that nearly 132 countries across the world already have 3G technology and mobile services in one form or the other.

• Most competitive market

▫ 10 to 12 companies offer mobile services in most parts of India, globally, the average is 4.

• A market strongly regulated by Government.

• Difficult to enter because of requirement of huge financial resources.

• E.g Auction of 3G license has reached Rs 15814.15 crores.

OPPORTUNITIES

• 3G Telecom services and 4G services

• More Quality Service:

– Mobile Number Portability will force the Service provider to improve their quality to avoid losing subscribers

• Value added Services (VAS):

– The mobile value added services include, text or SMS, menu based services, downloading of music or ringtones,,mobile TV e-commerce applications, mobile banking, mobile Ticketing etc

• Boost to Telecom Manufacturing Companies:

– Production of telecom equipments in value terms has increased from Rs. 412700 million (2007-08) to Rs.488000 million during 2008-09 and expected to increase to Rs. 575840 million during 2014-15.

• Telecom Equipment Exports:

– The Indian telecom industry is expected to reach a size of Rs 544,921 crore by early 2016 at a growth rate of over 26 per cent, and generate employment opportunities for about 10 million people during the same period.

– The sector would create direct employment for 2.8 million people and for 7 million indirectly, according to a Frost and Sullivan report.

CONTD….

Horizontal Integration Entry Into other consumer segments leveraging the present channels E.g. DTH service like Reliance BIG TV, Tata SKY, Airtel digital TV

by telecom majors like Reliance, Tata and Airtel Respectively. Other examples : Airtel website builder

Providing Connectivity to 4,50,000 village panchayat by 2015. More scope in content related services, since, the consumer is influenced by

local culture. Local festivals like Baisakhi, Chhath Puja, religious festivals like

Diwali, Chrismas etc., National festivals like Independence Day.

THREATS

• Telecommunication Policies .

▫ e.g. TRAI's 2G direction affecting new players most notably Tata Teleservices, Norway’s Telenor and Essar -owned Loop Telecom

▫ Renewal of 2G license on the basis of market rates of 3G auctions

▫ TRAI intentions of rolling out 4G or the fourth-generation technology, known as the ultra-broadband in 2-3 years raising fears rendering 3G services somewhat obsolete.

• Declining ARPU (average Revenue per user)

▫ E.g. price wars like per-second billing which is deflating revenues and making sure the ‘survival of the fittest’

• Partiality on the part of the Govt.

▫ E.g. Allowing 3G service in a PSU (MTNL,BSNL) before auctioning to Private Sector .

FUTURE SCOPE

Telecom Subscribers to cross 1.5 billion by 2015 and 5 billion by 2020. Indian Telecom sector to witness huge investments - the total investment in

the pan-India broadband rollout is expected to be $ 20 billion. Mobile sector in India to contribute USD 400 Billion to GDP by 2020, will

generate 4.1 Million jobs: GSMA The sector will give rise to 40 lakhs of jobs in the coming five years.  Government has adopted the National Telecom Policy 2012, to drive the next

revolution in growth of telecom services and provide a stable policy regime for the years to come.

The policy has set ambitious targets of 100% rural tele density and 600 million broadband connections by 2020.

Tata Teleservices plans to set up nearly 4,000 Wi-Fi hotspots in nine cities across the country in the next two years.

“Vodafone is investing nearly US$ 3 billion over the next two years in India in expanding its network infrastructure and distribution channel in the country,” as per Vittorio Colao, CEO, Vodafone Plc.