Infra SWOT Doc.

7/28/2019 Infra SWOT Doc.

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STRENGTHS:

High Growth Rate - The gross telephone subscribers in the country reached 787.28 Million at the end of

December, 2010. Tele-density grew from 48% in 2005 to 64% in 2010. Total wireless subscribers are 752.19

million as on December, 2010. The total Wire line subscribers are 35.09 million as on December, 2010. The total

broadband (256 kbps download) subscriber base of India is 10.92 million in December, 2010.

Allowed FDI limit ranging from 74% to 100% - At present 74% to 100% FDI is permitted for various

telecom services. 100% FDI is permitted in the area of telecom equipment manufacturing and provision of IT

enabled services. This has made telecom one of major sectors attracting FDI inflows in India. For Basic and

cellular, Unified Access Services, National / International Long Distance etc., FDI up to 74% is permitted.

Fast adaptation of technological development - i.e. Mobile Number Portability (MNP), Next generation

Network (NGN), 3G and Broadband Wireless Access (BWA), IPv6.

Liberalization efforts by Govt. - The telecommunications sector is growing at a very fast pace in India. The

share of private sector in total telecom was 84.60% in 2010, as against a mere 5% in 1999, based on

Department of Telecom statistics.

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

per tower. This means lower capital expenditure cost. In developing countries, capital expenditure growth

slowed in 2009, but did not turn negative due to the buoyancy provided by the growth in mobile subscriber.

Establishment of Regulatory /Dispute resolution bodies - Telecom Disputes Settlement and Appellate

Tribunal was establish in 2000 to adjudicate disputes and dispose of appeals with a view to protect the

interests of service providers and consumers of the telecom sector and to promote and ensure orderly growth

of the telecom sector.


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WEAKNESSES:

Poor Telecommunication Infrastructure - Resulting in large call drops. It is important to focus on

the most expensive and time consuming part of wireless networks namely creation of infrastructure

such as towers, fibre, ducts, antennae and related infrastructure.

Late adopters of New Technology - India will be among the last countries in the world to get

access to 3G technologies. Some estimates suggest that nearly 132 countries across the world already

have 3G technology and mobile services in one form or the other.

Difficult to enter because of requirement of huge financial resources -E.g. Auction of 3Glicense had reached Rs. 15814.15 crores.

Non availability of adequate power supply for Telecom Services - According to industry estimates,

the telecom tower industry consumes two billion litres, or 3.5 per cent of the total consumption in

India, of diesel every year, as 60 per cent of towers in India solely depends on diesel. But, Finance

Minister P Chidambaram, in his Budget speech urged the state governments to prepare the financial

restructuring plans for power distribution firms.

Slower growth in rural/remote areas- Telecom firms in India are spending more on adding

capacity in the existing markets and not expanding to new rural areas although the countryside offers a

huge potential for growth.

This approach defeats the objective of the national telecom policy, which focuses on increasing rural

tele-density from around 39% to 70% by 2017 and 100% by 2020. In contrast, urban India has a tele-

density of about 153%.


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OPPORTUNITIES:

3G Telecom services and 4G services Airtel launched its 1st 4G Broadband Wireless Access or

BWA services on March 12th in Kolkata. Now that the leading Indian telecom company has launched

4G, a successor to the 3G and 2G families and expected to be five times quicker than 3G services, users

are more anxious to know the price of the data package.

More Quality Service Options like Mobile Number Portability force the Service providers to

improve their quality to avoid losing subscribers.

Value added Services (VAS) To offer better value added services like text or SMS, menu based

services, downloading of music or ringtones, mobile TV, videos, streaming, sophisticated m-commerce

applications, Mobile banking, Mobile Ticketing etc.

Boost to Telecom Manufacturing Companies - The total number of telephones increased from

206.8 million on 31 March 2007 to 926.95 million on 31 December 2011 and the sector is expected to

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 (Business Consulting Firm).

Horizontal Integration - Entry Into other consumer segments leveraging the present channels.

E.g. DTH service like Reliance BIG TV, Tata SKY, Airtel digital TV.

Other examples: Airtel website builder

For creation of telecom infrastructure in rural and remote areas by utilization of the USO (Universal

Service Obligation) Fund.


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THREATS:

Obsolete technologies - Obsolence of existing network elements due to fast changing telecom

technologies.

Cyber threats - Cyber threats on ICT networks, leading to security concerns.

Declining ARPU (average Revenue per user) - Due to factors like 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. - Allowing 3G services in a PSU (MTNL, BSNL) before

auctioning to private sector.

Fall in FDI during April-September, 13-FDI as a source offunding has shrunk to a trickle for theonce lucrative telecom sector with foreign investment inflows plunging to $43 million in the April-

September period of the current fiscal.

FDI in the telecom sector, which includes radio paging, cellular mobile, basic telephone services,

attracted $1.9 billion in April-September 2011, according to the latest data of the Department of

Industrial Policy and Promotion (DIPP). Experts said that besides the global economic slowdown,

Industry is shrinking in terms of margins and profitability and that is the main reason why foreign

investors are shying away

Experience of Privatisation in Indian Telecom Sector

For the first time, allowed private/foreign players to enter the 'basic' and the 'new cellular mobile section. For

the provision of basic services, the entire country was divided into 21 telecom circles, excluding Delhi andMumbai.

With telecom markets opened to competition, DoT and MTNL were joined by private operators but not in all

parts of the country. By mid-2001, all six of the private operators in the basic segment had started operating.

The overall Experience of privatisation:

Indias economic growth story started in the year 1991 when it started the economic liberalization process. In

fact, the reforms were initiated by compulsion and not by choice in many respects. Although there were a lot of

reformist people in India, most of the key politicians had a socialist orientation for decades. Nevertheless a core
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team of ministers started the reform process. One of the first industries to be privatized was the telecom

industry.

The telecom reforms and privatization in India has been slow but a steady process. Due to the multi party

coalition federal governments which have become the trend in the last decade, often the reform policies face a

lot of hiccups. Despite this, the telecom sector in India has been doing really well and is a good example of

privatization.

Today customers have a wide variety of choices for their telephone service providers and prices have been

racing to the bottom.

The public sector companies have started working after many decades and are facing up to the competition.

Some of them have sold partial stakes to private players and some have even listed their stocks in NASDAQ

to raise much needed capital to improve research, infrastructure and operations.

India is among the fastest growing mobile markets in the world. The total number of mobile subscribers in

India (i.e., the subscriber base) has increased from 6.4 million in March 2002 to around 350 million

compounded annual growth rate (CAGR) of 81%, aided by a significant increase in network coverage and a

continual decline in tariffs and handset prices.

Telephone connections are today affordable to everyone and are also easily available. Gone are the days,

when one had to wait for years to get a telephone connection. The number of telephone connections which

was only 2.15 million (fixed lines) in 1981 and in 2001 there were 54.62 million telephone connections of

which 41.33 million were fixed line telephone connections, 12.69 million were cellular mobiles and the

remaining 0.60 million were Wireless in Local Loop (WLL) telephones.

Cell phones charges have come down so much that today one can see even a common man going around

with a cell phone in his hand.

The private companies are giving various incentives to attract customers, a situation which is entirely

opposite to the conditions prevailing in the pre reforms era when one had to wait for years to get a telephone.

There has been an increased efficiency in their functioning post reforms.

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