- 1 Definition / Scope
- 2 Market Overview
- 3 Key Metrics
- 4 Market Risks
- 5 Top Market Opportunities
- 6 Market Drivers
- 7 Market Restraints
- 8 Industry Challenges
- 9 Technology Trends
- 10 Pricing Trends
- 11 Regulatory Trends
- 12 Other Key Market Trends
- 13 Market Size and Forecast
- 14 Market Outlook
- 15 Technology Roadmap
- 16 Distribution Chain Analysis
- 17 Competitive Landscape
- 18 Competitive Factors
- 19 Key Market Players
- 20 Strategic Conclusion
- 21 References
- 22 Further Reading
- 23 Appendix
Definition / Scope
Indian telecommunication sector is shaped by increasing consumer demand, innovations, and competition in market, giving tremendous growth opportunities. Liberalization in India brought a revolution in the telecom industry. Telecom equipment companies were decentralised and the sector was opened for the private companies. Indian telecom sector can be divided into major sectors like telephone, internet, television, and broadcast.
India is a country which consists of more than 1.01 billion telecom subscribers which has grown at the growth rate of 19% y-o-y from the last decade. India holds second position with respect to subscriber base with 1.06 billion connections(with fixed lines) in the world. India is the second largest country and comes third after USA and China in the internet user’s base. Urban regions in the country dominates in the telecom subscription accounting 55.76%.
India will be having 700 million internet users by 2020. The liberal and reformist policies of India has enabled easy market access. Telecom sector has became among the top five employment opportunity generator in the country. Telecommunication industry is booming with 275 million smart-phone subscribers and has outpaced the USA.
According to the data published by Indian Ministry of Communications and Information Technology, the telecom industry is growing at the rate of 20- 40 percent. The government has approved 100% FDI in the telecom industry.
India smartphone industry grew from 16.2 million handsets in 2012 to 44 million in the span of 3 years. The government has provided easy accessibility for import of telecom equipment’s. With the strong consumer demand and its lowest call tariffs, India is holding second position in the world in telecom sector. According to the department of industrial policy and promotion, the industry has attracted the FDI of worth US$ 18.38 billion during the period of April 2000 to March 2016. Since 2015, 38 new mobile manufacturing units have been established in India ramping the manufacturing by 90%. According to reports of November 2016-
- India is second largest subscriber base in world with 1.06 billion connections and 616 million unique mobile service subscribers.
- India is second largest smart phone subscriber base with 275 million users in the market.
- There is 90% jump in number of mobile manufacturing units.
- Rural tele-density is reaching 51.04%.
- Currently this sector is contributing 6.5% (USD 140 billion) to country’s GDP.
- It is acting as direct or indirect source of income to 4 million people.
|Base Year||2016||Researched through internet|
- Mergers and Acquisitions are the major challenge. Spectrum and market share allocation is still a major issue for the merged entity.
- Competition Commission- Continuous tracking of the companies relating to the capture of the market share.
- Spectrum Allocation- TRAI decides the price of the spectrum and allows bids to the telecom companies. However the industry players finds the spectrum to be overly priced.
Top Market Opportunities
- Population- India is the second largest country in the world. Gaining market share by capturing maximum consumers for providing services is fruitful opportunity for the companies.
- Reaching rural- The rural part of India is untouched and there is a huge e opportunity for the telecom companies to increase their subscriber base.
- Outsourcing- Telecom has understood of reducing the cost by outsourcing. Telecom companies can outsource to Managed Service Provider for a contract to handle specific function and capability for a specific period of time. Outsourcing will help in increasing the efficiency of the operations.
- Infrastructure sharing- The challenge of rapid change in technology and capital expenditure has led to infrastructure sharing which helps all the parties share the cost associated with the asset building to improve the quality of service. This approach will help company adapt to the new technology as well as help in reducing the operating cost. The time for roll out new services has also reduced for execution in the market.
- Value added services- There is a huge opportunity for customer engagement from the value added service which will help companies earn revenues. Mobile banking and mobile commerce are one of the trends in the market.
- Internet Bandwidth- Providing high speed internet is one of the major opportunity for the telecom players as more and more youths are entering the market and accessing the mobile for accessing various applications. Residential and commercial use of high speed internet is also increasing across the country.
- Innovation- There is a huge opportunity of innovation for the service and telecom equipment’s for improving the service and reducing the cost of the companies.
100% FDI is allowed in telecom sector out of which 49% is allowed through automatic route. Strong research and development capabilities in auto electronics and industrial electronic sectors. 65% of the total demand of electronic products is met by imports. This presents opportunity for import substitution. Government initiatives like Digital India, Make in India and supportive policies like FDI are playing major role for growth of telecom sector. Some other policies are
- Modified Special Incentive Package Scheme (M-SIPS).
- Electronic Manufacturing Clusters Scheme (EMC).
Skill Development Schemes.
Encouragement of research and development.
Rise in disposable income and domestic demand.
Cost of manufacturing is increasing day by day in major manufacturing economies.
By 2020, the expected market for Internet of Things (IoT) is USD 15 billion.
For promotion of the research and development the government has established centres of excellences at 8 premier technical institutes. A CoE for Internet of Things (IoT) is launched at NASSCOM Bangaluru in August 2016.
- In this digital era the telecom operators are facing increasing challenges. Communication tools such as Weixin, Weibo, facebook, and Twitter have reduced the traditional profits of the telecom operators for messaging and calling. As they are trying to avoid becoming just simple channels.
- Companies have to bring subsidizing low-cost Android-based devices in market to reach low-end users.
- There is high competition in market with insufficient spectrum available for auction.
- Number of CDMA voice subscribers is declining continuously with a negative growth rate as they switch to GSM services. EVDO networks have shifted to Rev B with peak download speeds.
- India going on path to use more local products for raising country’s economy. BSNL is also going digital to compete in market.
- Broadband is a good alternative of the mobile data. With operators having differential charges of services broadband is gaining popularity.
- More and more public places are offering free wi-fi services to their customers. This is challenging for the telecom companies. Jio is offering hotspots to enable Wi-Fi offloading. TATA and Vodafone are also active players in this domain.
- Falling ARPU (Average revenue per user) - There has been sharp decline in ARPU which results in the reduction in revenue for the companies.
- Pricing Competition- There is a huge competition to gain subscribers across the country. Hundreds of services are launched by the companies. This has led to the price war for the services.
- Lack of Telecom Infrastructure- Availability of basic electricity and proper infrastructure for the construction of proper setup for telecom is missing in most of the rural parts of the country.
- Lack of skilled manpower- The industry is in need of professionals who are specialised in the telecom industry. Engineers and marketing professionals are lacking knowledge for innovation as well as business in the industry.
- Spectrum Allocation- One of the challenging aspect for the telecom companies are the spectrum allocation which are highly priced as well as controversial. High pricing from the telecom authorities for the spectrum drains out revenues from the companies.
- Technology- Companies has to be in par with the technology in the market to capture the trends of the Indian consumers. Implementation of technology for the service is one of the major challenge.
- Decrease in the profit margin- Competitive pricing for services have reduced the profitability in the revenues of the companies.
- Capital expenditure- This industry requires major capital investment for building telecom infrastructure.
- Rapid change in technology- Companies are bringing in new services in the market to grab more consumers due to which the competitors has to be in par with the new change in the market.
All the sectors of telecommunication are undergoing transformations. They are changing into next generation networks like digital telephone exchanges, mobile switching centres, media gateways, and signalling gateways at the core. They are interconnected by different transmissions like fibre-optics or microwave radio relay networks.
- With the efforts of government DTH has became compulsory.
- Introduction of private FM has given a boost to the radio broadcasting.
- INSAT system of India is one of the largest system in the world.
- 4G technology- This technology will be game changer for the industry as well as consumers because 4G will provide high speed internet to the users.
- WiMax Technology- The government is going to implement this technology in the public places for internet accessibility.
- Digitization- Telecom companies are tie- up with companies for providing services with the synergy.
- Mobile Number Portability- This technology allows subscribers to port different company service by the use of the same number.
- Increase in the wireless- There is complete shift of the consumers shifting from the wire-line technology to the wireless technology.
- According to the GSMA Artificial Intelligence would accelerate the future innovations. Personal assistants like Amazon Alexa, Apple Siri would be in higher demand.
- Two technologies are used now a days in areas of advanced communication, convergence, and broadband technologies to enable manufacturing are
a. Software Defined Radio for Naval Communication (SDR-NC), and b. TETRA- Terrastrial Trunked Radio technology for use of police and army.
Companies offer free data for some time to attract customers. Like Reliance has just launched a data pack in which company is offering free voice calls and internet data usage. But TRAI limits their attraction plans to just 90 days.
Prices have came down drastically, due to tough competition. Call rate in India are cheapest in the world.
With the increasing use of online shopping, the prices have came down to some level.
- Spectrum Trading- Government has allowed telecom companies to trade the unused spectrum within the industry players to improve the efficiency and the quality of service.
- Manufacturing of goods related to the industry- Different initiatives and facilities are provided by the central and state government to manufacture goods like mobile handsets and telecoms goods in the country.
- High Speed Connectivity- Government is planning for the high speed internet across the country for connecting the people with the digital media.
- Investment- There is an investment initiative been taken by the government to the telecom industry.
- Restructure of the government owned telecom companies- The government is taking multiple measures for the restructuring the assets. Additional investment is made in the companies to improve the infrastructure and reach to the consumers.
- Department of Telecommunications is considering merger of Mumbai and Kolkata region with Maharashtra and West Bengal circles for efficient operability.
- FDI- The government is making initiatives in bringing international companies invest in the telecom sector in order to bring technology know-how and investment in the sector.
- Tariff on import- The government is increasing tariff on import of telecom equipment in the country to support domestic manufacturing of equipment’s.
- Development of infrastructure- Central government is providing funds to the State government for the development of infrastructure connecting the urban and rural population together.
Government has arranged funds and incentives to promote the sector growth. Like Electronics Development Fund
- It is for investing in professionally managed venture funds.
Electronic Manufacturing Clusters (EMC)
- Provides support for creation of infrastructure.
- The projects coming under Greenfield Electronics Manufacturing Clusters will get assistance by getting 50% of the project cost.
- For Brownfield EMC 75% of the cost of infrastructure is provided as grant.
- Under the Merchandise Export from India Scheme(MEIS) export incentives available are 2-3%.
Area based Incentives
- Incentives are available for units in SEZ/NIMZ or in some special areas like Jammu and Kashmir, Himachal Pradesh, and Uttarakhand.
- Government offers additional incentives for industrial projects while some states offer separate policies.
Simplification of Customs
- For manufacturing of excisable goods, rate of duty is managed at concessional rates. Existing custom rules have been substituted with Custom Rules 2016 for simplifying rules. Need for additional registration is removed and duty exemptions are allowed to importer/manufacturer based on self-declaration.
For promotion of manufacturing of handsets
- For promotion of domestic value addition Countervailing Duty/Excise duty exemption has been withdrawn on charger, adapter, battery, and wired headsets.
Other Key Market Trends
The ministry of communication and information technology has launched Twitter Sewa, providing way for registration and resolution of complaints.
Government has liberalised the payment terms for spectrum auctions.
Government has amended the unified licence for operators for lowering the costs of operations. It includes the sharing of active telecom infrastructure.
TRAI has recommended PPP model for setting up broadband network in rural India.
For the skill development in the telecom sector, an agreement has been signed between MSDE and DoT.
Call drop facility has been provided for consumers by TRAI.
Telecom scenario has been changed by Generation Network solution and there has been a smooth transition from Plain Old Telephone System (POTS) to NGN based Voice-over-IP (VoIP).
‘GyanSetu’ is providing e-services to rural population of India.
Government initiatives like Preferential Market Access have reinvigorated the Indian telecom industry.
Development of electronic manufacturing clusters throughout the country is promoted for providing world class infrastructure and facilities.
Market Size and Forecast
By 2015, India has achieved 1.01 billion subscribers. There are 22 circles in the country where the telecom companies are operating these are Andhra Pradesh, Bihar, Jharkhand, Chennai, Delhi, Gujarat, Daman & Diu, Haryana, Himachal Pradesh, Jammu and Kashmir, Karnataka, Kerala, Lakshadweep, Kolkata, Madhya Pradesh, Chhattisgarh, Maharashtra, Goa, Mumbai, North Eastern States (Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, & Tripura), Orissa, Punjab, Tamil Nadu excluding Chennai & Puducherry, Eastern Uttar Pradesh, Western Uttar Pradesh & Uttarakhand, West Bengal excluding Kolkata, Andaman & Nicobar Islands & Sikkim.
- By 2020, the expected market size
- for telecom equipments - USD 34 Billion.
- Laptops, Desktops, Tablets - USD 34 Billion.
- Set Top Boxes – USD 10 Billion.
- By 2017, it is expected that user-base of broadband services will grow at 250 million.
- By 2020, Indian market size will reach USD 400 billion. During 2014-20, the market is estimated to grow at a CAGR of 26%.
- Electronic Manufacturing Services (EMS) industry will be significant contributor for making the future of telecom sector bright.
- Revenue generated by total mobile services in India will reach US$ 37 billion by 2017 with a CAGR of 5.2% between 2014-2017.
- According to estimates by 2019, there will be 180 million smartphones in the country having about 13.5% of global market share.
- A report by Market Research Store says that a growth rate of 10.3% will be seen per year to reach US$103.9 billion by 2020.
- Ericsson Mobility Report India has expectation that smartphone subscriptions will increase by four-folds to reach 810 million users by 2021. Whereas the smarphone traffic will grow at the rate of 4.2 exabytes per month by 2021.
- According to a report generated by government in November 2016, by 2020, a contribution of 8.2% to GDP is expected and more than 800,000 jobs will be generated. The report says that by 2020, there will be 1 billion phone subscribers in India. Number of 4G connections will increase to 280 million from just 3 million in 2015.
- There are about 1.01 billion telephone subscribers, out of which 26.27 million are land-line users and 975 million are wireless connection in the commercial and personal sector.
- There has been over 2.44 million cell phone addition every month in the country.
- Teledensity is 79.67% in the country.
- India is having ARPU of Rs. 114 which is one of the lowest and it is decreasing.
- Bharti Airtel, Vidafone India, Idea Cellular and Reliance Communications holds the major market share of 77% in the telecommunication industry.
- Customers are getting addicted to connectivity and speed.
- Microsoft says that with the 700 million internet users, India will emerge as a leading player in the telecom world. With the efforts of our prime minister Mr. Modi, G services are knocking the door and soon India will witness an immense growth in the telecom sector.
- By 2020, the expected market for Internet of Things (IoT) is USD 15 billion.
- International Data Corporation (IDC) has an estimate that India can overtake US in the smartphone market globally as more and more people are upgrading to 4G network.
Broadband has became our lifeblood. There is some speculation that Netflix and Amazon Prime Video will arrive in India. Both Sony and Nvidia are planning to stream video games to each device. There is constant upgradation of gadgets and broadband connection. Companies have brought OLED in market over the commonly used LED television sets. OLED TVs use a thin, electrically charged organic film to emit light, and each pixel can generate its own light. Many advantages of new technology are lighter, thinner panels, deeper blacks, and wider viewing angles. Our smartphones and PCs are expected to use USB Type-C ports that will make it easier to plug your phone into its charger. 4G network is growing at fast pace in India, with the advent of the 5G in the world. In future, more phones will have high-resolution screens and more flagship smartphones will have Quad-HD or 4K resolution. Soon our devices will be able to learn about us and our environment in order to make specific and subjective decisions. Cognitive computing, machine learning, artificial intelligence, and neural networks are some advancement terms which will be added to our devices. For increasing security more and more companies are adding backdoors to their hardware and software. They are reducing strength of commonly used encryption standards and bumping up the surveillance using best technology. Indian government’s initiative to make India a global manufacturing hub will explode on big scale. Xiaomi, Asus, and Gionee have already taken steps for establishing plants in the country.
Distribution Chain Analysis
Telecom operators are planning on strategies like to build an open platform that can attract participation from hardware providers, end device suppliers, content developers, and end users.
There are two state-run companies along with various private companies in this sector. Most of the companies gained 2G, 3G, and 4G licences and made roots for fixed-line, mobile and internet business in India.
After the reforms of 1990s, satellite television channels from around the world gained foothold in the country. Many corporate business houses initiated the growth of number of satellite channels. There is a tough competition between channels for gaining popularity.
With the introduction of Universal Access Service (UAS) in 2003 and entry of 3G and 4G networks the competition in the market reached its heights.
Telecom Companies have three focus 1. Smart phone penetration and use the rising market.
2. Data explosion and 3. Implication for data on 4G.
Differential charges, bundled packs which have preferred applications, and revenue shared agreements with OTTs are some strategies which operators use for staying in market.
Prices have came down drastically due to tough competition. Call rate in India are cheapest in the world. Government is providing Electronics India B2B Platform which is inviting various technology players to come and invest through joint ventures. There is a tough competition between companies for reaching maximum population for which they launches different types of tariff plans to reach every level of society. There are short-term, long-term, only calls, only message, or full data plans available in the market. Companies are increasing their area of reach to different places for which number of towers are increasing. As more will be availability of network more will be market capture. More and more telecos are announcing that they are coming with 4G to stay in competition. Telecom operators are planning on strategies like to build an open platform that can attract participation from hardware providers, end device suppliers, content developers, and end users. Core competitiveness will be the gene combination of internet and telecom companies. Telecom companies are increasing migration cost for change of mobile numbers and switching service provider.
Main factors on which companies compete are-
1. Improved levels of customer service.
2. Giving a more personalized customer experience.
3. Wider range of services.
4. More flexible pricing options.
5. Striking partnerships with other players.
6. Improved network quality.
Key Market Players
- BSNL- All 22 circles.
- MTNL- Delhi and Mumbai.
- Tata Docomo- Andhra Pradesh, Bihar_Jharkand, Goa, Gujarat, Haryana, Karnataka, Kerala, Kolkata, Maharashtra, MPCG, Mumbai, Odisha, Punjab, Rajasthan, Tamil Nadu, UP East, UP West & West Bengal.
- Airtel- All 22 circles.
- Idea Cellular- Gujarat, Maharashtra, Goa, Andhra Pradesh, Madhya Pradesh, Haryana, Kerala, Chhattisgarh, Himachal Pradesh, Uttaranchal, Uttar Pradesh (West) and Delhi.
- Reliance- All 22 circles.
- Spice- Karnataka, Punjab
- Vodafone India- All 22 circles.
- Aircel- Assam, North Eastern states, Orissa, West Bengal, Jammu & Kashmir, Tamil Nadu (incl. Chennai) and Pondicherry.
- Aircell Digilink- Uttar Pradesh (East), Haryana and Rajasthan.
Top companies in the market (in 2015)
Late Shri Dhirubhai H Ambani founded Reliance communications in 2002-03. It is the India’s largest private sector information and communication company with 150 million subscribers.
It is Tata teleservices limited telecom service on the GSM platform. It is the alliance of Tata group and Docomo a Japanese telecom major. Docomo is global leader in value added services.
Aircel is fastest growing GSM mobile service provider with a subscriber base of 65.1 million in the country.
Lava international limited is one of the fastest growing handset manufacturing company in India. Lava having a wide product portfolio that encompasses tablets, featured phones, and smart phones realised revenues of more than US$1 billion in 2014-15 registering a 100% growth in the market.
Aksh Optifibre limited
It is one of the leading providers of transmission solutions for telecom industries. It is founded with major focus on manufacturing of optical fibre cables.
The government should provide more opportunity for the development of technology infrastructure in the rural area. The growth of the country depends on the connectivity of the people. More and more technology is needed to bring people to the digital world and it is the primary responsibility of the telecom industry to make India fastest growing economy in the world.
As we all know that this year(in 2016) Reliance has launched Jio 4G service offering free of charge scheme, this has lead some results simultaneously-
War for data prices between companies.
Increasing 4G subscriber base as availability of 4G network has increased.
Demand for 4G devices will increase.
Operators will pay more stress on music, videos, images, gaming as it will incentivise 4G.
Companies will increase 2G data tariffs to increase the popularity of 3G and 4G services.
In upcoming spectrum auction, voice tariffs can increase due to aggressive bidding.
There is a sudden shift in the interest of the consumers from value added services to the other applications like music and videos which pushes the voice revenues of the companies. So companies are focussing more on these applications now a days.
FDI- Foreign Direct Investment. PPP-public-private partnership. TRAI-Telecom Regulatory Authority of India. Dot-Department of Telecommunication. MSDE- The ministry of Skill Development and Entrepreneurship.