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March, 2011

The Indian telecommunications industry is one of the fastest growing in the world. The industry has witnessed consistent growth during the last year on the back of rollout of newer circles by operators, successful auction of third-generation (3G) and broadband wireless access (BWA) spectrum, network rollout in semi-rural areas and increased focus on the value added services (VAS) market.

According to the data released by Telecom Regulatory Authority of India (TRAI), the number of telephone subscribers in the country reached 806.13 million at the end of January 2011 from 787.28 million in December 2010, thereby registering a growth rate of 2.39 per cent. With this the overall tele-density (telephones per 100 people) has touched 67.67. The wireless subscriber base has increased to 771.18 million at the end of January 2011 from 752.19 million in December 2010, registering a growth of 2.52 per cent.

Meanwhile, Indian Global System of Mobile Communication (GSM) telecom operators added 14.69 million new subscribers in February 2011, taking the all-India GSM cellular subscriber base to 555.06 million, according to the Cellular Operators Association of India (COAI). The GSM subscriber base stood at 540.37 million at the end of January 2011.

The sector will witness up to US$ 55.95 billion investments and the market will cross the US$ 100 billion mark in 5 years, according to consultancy firm Boston Consulting Group (BCG). BCG India's Partner and Director, Arvind Subramanian said the industry will continue to grow at 12-13 per cent annually.

Key Players

With new players coming in, the intensity of competition in the industry has increased, especially over the last four years. The market share of the telecom companies reflects the fragmented nature of the industry, with as many as 15 players. As of September 30, 2010, Bharti Airtel led the market with 20.8 per cent share, Reliance (17.1 per cent), Vodafone (16.8 per cent), BSNL (11.4 per cent), Tata (11.5 per cent), Idea (10.8 per cent), Aircel (6.8 per cent), with the remaining share being held by other smaller operators, according to Telecom Regulatory Authority of India (TRAI) database.

Value-Added Services (VAS) Market

Mobile value added services (VAS) include text or SMS, menu-based services, downloading of music or ring tones, mobile TV, videos and sophisticated m-commerce applications. As per a report, ‘India Telecom 2010’ released by KPMG in December 2010, currently, the VAS market is worth US$ 2.45 billion-US$ 2.67 billion, which is around 10 per cent of the total revenue of the wireless industry. The share of VAS in wireless revenue is likely to increase to 12-13 per cent by 2011, on the back of increased operator focus on VAS due to continuous fall in voice tariffs, increasing penetration of feature rich handsets, availability of vernacular content and increased user adoption of VAS applications.

Major Investments

The booming domestic telecom market has been attracting huge amounts of investments which is likely to accelerate with the entry of new players and launch of new services. According to the Department of Industrial Policy and Promotion (DIPP), the telecommunications sector which includes radio paging, mobile services and basic telephone services attracted foreign direct investment (FDI) worth US$ 1.33 billion during April-January 2010-11. The cumulative flow of FDI in the sector during April 2000 and January 2011 is US$ 10.26 billion.

Going Green

Telecom companies incorporate heavy costs on energy consumption. Besides being expensive, the resources used tax the environment heavily. In the wake of these facts, the ETIG Knowledge Forum in association with Global Group has attempted to articulate the road map to green telecom in India. Constantly evolving professional grade energy management products are leading the revolution and R&D has helped bring costs down. For instance, in the past, to deploy 2G, 3G, 4G technology, one would need separate base-stations. But today, a single base-station puts all the technology in one place such that one needs to simply change the radio configuration.

Companies are on a continuous look-out for alternatives like solar panels and other types of sources of energy and their combinations to achieve cost-effectiveness.

Private GSM cellular operator Vodafone Essarhas launched its 3G service in Uttar Pradesh (East) circle, which is one of the largest telecom circles in the country with around 60 million subscribers.

More than 5 lakh customers have upgraded to Bharti Aritel's high-speed data or 3G services, from voice-based 2G services, within a month after India's largest mobile operator launched this facility in Bangalore. The company is talking to other operators to offer 3G services in the rest of the 22 circles where Airtel did not have permits. Competitors like Reliance Communications, Vodafone Essar, Tata DoCoMo and Aircel have launched 3G in areas where they hold respective permits. No mobile operator has 3G permits in all 22 circles of the country.