Telecommunication
India is the world's second-largest telecommunications market, with 933 million subscribers.

Indian Telecom Industry

Latest update: December, 2014

Teledensity in India

In March 2014, total telephone subscription stood at 933 million, while teledensity was at 75.2.

Teledensity in India

Composition of telephone subscribers in India

The wireless segment (96.9 per cent of total telephone subscriptions) dominates the market, while the wireline segment accounts for the rest.

Composition of telephone subscribers in India

Wireless and wireline revenues in India

Wireless and wireline revenue increased at a CAGR of 10.4 per cent to US$ 39.1 billion over FY06-13.

Wireless and wireline revenues in India

Wireless market share in terms of total subscribers in India

Bharti Airtel is the market leader, with a 22.7 per cent share of total subscription, followed by Vodafone (18.4 per cent share).

Wireless market share in terms of total subscribers in India

Updated: December, 2014

SECTORAL REPORT | October, 2014

Introduction

Telecommunication services are globally recognised as one of the driving forces for overall economic development in a nation. They are also one of the prime support services needed for rapid growth and modernisation of various sectors of the economy. The Government of India recognises this fact and hence, has taken several major initiatives to provide a business friendly environment for companies in this sector.

Driven by 3G and 4G services, it is expected that there will be huge machine-to-machine (M2M) growth in India in 2016-17, according to UST Global. There is also a lot of scope for growth of M2M services in the government's ambitious Rs 7,000 crore (US$ 1.1 billion) 'Smart City' program

The rapid strides in the telecom sector have been facilitated by liberal policies of the Government of India that provide easy market access for telecom equipment and a fair regulatory framework for offering telecom services at affordable prices. According to a study by GSMA, it has been expected that smartphones will account for two out of every three mobile connections globally by 2020 and India is all set to become the fourth largest smartphone market.

Market Size

India saw the fastest growth in new mobile-phone connections with 18 million net additions in the third quarter of 2014, according to a report by Swedish mobile network equipment maker Ericsson. The number of smartphones, which account for just 37 per cent of all mobile-phone subscriptions, will reach 2,700 million by 2014, and growing at 15 per cent compounded annual growth rate, will cross 6,100 by 2020. The falling cost of handsets, coupled with improved usability and increasing network coverage, are factors that are making mobile technology a popular phenomenon in the country.

The broadband services user-base in India is expected to grow to 250 million connections by 2017, according to GSMA. It also expects to see increased mobile broadband penetration in India, with over 250 million on either 3G /4G by 2017.

According to the GSMA’s broadband services report card, the month-on-month (m-o-m) broadband growth rate in India was at 4.95 per cent, with 60.87 million subscribers as of March 2014. State-owned Bharat Sanchar Nigam Ltd (BSNL) leads the combined wired and wireless broadband market with 27.54 per cent share.

Investments

With daily increasing subscriber base, there have been a lot of investments and developments in the sector. Some of the major developments in the recent past are:

  • Bharti Infratel has planned to take over the telecom towers of Vodafone and Idea Cellular in India at a valuation of Rs 5,000 crore (US$ 785.82 million). The company is also scouting for telecom tower acquisition opportunities in Sri Lanka and Bangladesh.
  • Japanese telecom company SoftBank has planned to invest around US$ 10 billion in India’s IT sector over the next few years.
  • Ericsson has won Rs 60 crore (US$ 9.42 million) three-year operations support systems (OSS) deal from Mukesh Ambani-headed Reliance Jio Infocomm, the only pan-India 4G licence holder in the country. Under the deal Ericsson will provide the telecom unit of Reliance Industries its service fulfilment software solutions comprising nine suites.
  • Reliance Jio Infocomm Ltd has signed an agreement to share telecom towers of GTL Infrastructure Ltd. This is the seventh tower-sharing agreement that Reliance Jio has forged with telecom tower owners in India. This is the seventh tower-sharing agreement that Reliance Jio Infocomm has forged with telecom tower owners in India.
  • ISUN is the latest Indian brand in mobile phones and tablet personal computers. The Chennai-based Exotic Global Trades Pvt Ltd launched its telecom products under the ISUN brand that will be bundled with various BSNL schemes.
  • Reliance Jio Infocomm has planned to raise US$ 1.5 billion from more than two dozen overseas banks to refinance the loans taken in the year 2010. A total of 26 banks participated in the deal, including 15 mandated lead arrangers and book runners (MLABs).

Government Initiatives

The government has fast-tracked reforms in the telecom sector and plans to clear the proposal allowing spectrum trading and sharing ahead of the year-end deadline as it wants to lift the business sentiment for the forthcoming airwave auction. Some of the other initiatives taken by the government are:

The department of telecommunications (DoT) has agreed to the defence ministry’s demands for a defence band and a so-called defence interest zone (DIZ). This move will free up 3G telecom spectrum for at least three new carriers.

The Government of India has asked telecom firms to implement full mobile number portability by May 2015, a move that will enable subscribers to retain their numbers when they shift to other states or licensed service areas.

DoT has planned to frame a separate exit policy for the country’s telecom sector that will allow companies to leave the business without losing out on the value of the assets. The move is being seen as part of Government of India’s endeavour to make the country’s telecom sector investor-friendly and enhance the ease of doing business in India.

The telecom department is examining a proposal from the National Manufacturing Competitiveness Council to float a US$ 1 billion government-sponsored fund to seed 'Made in India' technologies to boost local gear manufacturing. The proposed telecom manufacturing fund will infuse equity in start-ups promoted by technocrats and scientists of Indian origin on condition that product development and manufacturing happens in India.

Road Ahead

India will emerge as a leading player in the virtual world by having 700 million internet users of the 4.7 billion global users by 2025, as per a Microsoft report.

With the government’s favourable regulation policies and 4G services hitting the market, rapid growth is expected in the Indian telecommunication sector in the next few years. Also, with developments in this sector, services such as security and surveillance, remote monitoring of ATM machines, home automation, traffic management, retail, logistics and grid energy could eventually facilitate optimisation of resources.

Exchange Rate Used: INR 1 = US$ 0.0157 as on December 26, 2014

References:Media Reports and Press Releases, Cellular Operators Authority of India (COAI), Telecom Regulatory Authority of India (TRAI), Department of Telecommunication (DoT), Department of Industrial Policy and Promotion (DIPP)

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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