India is currently the world’s second-largest telecommunications market and has registered strong growth in the past decade and half. The Indian mobile economy is growing rapidly and is expected to contribute substantially to India’s Gross Domestic Product (GDP).
The liberal and reformist policies of the Government of India have been instrumental along with strong consumer demand in the rapid growth in the Indian telecom sector. The government has enabled easy market access to telecom equipment and a fair and proactive regulatory framework that has ensured availability of telecom services to consumer at affordable prices. The deregulation of Foreign Direct Investment (FDI) norms has made the sector one of the fastest growing and a top five employment opportunity generator in the country.
The Indian telecommunication services market will likely grow by 10.3 per cent year-on-year to reach US$ 103.9 billion by 2020#.
Driven by strong adoption of data consumption on handheld devices, the total mobile services market revenue in India is expected to touch US$ 37 billion in 2017^.
Smartphone subscription in India is expected to increase four-fold to 810 million users by 2021, while the total smartphone traffic is expected to grow 15-fold to 4.5 exabytes (EB) per month by 2021###.
India' has the second largest mobile subscriber base in the world. According to Telecom Regulatory Authority of India (TRAI), the total telecom subscriber base in December 2015 stood at 1.04 billion, out of which 1.01 billion were mobile subscribers and 25.52 million were wireline subscribers.$
According to a study by GSMA, smartphones are expected to account for two out of every three mobile connections globally by 2020 making India the fourth largest smartphone market. Total number of Fourth-Generation (4G) enabled smartphone shipments in India stood at 13.9 million units in the quarter ending December 2015, which was more than 50 per cent of total shipments, thereby surpassing number of Third-Generation (3G) enabled smartphone shipments for the first time. ^^
The broadband services user-base in India is expected to grow to 250 million connections by 2017, according to GSMA.
India added the highest number of net mobile phone subscriptions of 21 million during the fourth quarter of 2015@.
International Data Corporation (IDC) predicts India to overtake US as the second-largest smartphone market globally by 2017 and to maintain high growth rate over the next few years as people switch to smartphones and gradually upgrade to 4G.
In spite of only 5 per cent increase in mobile connections in 2015, overall expenditure on mobile services in India is expected to increase to US$ 21.4 billion in 2015, led by 15 per cent growth in data services expenditure@@.
The Indian telecom sector is expected to generate four million direct and indirect jobs over the next five years according to estimates by Randstad India. The employment opportunities are expected to be created due to combination of government’s efforts to increase penetration in rural areas and the rapid increase in smartphone sales and rising internet usage.
With daily increasing subscriber base, there have been a lot of investments and developments in the sector.
The industry has attracted FDI worth US$ 18.38 billion during the period April 2000 to March 2016, according to the data released by Department of Industrial Policy and Promotion (DIPP).
Some of the major developments in the recent past are:
- Xiaomi, world’s third largest smartphone maker, has approached state governments in India to set up handset plants in collaboration with Chinese contract manufacturer Foxconn, in order to boost their production to keep pace with the rising demand.
- Axiata Digital, a subsidiary of Malaysia’s largest telecom firm Axiata Group Berhad, has made its entry into Indian e-commerce market by investing Rs 100 crores (US$ 14.82 million) in Bengaluru-based StoreKing.
- Sterlite Technologies, one of India’s leading optic fibre and telecommunication cable manufacturers, plans to collaborate with telecommunication carriers to deploy smart communication networks in India, which are expected to have a lifespan of up to 25 years as against the normal lifespan of seven to eight years.
- India’s largest telecom operator Bharti Airtel Limited plans to buy entire spectrum of Videocon Telecommunications Limited for Rs 4,428 crore (US$ 656.4 million) which will give the telecom operator additional spectrum in the 1,800 MHz band in six licence areas namely Bihar, Haryana, Madhya Pradesh, Eastern Uttar Pradesh, Western Uttar Pradesh, and Gujarat.
- Chinese smartphone manufacturer OnePlus has partnered with Foxconn to start manufacturing its products in India as part of its plan to have 90 per cent of the devices sold in India to be locally manufactured by the end of 2017.
- Government of India to make a windfall gain from sale of spectrum in 2016-17 and achieve its fiscal deficit target of 3.5 per cent of Gross Domestic Product (GDP) for the year.
- Mr Paolo Colella, Managing Director, Ericsson India has identified India to be one of the fastest growth regions for Ericsson globally and has announced setting up of its second manufacturing plant in Pune, Maharashtra.
- Walmart India Private Limited's president has shown interest in opening its chain of stores in Haryana, while Micromax has also offered to set up a mobile handset manufacturing unit in the National Capital Region (NCR).
- Vodacom SA, a subsidiary of Vodafone Plc, has entered into an agreement with Tata Communications Ltd to buy the fixed-line assets of TataComm's South African telecom subsidiary Neotel Pty Ltd.
- Bharti Airtel has planned to invest Rs 60,000 crore (US$ 8.89 billion) over a period of three years with a view to boost its telecom network capacity thereby improving the quality of voice and data services to its customers.
- Reliance Communications Ltd, India’s fourth largest mobile services provider, has agreed to acquire Sistema Shyam TeleServices Ltd (SSTL), the local unit of Russian company Sistema JSFC, in a deal valued at Rs 4,500 crore (US$ 667.08 million), which includes payments to the government for spectrum allotted to Sistema.
- Videocon Industries Ltd plans to set up a mobile handset assembly plant along with manufacturing set top boxes in Punjab for an investment of Rs 500 crore (US$ 74 million) over three years.
- American Tower Corporation, a New York Stock Exchange-listed mobile infrastructure firm, has acquired 51 per cent stake in telecom tower company Viom Networks in a deal worth Rs 7,635 crore (US$ 1.13 billion).
- Chinese smartphone maker OnePlus has announced its partnership with Foxconn, a Taiwanese company, for assembling its phones in Foxconn's factory in Andhra Pradesh.
- Swedish telecom equipment maker Ericsson has announced the introduction of a new radio system in the Indian market, which will provide the necessary infrastructure required by mobile companies in order to provide Fifth-Generation (5G) services in future.
- Global telecom equipment makers like Ericsson, Nokia Networks and Huawei are looking forward to over US$ 1 billion revenue opportunity as mobile phone operators in India roll out high-speed broadband services on the 4G LTE technology across the country.
- Lenovo Group of China has commenced manufacturing its smartphones in India, through its contract manufacturer Flex’s facility near Chennai, thus becoming the largest Chinese company to follow ‘Make in India’ strategy.
- Foxconn, the world’s largest contract-manufacturing firm for consumer electronics and manufacturer for Apple products, has signed a Memorandum of Understanding (MoU) with Maharashtra state government to invest US$ 5 billion over the next three years for setting up a manufacturing unit between Mumbai and Pune.
The government has fast-tracked reforms in the telecom sector and continues to be proactive in providing room for growth for telecom companies. Some of the other major initiatives taken by the government are as follows:
- The Government of India has cleared India's biggest spectrum auction across seven bands, which is expected to generate revenue of Rs 5.66 trillion (US$ 83.9 billion), expand the bandwidth and the ability of telecom companies to service consumers and address the problem of call drops.
- The Telecom Regulatory Authority of India (TRAI) has released a consultation paper which aims to offer consumers free Internet services within the net neutrality framework and has proposed three models for free data delivery to customers without violating the regulations.
- The Government of India has liberalised the payment terms for spectrum auctions by allowing two options of payments to telecom companies for acquiring the right to use spectrum, which include upfront payment and payment in instalments.
- The Department of Telecommunications (DoT) has amended the Unified Licence for telecom operations which will allow sharing of active telecom infrastructure like antenna, feeder cable and transmission systems between operators, thereby lowering the costs of operations and leading to faster rollout of networks.
- The Telecom Regulatory Authority of India (TRAI) has recommended amendments in the Unified Licence in order to facilitate interconnection at Internet Protocol (IP) level among licenced operators.
- The Telecom Regulatory Authority of India (TRAI) has recommended a Public-Private Partnership (PPP) model for BharatNet, the central government’s ambitious project to set up a broadband network in rural India, and has also envisaged central and state governments to become the main clients in this project.
- The Ministry of Skill Development and Entrepreneurship (MSDE) signed a Memorandum of Understanding (MoU) with Department of Telecommunication (DoT) to develop and implement National Action Plan for Skill Development in Telecom Sector, with an objective of fulfilling skilled manpower requirement and providing employment and entrepreneurship opportunities in the sector.
- The Telecom Regulatory Authority of India (TRAI) has directed the telecom companies or mobile operators to compensate the consumers in the event of dropped calls with a view to reduce the increasing number of dropped calls.
- With a view to encourage consolidation in the telecom sector, the Government of India has approved the rules for spectrum trading that will allow telecom companies to buy and sell rights to unused spectrum among themselves. The Union Cabinet chaired by the Prime Minister, Mr Narendra Modi, gave its approval to the guidelines on spectrum sharing, aimed to improve spectral efficiency and quality of service, based on the recommendations of the Telecom Regulatory Authority of India (TRAI).
- The Central Government’s several initiatives to promote manufacturing in the country, such as ‘Make in India’ campaign appears to have had a positive impact on mobile handsets manufacturing in the country. Companies like Samsung, Micromax and Spice had been assembling handsets in the country already. Xiaomi and Motorola, along with Lenovo have also started assembly of smartphones in India. Firms like HTC, Asus and Gionee too have shown interest in setting up a manufacturing base in the country.
- The Government of India plans to roll out free high-speed wi-fi in 2,500 cities and towns across the country over the next three years. The program entails an investment of up to Rs 7,000 crore (US$ 1.04 billion) and will be implemented by state-owned Bharat Sanchar Nigam Ltd (BSNL).
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, the Indian telecommunication sector is expected to witness fast growth in the next few years.
Exchange Rate Used: INR 1 = US$ 0.0148 as on July 11, 2016
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)
Notes: ^ - According to research firm IDC, ! - GSMA report 'The Mobile Economy: India 2015', @ - Ericsson Mobility Report February 2016, # - According to a report by leading research firm Market Research Store, ## - According to a study by the Associated Chambers of Commerce and Industry of India (Assocham), ### - According to the Ericsson Mobility Report India, @@ - as per research firm Gartner, $ -TRAI Telecom Subscription Report December 2015, ^^ - According to a report by International Data Corporation (IDC)