Telecom Industry in India

Introduction

India is currently the world’s second-largest telecommunications market with a subscriber base of 1.17 billion and has registered strong growth in the past decade and half. The Indian mobile economy is growing rapidly and will contribute substantially to India’s Gross Domestic Product (GDP), according to report prepared by GSM Association (GSMA) in collaboration with the Boston Consulting Group (BCG). App downloads in the country grew approximately 215 per cent between 2015 and 2017.

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.

Market Size

With 493.96 million internet subscribers, as of March 2018, India stands second in terms of total internet users. As of June 2018, overall tele-density stood at 89.72 per cent. Urban tele-density stood at 158.16 per cent and rural tele-density at 57.99 per cent.

Rise in mobile-phone penetration and decline in data costs will add 500 million new internet users in India over the next five years, creating opportunities for new businesses. The monthly data usage per smartphone in India is expected to increase from 3.9 GB in 2017 to 18 GB by 2023.

India’s smartphone market grew 14 per cent year-on-year to a total of 124 million shipments in 2017, as per IDC. Availability of affordable smartphones and lower rates are expected to drive growth in the Indian telecom industry.

Investment/Major development

With daily increasing subscriber base, there have been a lot of investments and developments in the sector. The industry has attracted FDI worth US$ 31.75 billion during the period April 2000 to June 2018, according to the data released by Department of Industrial Policy and Promotion (DIPP).

Some of the developments in the recent past are:

• During the first quarter of 2018, India became the world’s fastest-growing market for mobile applications.
• In November 2017, Airtel’s acquisition of Tata Teleservices’ mobile business was given approval by Competition Commission of India (CCI).
• Bharti Airtel is planning to launch 6,000 new sites and 2,000 km of optical fiber in Gujarat in 2018-19.
• The number of mobile wallet transaction increased 5 per cent month-on-month to 325.28 million in July 2018.
• As of June 2018, BSNL is expected to launch its 5G services by 2020.
• Vodafone India and Idea Cellular have merged into ‘Vodafone Idea’ to become India’s largest telecom company, as of September 2018.

Government Initiatives

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 is soon going to come out with a new National Telecom Policy 2018 in lieu of rapid technological advancement in the sector over the past few years. The policy has envisaged attracting investments worth US$ 100 billion in the sector by 2022.
• The Department of Information Technology intends to set up over 1 million internet-enabled common service centres across India as per the National e-Governance Plan.
• FDI cap in the telecom sector has been increased to 100 per cent from 74 per cent; out of 100 per cent, 49 per cent will be done through automatic route and the rest will be done through the FIPB approval route.
• FDI of up to 100 per cent is permitted for infrastructure providers offering dark fibre, electronic mail and voice mail.
• The Government of India has introduced Digital India programme under which all the sectors such as healthcare, retail, etc. will be connected through internet

Achievements

Following are the achievements that the government has registered under its initiatives in 2017:

• Department of Telecommunication has launched ‘ Tarang Sanchar’ a web portal sharing information on mobile towers and EMF Emission Compliances.

Road Ahead

Revenues from the telecom equipment sector are expected to grow to US$ 26.38 billion by 2020. The number of internet subscribers in the country is expected to double by 2021 to 829 million and overall IP traffic is expected to grow 4-fold at a CAGR of 30 per cent by 2021. The Indian Government is planning to develop 100 smart city projects, where IoT would play a vital role in development of those cities. The upcoming National Telecom Policy 2018 has envisaged attracting investments worth US$ 100 billion in the telecommunications sector by 2022. The Indian Mobile Value-Added Services (MVAS) industry is expected to grow at a CAGR of 18.3 per cent during the forecast period 2015–2020 and reach US$ 23.8 billion by 2020.

Exchange Rate Used: INR 1 = US$ 0.0149 as of Q1 FY19.

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), India Services Sector Report by Deloitte

Note: IP – Internet Protocol

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