Telecom Industry in India

Introduction

India is currently the world’s second-largest telecommunications market with a subscriber base of 1.20 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). As of January 2019, India has witnessed a 165 per cent growth in app downloads in the past two years. 4.8 billion downloads of mobile applications were registered in India in first three months of 2019.

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

India ranks as the world’s second largest market in terms of total internet users. The number of internet subscribers in the country increased at a CAGR of 45.74 per cent during FY06-FY19 to reach 636.73 million in 2018-19. Total wireless data usage in India grew 119.00 per cent year-on-year to 17,940,576 terabytes between April-June 2019. The internet subscribers reached 665.31 million till June 2019.

Further, India is also the world’s second largest telecommunications market, total telephone subscriber base and tele-density reached 1,195.24 million and 90.52 per cent, respectively, at the end of September 2019.

Gross revenue of the telecom sector stood at Rs 61,535 crore (US$ 8.93 billion) during April-June 2019.

Over the next five years, rise in mobile-phone penetration and decline in data costs will add 500 million new internet users in India, creating opportunities for new businesses.

Investment/Major development

With daily increasing subscriber base, there have been a lot of investments and developments in the sector. FDI inflows into the telecom sector during April 2000 – June 2019 totalled to US$ 37.05 billion, according to the data released by Department for Promotion of Industry and Internal Trade (DPIIT).

Some of the developments in the recent past are:

• As per report by Ericsson, India has the world’s highest data usage per smartphone at an average of 9.8GB per month.
• As of August 2019, Jio's IoT platform is ready to be commercially available from January 2020.
• In August 2019, commercially launched Jio GigaFiber as wired broadband service.
• During the first quarter of 2018, India became the world’s fastest-growing market for mobile applications. The country remained as the world’s fastest growing market for Google Play downloads in the second and third quarter of 2018.               
• Bharti Airtel is planning to launch 6,000 new sites and 2,000 km of optical fiber in Gujarat in 2018-19.
• 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 of the government in the past four years:

• Department of Telecommunication launched ‘Tarang Sanchar’ - a web portal sharing information on mobile towers and EMF Emission Compliances.
• Value of Unified Payments Interface (UPI) transactions crossed 1 billion-mark and witnessed transaction value of Rs 1.91 lakh crore (US$ 27.33 billion) in October 2019.
• As of July 2019, India achieved 100 per cent digitisation of cable TV network.
• Six-fold increase in Government spending on telecommunications infrastructure and services in the country – from Rs 9,900 crores (US$ 1.41 billion) during 2009-14 to Rs 60,000 crores (US$ 8.55 billion) (actual + planned) during 2014-19.
• Over 75 per cent increase in internet coverage – from 251 million users to 446 million
• Country-wide Optical Fibre Cable (OFC) coverage doubled – from 700,000 km to 1.4 million km

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 National Digital Communications 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. App downloads in India are expected to increase to 18.11 billion in 2018F and 37.21 billion in 2022F.

Note: Conversion rate used as on September 2019, Re 1 = US$ 0.014019

References: Media Reports and Press Releases, Cellular Operators Authority of India (COAI), Telecom Regulatory Authority of India (TRAI), Department of Telecommunication (DoT), Department for Promotion of Industry and Internal Trade (DPIIT), 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.