Maharashtra Economic Development Council Industry Monitor

Indian Telecom Industry

Ms. Vidya Dhopatkar
Economist , MEDC

T
he telecommunication sector has emerged as
Table 1: Growth in Subscriber Base
one of the key sectors responsible for resurgent
Period Wire Wire Total Broad Tele
India’s economic growth. In recent times, India line less (million) band density
has emerged as one of the fastest growing telecom (million) (million) (million) (%)
Apr-10 36.83 601.22 638.05 9 54.1
markets in the world. Since FY05-FY09, the telecom
May-10 36.39 617.53 653.92 9.24 55.38
industry has grown by a healthy CAGR of 36.1%. But
Jun-10 36.18 635.51 671.69 9.45 56.83
this growth is skewed in favor of wireless services
Jul-10 35.96 652.42 688.38 9.77 58.17
rather than fixed or wireline services. The telecom
Aug-10 35.77 670.6 706.37 10.08 59.63
sector is one of the highest FDI attracting sectors in Sep-10 35.57 687.71 723.28 10.29 60.99
India, and has recorded FDI inflows worth over Rs Oct-10 35.43 706.69 742.12 10.52 62.51
45,530 crore (US$ 9,993 million) between April 2000 Source: TRAI

and October 2010. The Indian telecommunications Wireline Segment

industry comprises of three major categories of
players Regulatory authorities, Service providers and
Equipment vendors.
Telecom Snapshot (as on October 2010)
Telecom Subscribers (Total) 742.12 million
Wireless Subscribers 706.69 million
Wireline Subscribers 35.43 million
Overall Teledensity 62.51%
Source: TRAI
The Indian telecom industry can be primarily divided
into wireline, wireless and internet services. It
also has smaller segments such as radio paging
services, Very Small Aperture Terminals (VSATs),
Public Mobile Radio Trunked Services (PMRTS)
and Global Mobile Personal Communications by
Satellite (GMPCS). Factors including low tariffs, low
handset prices, effective government regulations,
higher incomes and changes in customer behavior
are the key drivers of growth in the sector.
Chart 1: Growth of telecom subscribers (million)
The wireline (fixed line) segment has witnessing
a deceleration trend interms of subscribers over
the past few years, as against explosive growth
in the cellular segment. The Government owned
companies viz BSNL (75.3%) and MTNL (9.5%)
are the dominant players in the fixed line segment.
But, private players are aggressively targeting
this segment, predominantly in the urban areas.
The fixed line services can be divided into Direct
Exchange Lines (DELs), Public Call Offices (PCOs),
Village Public Telephones (VPTs).
Since FY05, Wireline subscriber base drastically
reduced from 41.43 million to 36.96 million in FY10.
Infact, Year FY10 witnessed a reduction of 1 million
subscribers over FY09. Out of the 36.96 million
wireline subscribers, 27.03 million are urban wireline
subscribers and 9.93 million rural subscribers. The
rural wireline subscriber base decreased from 12.56
million in FY07 to 9.93 million in FY10.
Chart 2: Trend in growth of Wireline Subscribers

Note: FY11* data up to Oct 2010 ; Source: TRAI Source: TRAI

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Wireless Segment Chart 6 : Market share of Wireline providers (as on October 2010)

The growth in the wireless segment has been

substantial from past few years. Since FY05, this
segment is growing at a CAGR of 62.1%. The
private sector service providers adopted wireless
technology since it was easy to roll out wireless
telecom services. Wireless phones have been widely
preferred due to their convenience and affordability.
The Wireless subscriber base increased to 584.32
million in FY10 as compared to 391.76 million in Source: TRAI
FY09. In FY10, 192.56 million subscribers were Chart 7: Market share of Wireless providers (as on October 2010)

added at a healthy growth rate of 49%. Out of

584.32 million subscribers in FY10, 478.68 million
(81.9%) were GSM subscribers and 105.64 million
(18.1%) were CDMA Subscribers. In FY10, the
subscriber growth in rural market has reached the
190.88 million as against 111.63 million in FY09.
According to the Annual report of TRAI (2009-10),
the rural subscriber base is steadily increasing and
around 32.7% of total wireless subscribers are now
in rural areas.
Note: others includes Loop (0.43%), Stel (0.26%), HFCL (0.16%) and Etisalat
Chart 3: Trend in growth of Wireless Subscribers
(0.01) ; Source: TRAI

Trends and Developments

Wireless segment has emerged as the fastest
growing segment in the Indian telecom industry,
which was helped by tariff reduction and decline in
handset costs. The telecom industry worldwide is
Source: TRAI
more concerned with Internet technologies, rather
Chart 4: Growth in Tele-density than providing only telephone services. Recently, a
lot of focus will be given to new policy initiatives in
the industry. The implementation of mobile number
portability (MNP) will allow subscribers to switch
networks without changing the number. This would
definitely lead to an increase in churn in the sector
with each operator vying for subscriber attention to
Source: TRAI
their own networks, this will eventually lead to severe
Chart 5: Trend in Broadband subscribers competition among the service providers.
The 3G and BWA spectrum auctions are among the
major milestone of the sector. The government has
announced guidelines for penetration of 3G telecom
services, which will provide a good opportunity for
existing operators and also for foreign players to
make an entry into the Indian market and bring in new
Source: TRAI technology and innovations. The government has
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issued guidelines for Broadband Wireless Access Going Forward
(BWA) Services. Introduction of BWA services The growth momentum in the domestic telecom
will enhance the penetration as well as growth of industry is likely to sustain. Improving telecom
broadband subscribers. infrastructure, rising disposable incomes, declining
The telecom service providers are opting for tariffs, increasing demand, growing attraction for
infrastructure sharing to reduce their cost instead mobiles with new features and greater availability of
of setting up towers. Reliance communication has handsets at lower prices, are expected to drive the
entered into a 10 year agreement with S Tel for growth of the telecom sector, going forward.
sharing towers, transmission lines. The target of 11th Five Year Plan to achieve the
Wireless broadband is SWOT Analysis subscriber base of 600 million
emerging as a preferred Strengths has successfully achieved in
technology worldwide due to • Strong demand, especially for wireless services FY10. The government has also
its lower cost and large reach. • Rapidly growing economy proposed to achieve a rural
• Number of successful operators
In India, only six companies teledensity of 25% by addition
• Successful software companies catering to global
won the braoadband wireless of 200 million rural telephone
telecom companies
spectrum access auction • Presence of global telecom equipment
connections by 2012. The
(June 2010). India has lower manufacturers with development centers optimum utilisation of Universal
broadband penetration level Weaknesses Service Obligation Fund and
in the World. According to • Spectrum availability increase in mobile services might
TRAI, broadband penetration • Telecom Infrastructure help the government attain this
• Double taxation (telecom treated as service and
in India is just 0.74%. The goal. During the Eleventh Five
goods)
reason behind this slow Year Plan period, Rs 231,000
• Government regulations
growth is limited access to • Small domestic/local manufacturing of telecom crore worth of investments are
wireline network. equipment projected to be made in the
The Indian telecom industry has Opportunities telecom industry. The growth
• Low teledensity process in this ever-evolving
been one of the best performing
• Low penetration in rural area
industry groups in the recent • Increased affordability of services and handsets sector needs to be backed by a
years. Though the telecom • Huge potential market (Rural India) strong research and development
sector has reflected promising • Increasing value added services support. The active participation
growth, the teledensity in India • Increased outsourcing / offshoring (IT/ITES of the private sector in R&D would
still remains at a very low level sector) ensure greater benefits for the
compared with international
• Favorable Government initiatives sector. Further, the government
• Low broadband penetration also envisions making India a
standards and thus providing
Threats
tremendous opportunity for • Intense competition, margin pressures hub for telephone equipment
future growth. manufacturing that is expected
• Price war among service providers
• Technology dependence on foreign companies to be achieved through telecom
The rapidly growing telecom
• Falling ARPUs specific special economic zones
industry is attracting the global
(SEZs) and by setting up Export
as well as domestic players
Promotion Council to promote
to enter the market and launch new services. Post
export of telephone equipment and services.
2006, several foreign companies have tied up with
the domestic firms for their foray into the market. vidyadhopatkar@gmail.com
Companies such as Uninor, SSTL, Etisalat DB, S
Tel, Videocon telecommunications, Loop Telecom
have emerged as the new entrants in the market.

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