MANAGERIAL ECONOMICS ASSIGNMENT - 2

GROUP - 5
THE EVOLUTION OF THE MARKET STRUCTURE OF INDIAN
TELECOM INDUSTRY AND THE MERITS AND DEMERITS OF
THE STRUCTURE IN EACH STAGE

INTRODUCTION

Telecom industry is growing at a rapid pace in India. Today, in terms of

market share India’s Telecom sector stands second in the world. The Indian Telecom
Sector has emerged as one of the critical components of economic growth required for
overall socio-economic development of the country as there is a positive correlation
between the penetration of mobile services and internet on the growth of GDP of a
country. Telecom sector in India is over 165 years old. Introduction of
Telecommunications in India dates to 1851 when the first landlines were made
operational by the government at a place near Kolkata.

Telephone services were formally introduced in India in 1881 and were

subsequently merged with the postal system in 1883. Post-Independence, Posts,
Telephone and Telegraph (PTT)body was formed by nationalization of all
telecommunication companies and its governance was under the Ministry of
Communication. The development of the Telecom Sector of India has experienced a
major process of transformation in terms of its growth, technological content, and
market structure in the last decade through policy reforms introduced by Government
of India. The sector has undergone a dramatic transformation from the government
monopoly to a competitive environment after liberalization, where multiple private
players could enter and started giving services to customers. It has become a very
essential service, needed for rapid growth and modernization of various sector of the
country’s economy.

The telecommunications industry is made up of cable companies, internet

service providers, satellite company, and telephone companies. Telecommunication is
defined as communicating over a distance. The industry’s origin can be traced to
postal courier services.
 1st PHASE OF TELECOM INDUSTRY

Indian Telecom Industry started in 1851 when the first operational land lines were
laid by the government near Calcutta . In 1881 the telephone services were
introduced in India and telephone services were merged with the postal system in
1883. In 1923 the Indian Radio Telegraph Company was formed. In 1947, after the
independence, all the foreign telecommunication companies were nationalized to
form the Posts , Telephone and Telegraph, a monopoly run by the government’s
ministry of Communications. The Indian Telecom Industry was considered as a
strategic service and best to bring under state’s control. In 1980, when the private
sector was allowed in telecommunications equipment manufacturing the first wind
of reforms in telecommunication sector began to flow.
Department of Telecommunications was established which was an
exclusive provider of domestic and long distance service that would be its own
regulator (separate from postal system). Government has two wholly owned
companies which create as: the Videsh Sanchar Nigam Limited (VSNL) for
international telecommunications and Mahanagar Telephone Nigam
Limited(MTNL) for service in metropolitan areas in 1986. In 1990s the opening up
of economy led to the benefits of telecom industry. In 1994 the National Telecom
Policy (NTP) was formulated which was the first attempt to give a comprehensive
roadmap for the Indian Telecommunication sector. Telecom Regulatory Authority
of India (TRAI) was created in 1997. It was formed to act as a regulator to
facilitate the growth of telecom sector.
Indian Telecom Industry can be divided into two segments; Fixed
Service Provider (FSPs) and Cellular services. The Indian Fixed Line Services
consist of basic services, national or domestic long distance and international long
distance services. The state operators (BSNL and MTNL) account for almost 90%
of revenues from basic services. In selective urban areas the private sector services
are presently available which collectively account for less than 5% of
subscriptions. However, private services focus on the business/corporate sector
offer reliable, high -end services, such as leased lines, ISDN, closed user group and
video conferencing.

2nd PHASE OF TELECOM INDUSTRY

The second phase was the internet phase which started approximately around the year
2000. The industry realigned itself around horizontal solutions during this phase. It
was the time of e-commerce and portals.

Top trends in the telecommunication industry

1. 5G Networks – The telecom carriers are working on providing the 5G
networks to spark an enormous wave of faster internet. While the technology
has not yet been fully defined, carriers are proceeding with the lab and field
trials in their race to stay competitive.

2. Secure and reliable services – Modern telecom environment offers a rich set of
services that need reliable and secure authentication. The number of
smartphones equipped with biometric fingerprint readers is increasing. This
technology is also being used by retailers, financial institutions, government,
and even schools, to verify identities.

3. Artificial Intelligence (AI) – The addition of artificial intelligence (AI)

capabilities to smartphones will bring the next shift in technology.AI allows
smartphones to perform highly sophisticated functions such as augmented
reality (remember Pokémon Go), speech recognition, indoor navigation, and
even learning the daily tasks and preferences of an individual to enable digital
assistants like Siri and Alexa.

4. Internet of Things – Although mentioned above as part of challenges faced by

telecom industry due to the huge amount of data that connected devices
generate, but this is one major trend that will provide telcos with more
opportunities in the coming years. Becoming an IoT connectivity service
 provider and offering Machine to Machine (M2M) devices can open up new
streams of revenue for the telcos.

5. Mergers & Acquisitions – With cut-throat competition, new technological

innovations disrupting the existing customer base, the year doesn’t seem to be
very easy for the telecommunication sector. That’s why a number of
companies are looking to partner with media and content firms, like AT&T’s
proposed merger with Times Time Warner Inc.

3rd PHASE OF TELECOM INDUSTRY

Technological innovations with 5G will redefine the future of telecom in India,

according to a recent CII-Deloitte report titled ‘Digital reset – Touching a billion
Indians’.
India is contributing significantly to the next generation of telecom services with
companies collaborating to broaden solutions, the report furthers. Private networks are
expected to see a huge demand from enterprises in the near future across industries
such as healthcare, education, fintech, e-commerce and entertainment. Telecom has
played a significant role in bringing a change in consumer usage pattern.
The govt, telecom regulators, telecom service providers (TSPs) and original
equipment manufacturers (OEMs) need to work in tandem,” said Vaish, identifying
the key issues to be low fiberisation, local hardware manufacturing, high spectrum
cost, and selecting appropriate 5G standards and bands.

With fibre infrastructure connecting only 30% of India’s telecom towers, this number
has to multiply fast enough for a successful roll-out across India. We need to
encourage and boost our local 5G hardware manufacturing at an unprecedented rate
considering our drive to minimise dependence on imports.

Furthermore, balanced 5G spectrum pricing will help the GoI generate adequate
revenue from the auction without hampering implementation plans for 5G in India, he
explains. "If India is to have a successful 5G launch, band allocation and pricing must
be carefully considered”.
Global superpowers are also campaigning to build up fifth-generation wireless
infrastructure. "It has been a domino effect ever since US sanctions on Chinese
telecom OEMs were imposed," said Vaish.
While a host of local companies and foreign manufacturers have already started
manufacturing facilities in India under the “Atmanirbhar Bharat’ mission, it needs to
be scaled up significantly to deliver the massive investment requirement of close to
$30 billion for pan-India roll out
According to a Zenith Media survey, India is expected to become the fastest-growing
telecom advertisement market, with an annual growth rate of 11% between 2020 and
2023.
The Indian Government is planning to develop 100 smart city projects, and IoT will
play a vital role in developing these cities.

A KEY PLAYER IN THE PRESENT INDIAN MARKET AND

DISCUSS ITS MARKET, PRICING, AND FUTURE PLANS

Market of Jio in Indian market

Reliance Jio Infocom Limited, popularly known as Jio is one of the successful and
popular telecom company that created revolution all over the Indian telecom market
during the time of it’s launch. Jio is owned by Reliance industries and its headquarters
is situated at Mumbai, Maharashtra. Jio was launched exactly on 5th of September,
2016. Jio has provided a lot of attractive offers that shook the entire telecom industry
as well as its rivals. Moreover, they have announced a humongous offer called as
“Welcome Offer” of free data for a time period of entire one year traumatised all the
other telecom players that were present in the Indian market at that time. The launch
of Jio has created a large disruption all over the Indian telecom market. Before the
arrival of Jio on 2016, there were about seven big players in the Indian telecom
market. But, after the launch of Jio, most of the companies lost their pace and was
forced to shut down. Some of the companies that was brutally affected by Jio are Tata
Docomo, Telenor and Aircel. Thousands of sub-vendors who were working for these
companies also lost their jobs.

Before the launch of Jio in India, Bharti Airtel had about 24.8% of market share,
Vodafone India had about 19.1% of market share, Idea had about 17% of market
share, BSNL had about 9.3% of market share and Aircel had about 8.6% of market
share. But currently, the Indian telecom market is ruled by Jio by holding a whopping
35.8% of market share. According to data, Jio holds about 443.2 million subscribers
surpassing Airtel, who stands in the second position, by about 100 million
subscribers. When other companies are struggling to survive in the market, Jio is
attracting more and more customers by their several attractive packages. When it
started in the year 2016, Jio’s market share was just 3.30% and now they are ruling
the sector.

Jio has introduced several interesting technologies such as Voice Over Long Term
Evolution (VOLTE) and Fiber to the Home (FTTH) which helped them to attract new
customers. VOLTE enable a user to call anyone at any time without any cost. Jio fiber
entirely made a revolution by giving whopping speeds to the broadband connections.
Due to all these modern technologies implemented in the right way, Jio was able to
win the race among their rivals.

JIO PRICING
A brand's performance is measured by its ability to solve a problem, provide a high-
quality product or service, generate new demand, and so on. However, in order for all
of this to happen, the brand must attract the correct audience, which is only feasible
through price methods. Pricing is an important component in determining a brand's
success. Apple, for example, has played the premium card since its creation; items are
priced high to transmit the idea that the brand is exclusively for the elite, establishing
the company as a sign of prestige.

Many brands have played this game of pricing to yield the desired results. Jio has
been one such contender who owes their huge success to their pricing strategies. The
brand sent shockwaves throughout the country with its initiation, made through
providing free service as its launch price. This aggressive pricing was done to grab the
market without spending a dollar on advertising, as the deal was designed to advertise
itself. This market penetration pricing strategy compelled competitors to lower their
prices, knowing that if they did not, they would lose market share. Furthermore, if the
opponent is a minor market participant, they will eventually be pushed out of the
market owing to the competition. This move by Jo changed the market into an
oligopolistic competition, leaving only 4 players in the market.

Jio soon shifted to competitive pricing, putting an end to the bleeding of its
competitors. Competitive pricing is simply matching the price of the competition,
which would then minimise the loss and while being able to retain the existing
customers.

Firstly, Jio employs a classic pricing method which is known to be highly effective;
the odd number pricing. The price of the all packs offered by Jio end with an odd
number such as 9, 1, and 5. The popular packs by Jio gives away 100 SMSs a day
even though it is commonly known that SMS services are no longer used by a
majority of consumers. Furthermore, it gives free subscription to Jio apps which in
turn requires data. In such a view, consumers are tricked into justifying the price they
pay due of the artificial value created.

Secondly, Jio uses the decoy pricing strategy, which is known to influence consumer
decisions. Because the majority of India's population is middle-class, and this segment
would never turn down a reasonable deal, Jio recognised this advantage and invested
on it, successfully introducing multiple packs offering similar services but at different
price margins. As a result, indirectly persuading the consumer to choose the scheme
that is valid for the maximum number of days with the greatest price difference.

Finally, Jio uses a technique similar to markup tactics used in discounts. Its famous
'Dhan Dhana Dhan' offer provided 84 days of service for 399, but was later changed
to 70 days for 399, allowing Jio to earn more revenue while keeping the price
unchanged.

Tata's Nano was likewise released at a market penetration price, but it failed
miserably because the market sees car ownership as a status symbol, and when it was
provided at that price, buyers saw it as a low-cost product. Pricing should be
determined based on the product and the market. Jio had a lot of success with its
customers because it understood the market and used a pricing plan that worked for its
goods.

FUTURE PLANS
The Indian telecommunications business is the fastest-growing in the world, with
enormous potential to serve people and room for improvement.. The telecom sector is
extremely competitive, particularly now that Reliance Jio has entered the market.
Almost everyone now a days uses a mobile phone. Reliance industry chairman
Mukesh Ambani announced Jio Phone Next, a 4G smartphone co-developed in
partnership with American technology giant Google.  He also announced a
partnership with Google for the latter’s cloud services to power Jio 5G
solutions. Mukesh Ambani announce partnership with Google for its Cloud services
to power Jio’s 5G network and services. In partnership, Google will provide a
complete end-to-end cloud offering for fully automated lifecycle management of Jio’s
5G network and services. Besides, Google will leverage its Edge Cloud infrastructure
to provide an open, scalable and high-performing platform for supporting Jio’s 5G
services. Jio is planning to develop an Android-based operating system for Indian
needs with help from Google. With help from Intel and Qualcomm, who are leaders in
5G technology, the company plans to roll out 5G services in India as soon as spectrum
is made available.

CONCLUSION
Reliance Jio Infocomm Limited, doing business as Jio, is an
Indian telecommunications company and a subsidiary of Jio Platforms, headquartered
in Mumbai, Maharashtra, India. It operates a national LTE network with coverage
across all 22 telecom circles. It does not offer 2G or 3G service, and instead uses
only voice over LTE to provide voice service on its 4G network.

Jio soft launched on 27 December 2015 with a beta for partners and employees and
became publicly available on 5 September 2016. It is the largest mobile network
operator in India and the third largest mobile network operator in the world with over
42.62 crore (426.2 million) subscribers.

In September 2019, Jio launched a fiber to the home service, offering home

broadband, television, and telephone services. As of September 2020, Reliance
Industries has raised ₹1.65 lakh crore (US$22 billion) by selling nearly 33% equity
stake in Jio Platforms.