telecom market can be split into three segments – wireless, wireline and
internet services. The wireless market comprises 98.1% of the total subscriber
base. India’s telephone subscriber base has expanded at a CAGR of 19.6%, India
is the world’s second-largest telecommunications market, with around 1.2
billion subscribers as of September 2018.
- In rural areas, the tele density is
far lower (56.9%) than that in urban India (171.1%).
- Foreign Direct Investment (FDI) cap in
the telecom sector has been increased to 100% from 74%. 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.
- The Government of India has introduced
Digital India programme under which all the sectors such as healthcare, retail,
etc. will be connected through internet
faced by telecom sector
- Financial Health of the Sector: Gross
revenue has dropped by 15% to 20% for the year 2017-18 over the preceding
year for the incumbents and overall sector revenue has dropped. Also,
there is drop in voice and data revenue per user
- Limited Spectrum Availability: Available
spectrum is less than 40% as compared to European nations and 50% as
compared to China. Hence, it is imperative that spectrum auctioning at
sustainable prices is the need of the hour. Also, government auction
spectrum at an exorbitant cost which makes it difficult for mobile
operators to provide services at reasonable speeds.
- High competition and tariff war: Competition
heating up post entry of Reliance Jio. Other telecom players have to drop
in tariff rates both for voice and data
- Lack of Telecom Infrastructure in Semi-rural
and Rural areas: Service providers have to
incur huge initial fixed cost to enter semi-rural and rural areas. Key
reasons behind these costs are lack of basic infrastructure like power and
roads, resulting in delays in rolling out the infrastructure.
- Lack of trained personnel to
operate and maintain the cellular infrastructure.
- Delays in Roll Out of Innovative Products and
Services: Substantial delays in roll out of
data-based products and services are hampering the progress of telecom
sectors. This is primarily due to the non-conducive environment resulting
out of government policies and regulations.
- Low Broad Band Penetration: Low
broadband penetration in the country is a matter of concern and the
government needs to do a lot more work in the field to go up in the global
- Over the top services: Over
the Top (OTT) applications such as WhatsApp, OLA, Viber and so on do not
need permission or a pact with a telecommunications company. This hamper
the revenue of telecommunication service provider.
- License fee: The
license fee of eight per cent of the Adjusted Gross Revenue including five
per cent as Universal Service Levy (USL) is one of the highest in the
taken by government
status: The National Digital Communications
Policy (NDCP) 2018 accorded telecom the status of critical and essential
infrastructure. This would help operators in reducing capex and operational
- Ease in
Merger & Acquisition guidelines: Ease
in M & A helps the sector to consolidate. Today there is consolidation in
the sector leading to 4-5 operators in each of the service area, similar to the
global average. There is also spectrum consolidation with each operator holding
reasonable quantities of spectrum.
- Revival of
the National Optic Fibre Network: This
enhance broadband connectivity. With the rising subscriber base, thrust on data
services has enabled a smartphone revolution.
- Payment bank
initiative: Operators have received in-principal
approval from the RBI for Payments Bank license, which is expected to aide in
customer retention and enables them to build on their M-Payment services.
virtual network operators: Introduction of the concept of
mobile virtual network operators (MVNOs) by the regulator are expected to open
up new opportunities for operators such as wholesale revenue stream.
- New national
telecom policy: The Telecom Commission, the highest
decision-making body of the telecom ministry, has given its nod to the new
telecom policy. The policy proposes to invite sustainable investment over a
period of time and promote fair competition. The National Digital
Communications Policy 2018 has envisaged attracting investments worth US$ 100
billion in the telecommunications sector by 2022.
- Smart cities
initiative: The Indian Government is planning to develop
100 smart city projects, where IoT would play a vital role in development of
Sharing: Since telecom business is heavy on capex and as much as 40%– 60%
of the Capex is utilized for setting up and managing the Telecom
infrastructure. By sharing infrastructure, operators can optimize their
capex, and focus on providing new and innovative services to their
of Affordable Smart Phones and Lower Tariff Rates: This would increase
tele penetration in rural areas.
on predatory pricing: government should fix a minimum price to save the
industry from price war.
License fee: The license fee of eight per cent of the Adjusted Gross
Revenue including five per cent as Universal Service Levy (USL) is one of
the highest in the world.
reserve price for spectrum auction: In the past, some of the operators
participated recklessly in these auctions leading to exaggerated prices —
much above their true valuations. Reasonable reserve prices for the market
mechanisms induce “truthful bidding”, and not leading to “winners’ curse”
as witnessed in some of the previous auctions.
All the digital initiatives of the government
including digital identification and authentication, e-Know Your Customer,
digital finance depend heavily on the telecom and broadband infrastructure.
Economic survey 2017-18 also underlined that the ‘crisis’ being faced by
telecom sector. Survey added that it has also deeply impacted their investors,
lenders, partners and vendors. The above steps could be taken to improve the
health of telecom sector.