Telecom India

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Executive Summary

Imagine being a part of an industry that has grown over twenty times in just ten years. The telecom industry of India has grown from under 37 million subscribers in the year 2001 to over 846 million subscribers in the year 2011.

This portentous growth of the Indian telecom sector in the past ten years has opened up numerous opportunities, with only traces of these being felt by rural India. The total telecom density of the country is about 71%, but only 33% of the rural India, which occupies over 70% of the country’s population, has realized the access and benefits of the industry.

The beginning of the Indian telecom industry can be marked with the introduction of the Posts and Telegraphs Department in the year 1851. Real liberalization of the telecom industry started in the year 1981, when the then Prime Minister of India Indira Gandhi, joined hands with authorities in France to merge with the state owned telecom company, in an effort to set up five million lines per year in the country. The first mobile telephone service started on a non-commercial basis in Delhi in the year 1985. However, the idea of mobile communication did not take-off until the first National Telecom Policy (NTP), which was released in the year 1994. A new National Telecom Policy was implemented in the year 2011 and licenses for a new fourth generation (4G) spectrum are expected to be rolled out by the year 2013. A detailed telecom timeline is illustrated in the report.

The industry has been profitable and the revenue has never been better. The total revenue of the telecom services sector went up from US$ 31.5 billion in 2009-2010 to US$ 34 billion in 2010-2011, indicating a growth of 8.69%. The revenue contribution in the year 2010-2011 was 20.34% from the public sector telecom companies and 79.66% from the private sector telecom operators. The sector is expected to witness up to US$ 55.95 billion in investments and the market will cross the US$ 100 billion revenue mark in the next 5 years.

The supply chain of the telecom industry in India is fairly linear, with telecom operators defining the quality, type of services and price. The ‘flow of orders’ in the supply chain is bottom/top - coming from the customers and going through the operators, whereas, the ‘flow of services’ is top/bottom - coming through operators and going to the customers.  Apart from the telecom operators, the other key players in the industry are tower providers, equipment distributors and retailers. A comprehensive supply chain analysis of the Industry has been detailed in this report.

The wireline segment of the industry has a high level of concentration, with BSNL accounting for over 72% of revenue. On the other hand, the industry concentration in the wireless segment is medium, with the top four companies in the segment sharing 68% of the revenue.

India is a diverse nation; while some parts of the country are competing with the world, other parts are struggling to make ends meet. A reflection of this diversity can be seen in the telecom segmentation of the nation. States such as Punjab and Tamil Nadu are leveraging with a tele-density of over 80% whereas; states such as Chhattisgarh, Jharkhand and some parts of North East India are perverted with a tele-density of less than 8%. This report provides a state-wise breakdown of the geographical segmentation of telecom industry of India.

The report provides an analysis of the competition and the market share of the telecom operators. In a nutshell, the competition in the industry is moderate and the trend is increasing. The wireless segment has a healthy mix of competition, with players such as Bharti (Airtel), Reliance, Vodafone and Idea occupying almost an equal share of the pie and BSNL continuing to dominate the wireline market. Rural competition mirrors the overall segment, with Bharti leading the rural wireless segment and BSNL dominating the wireline market.

The telecom sector is going through the growth stage of its life cycle, with penetration in the rural areas being one of the major areas of opportunity for the next five years. Until March 2006, the rural tele-density of the Indian telecom sector was just 1.86% which has increased to 33.79% in March 2011. In the next five years, all the major telecom operators will be focusing on leveraging the opportunities that lie thereabouts.

Barriers to entry in the telecom industry are high and steady and the level of tax burden is medium and stable. There is also a considerable amount of assistance provided to the industry and the trend has been increasing. The industry is highly regulated and the recent spectrum scam has only lead to an increased scrutiny. The cost structure analysis identifies high profit margins and major costs such as depreciation and network operations expense incurred by the operators. This further justifies the high capital intensity of the telecom industry. The report provides us an analysis on such factors which gives us an insight into the conditions of the telecom industry of India.

The real question to ask is; has the telecom industry of India realised its complete potential? If it has not, then what is to unfold will not only change the great nation but also the world we live in.


Table of Content

Industry Definition

Telecommunications Timeline

Key Statistics

Financial Performance

Supply Chain

Segmentation

Market Characteristics

Industry Conditions

Key Competitors

Key Factors

Appendices

References


List of Figures and Charts

  1. Telecommunications Timeline
  2. Growth of Telephone Subscriber base (in million) from 2001 to 2011
  3. Supply Chain of Telecommunications Industry India
  4. Product and Service Segmentation of Telecom Industry India
  5. Segmentation of Wireless Services (as on 31st March 2011)
  6. State wise tele-density as on 31st March 2010
  7. Product Life Cycle - Telecom
  8. Cost Structure of leading telecom operators for the year 2010-2011
  9. Capital and Labour Intensity
  10. Notions of Interference
  11. Inside the Radio Wave Spectrum
  12. Comparing Broadcast vs. Cellular Architecture
  13. Layers
  14. Market share of Wireless Service Providers (as on 31st March 2011)
  15. Market share of Wireline Service Providers (as on 31st March 2011)
  16. Market Share of Rural Wireless Subscribers (as on 31st March 2011)
  17. Market share of Rural Wireline Service Providers (as on 31st March 2011)

List of Tables

  1. Subscribers Data
  2. Teledensity - Rural & Urban Data
  3. Financial Performance of telecom service sector in the year 2009-10 & 2010-11
  4. Segmentation of Wireless Services (as on 31st March 2011)
  5. Concentration of Telecom Sector
  6. State wise tele-density & total telephones (Wireless & Wireline) as on 31st March 2010 and December 2010
  7. Cost Structure Of Leading Telecom Operators For The Year 2010-2011
  8. Market Share of Wireless Subscribers (as on 31st March 2011)
  9. Market share of Wireline Service Providers (as on 31st March 2011)
  10. Market Share of Rural Wireless Subscribers (as on 31st March 2011)
  11. Market share of Rural Wireline Service Providers (as on 31st March 2011)
  12. Subscriber Base of Wireless (GSM and CDMA) Services from 31st March 2006 to 31st March 2011
  13. Bahrti Airtel – Performance at a glance
  14. Reliance Communications – Performance at a glance
  15. Vodafone India – Performance at a glance
  16. Telecom Timeline of India Table