TelecommunicationIndustryThetelecommunication industry is composed of companies that help in communicationthroughout the world either through the phone or the Internet.
Data is allowedto be sent anywhere in the world through infrastructure created by the company.Wireless operators, internet service providers, satellite companies, cablecompanies are the largest companies in the sector.Theindustry is important in a country like India because its plays a vital role insocio-economic development of a country. India is the world’s second largesttelecommunications market with 1.05 billion subscribers and has strong growthin the past decade and half.
The industry contribution to the GDP of thecountry is increasing every year with the contribution of 6.5 % currently andemploying over 4 million people today.StructureTele-density which is defined as the number oftelephone connections for every 100 individuals in India, increased from 85.9%in FY16 to 92.98% in FY17.
India as on march 2017 has the third highest numberof internet users in the world with around 450 million users. Most users accessinternet through mobiles. India telecommunicationindustry is split into Public Sector and Private Sector.
Public sector consistsof BSNL and MTNL. Public Sector is further divided into Indian companies andForeign invested companies. Thetelecom market can be categorised into three segments: MARKETSIZEIndianTelecommunication market is 2nd largest market I the world withsubscriber base of nearly 1,201.72 million. The sector’s revenue grew at CAGR (compound annual growth rate)of .8% from US$ 40.
8 billion in FY12 to US$ 42.6 billion in FY17. During 1stQuarter of FY18, gross revenue of the sector in India reached US$ 20.4 billion.Revenues are expected to grow at US$ 26.
38 billion from the telecom equipmentby 2020.Asof 2017, India has reached 1,206.71 million telephone subscriber bases. Thewireless segment dominates the market with 98.04% of total telephonesubscriptions.
Talkingabout urban and rural areas, urban regions amounts to 58.04% in total telecomsubscriptions in the country whereas rural areas amounts to 41.7%. Geographical market for theindustryIndia has 22telecom circles, including Metro, A, B and C category service areas.
This isthe list of officially recognised circles as stated by the Indian Department ofTelecommunication.India Telecom Circles Telecom Circle Circle Type Population Covered Telecom Circle Circle Type Population Covered Andhra Pradesh Telecom Circle A 76.2 Assam Telecom Circle C 26.
7 Bihar Telecom Circle C 109.9 Delhi Metro Telecom Circle Metro 18.6 Gujarat Telecom Circle A 51 Haryana Telecom Circle B 21.1 Himachal Pradesh Telecom Circle C 6.1 Jammu & Kashmir Telecom Circle C 10.1 Karnataka Telecom Circle A 52.9 Kerala Telecom Circle B 31.
9 Kolkata Metro Telecom Circle Metro 15.4 Madhya Pradesh Telecom Circle B 81.2 Maharashtra Telecom Circle A 76.
9 Mumbai Metro Telecom Circle Metro 21.3 Northeast Telecom Circle C 11.7 Orissa Telecom Circle C 36.
8 Punjab Telecom Circle B 25.3 Rajasthan Telecom Circle B 56.5 Tamil Nadu Telecom Circle* A 63.4 Uttar Pradesh (East) Telecom Circle B 101.6 Uttar Pradesh (West) Telecom Circle B 73.1 West Bengal Telecom Circle B 65.
7 Market survey by TelephoneRegulatory Authority of India (TRAI) According to the recentreport published by TRAI, the total number of wireless subscriber in Indiastands at 1162.47 million and wireline at 23.41 million. Growth in the subscriber base- category wise The total number of netaddition in wireline segment in all the circles are on a decline and wirelesssegment is on a decline in Circle A and B. MARKETTRENDS5GTherace for 5G is on and will continue.
Many telecom companies around the worldhave developed the architecture for 5G and also have initiated their fieldtests in the previous year. This will bring in the very first wave ofcommercial offerings which will be launched amongst widespread trials of thetechnology. the industry is expectedto see 1GB access move to 10GB and 10GB to 100GB in order to cope with 4Ggrowth.
Also, to lay the groundwork for new 5G-bearing core networks.As there is high consumer and business demand, carriers andgovernments are pushing the deployment forward with the ambitious goal ofrolling out 5G networks more widely by 2020.GREEN TELECOM § The green telecom concept is aimed atreducing carbon footprint of the telecom industry through lower energyconsumption § Tata has invested around US$16.38million to convert its 10,000 base stations from indoor to outdoor to reduceenergy consumption and carbon footprint across its 20 telecom circles in Indiaso farEXPANSION TO RURAL MARKETSThere are over 62,443uncovered villages in India; these would be provided with village telephonefacility with subsidy support from the government’s Universal ServiceObligation Fund (thereby increasing rural teledensity) § In October 2017, the rural subscriberbase accounted for 41.96 per cent of the total subscriber base, therebyfuelling growth across the sectorEMERGENCEOF BWA TECHNOLOGIESThemost significant recent developments in wireless communication include BWAtechnologies such as WiMAX and LTE § In 2015, Airtel launched its 4Gservices in 296 cities across the India § In 2015, BSNL started its 1st 4GWireless Broadband Internet Service- WiMax § Reliance Jio, has launched 4G servicesacross pan- India as on December 2015INTERNET OF THINGS (IOT)IoT is theconcept of electronically interconnected and integrated machines, which canhelp in gathering and sharing data.
The Indian Government is planning todevelop 100 smart city projects, where IoT would play a vital role indevelopment of those cities.CONSOLIDATION§ Vodafoneand Idea, India’s second and third largest operators have decided to merge. § Airtel’sacquisition of Tata Teleservices’ mobile business was given approval inNovember 2017RISING INVESTMENT§ In 2017,Vodafone disclosed its plans to invest US$1,310 million to upgrade and expandVodafone India network coverage and US$655 million to upgrade its technologycentre § In February 2017, Japanese Telecomcompany – Docomo, re-invested US$ 1.18 billion in Tata Telecom, to gather astake of 26.
5 per cent in the company.OUTSOURCINGNON-CORE ACTIVITIESAspart of the recent outsourcing trend, operators have outsourced functions suchas network maintenance, IT operations and customer serviceMOBILEBANKING§ In December 2017, 37.6 million mobilebanking transactions were made, and NPCI achieved a record volume of 1 billiontransactions in July 2017. § In March 2017, the government set atarget of achieving 25 billion digital transactions for banks with the help ofPoS machines, transactions enabled and merchants, which have been added infirms § In March 2017, Samsung launched itsmobile payment service, Samsung Pay, to facilitate smooth payment at retailoutlets, instead of using mobile wallets, credit or debit cards PorterFive Forces analysis of Telecom Industry COMPETITIVERIVALRYCompetitiverivalry is high because there is low switching cost of customer and competitionamong players is increasing because of price sensitivity. High exit barriersare also intensifying the competition. Also, there are around 6 to 7 players ineach region, leading to intensify the competition. THREATOF NEW ENTRANTThreat of newentrant is low.
This is mainly because of Strict government regulations. Moreover,telecom industry is an emerging industry and requires proper infrastructure thereforethere is extremely high infrastructure setup cost. Also, there is difficulty inachieving economies of scale. THREAT OFSUBSTITUTE PRODUCTSThreat ofsubstitute products is low. Hardly any threat of substitute products is there asthere is no substitute available in the market. Though low-cost rates and crossplatform application like Skype, WhatsApp and other apps have pose a seriousthreat to telecom industries.
BARGAINING POWER OF SUPPLIERSince there are only fewsuppliers the bargaining power of supplies is quite high as there are just a few suppliers in thesector and it involves high cost of switching suppliers.Bargaining power of buyers.Bargaining power of buyers ishigh as there is low switchingcost and mobile number portability give customers high bargaining power. Also,customers are price sensitive. MARKETSTRUCTUREThe marketconsists of:· Regionalplayer· NationalplayersThe big threetelecommunication companies namely are:AirtelVodafoneIdea