TELECOM INDUSTRY

GROUP MEMBERSANU K VARGHESE

GAURAV CHATTERJEE
LISBA ANNIE CYRIL
PRETTY SARA PAUL
S. AKHIL
SHUBHAM SRIVASTAVA
PROJECT REPORT ON TELECOM INDUSTRY

SUBMITTED TODr. SUSHIL KALYANI

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CONTENTS
CHAPTE
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CONTENT
EXECUTIVE SUMMARY
INDIAN TELECOM INDUSTRY-An Overview
MARKET STRUCTURE OF TELECOM INDUSTRY
PERFORMANCE OF PSUs vs. PRIVATE SECTOR
OUTPUT, EFFIECIENCY AND OVERALL GROWTH
OF SECTOR
STRONG POLICY SUPPORT CRUCIAL TO THE
SECTORS DEVELOPMENT
ROLE OF PHARMACEUTICAL INDUSTRY IN INDIA
GDP
GDP AFFECTS PRIVATE SECTOR MORE OR
PUBLIC SECTOR
PROJECTIONS FOR NEXT FEW YEARS
INVESTMENT AND LENDING IN THIS SECTOR BY
BANKS

CONCLUSION
BIBLIOGRAPHY

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1.EXECUTIVE SUMMARY
1.1. Introduction-

India is currently the worlds second-largest telecommunications market and has registered strong growth in
the past decade and half. The Indian mobile economy is growing rapidly and will contribute substantially to
Indias gross domestic product (GDP), according to report prepared by GSM Association (GSMA) in
collaboration with the Boston Consulting Group (BCG).
The liberal and reformist policies of the Government of India have been instrumental along with strong
consumer demand in the rapid growth in the Indian telecom sector. The government has enabled easy market
access to telecom equipment and a fair and proactive regulatory framework that has ensured availability of
telecom services to consumer at affordable prices. The deregulation of foreign direct investment (FDI)
norms has made the sector one of the fastest growing and a top five employment opportunity generator in
the country.

1.2 Market SizeDriven by strong adoption of data consumption on handheld devices, the total mobile services market
revenue in India is expected to touch US$ 37 billion in 2017, registering a Compound Annual Growth Rate
(CAGR) of 5.2 per cent between 2014 and 2017, according to research firm IDC.
India's mobile subscriber base is expected to cross 500 million! Subscribers by the end of FY2015 from 453
million subscribers at the end of FY2014.
According to a study by GSMA, Smartphones are expected to account for two out of every three mobile
connections globally by 2020 making India the fourth largest Smartphone market.
The broadband services user-base in India is expected to grow to 250 million connections by 2017,
according to GSMA.
India added the highest number of net mobile phone subscriptions of 13 million during the third quarter of
2015@.
International Data Corporation (IDC) predicts India to overtake US as the second-largest Smartphone market
globally by 2017 and to maintain high growth rate over the next few years as people switch to Smartphones
and gradually upgrade to 4G.
In spite of only 5 per cent increase in mobile connections in 2015, overall expenditure on mobile services in
India is expected to increase to US$ 21.4 billion in 2015, led by 15 per cent growth in data services
expenditure, as per research firm Gartner.

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The Indian telecom sector is expected to generate four million direct and indirect jobs over the next five
years according to estimates by Randstad India. The employment opportunities are expected to be created
due to combination of governments efforts to increase penetration in rural areas and the rapid increase in
Smartphone sales and rising internet usage.

2.INDIAN TELECOM INDUSTRY

An Overview

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3. MARKET STRUCTURE OF TELECOM INDUSTRY

A situation in which a particular market is controlled by a small group of firms. An oligopoly is much like a
monopoly, in which only one company exerts control over most of a market. In an oligopoly, there are at
least two firms controlling the market.

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An oligopoly is formed when a few companies dominate a market. Whether by non competitive practices,
government mandate or technological savvy, these companies take advantage of their position to increase
their profitability.
The presence of competition on the other hand, helps in preventing oligopoly from market failure. Although
the power to operate is only distributed to a few oligopolists, the competition factor encourages them
to produce quality goods and services.
This also drives them to become innovative and customer-oriented.
In turn, the presence of both monopolistic and competitive features in oligopoly creates a balanced system,
making it an ideal market structure

4. PERFORMANCE OF PSUs vs. PRIVATE SECTOR

There is a continuous rise in the number of wireless telephones of the private sector operators compare to
public sector in Indian Telecom sector in last decade. The total number of telephones of the private sector is
812.96 million, whereas in public sector it is 120.05 million at the end of the March 2014. The percentage
share growth of wireless public and wireless sector for last four years has given below.

Growth of public and private wireless telephone percentage share in last four yearsS. No.
1
2

Segment
Public
Private

March 11
14.89%
85.11%

March 12
13.69%
86.31%

March 13
14.49%
85.51%

March 14
12.87%
87.13%

5. OUTPUT, EFFIECIENCY AND OVERALL GROWTH OF SECTOR

India is currently the second-largest telecommunication market and has the third highest number
of internet users in the world
Indias telephone subscriber base expanded at a CAGR of 19.5 per cent to 1022.61 million over
FY0716*
Teledensity (defined as the number of telephone connections for every hundred individuals)
increased from 17.9 in FY07 to 80.98 in FY16*
In September 2015, total telephone subscription stood at 1022.61 million, while teledensity was
at 80.98 percent

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5.1. SURGING TELECOM REVENUE

Indian telecom sectors revenue grew 10.7 per cent to USD71.2 billion in FY14 as compared to
USD64.3 billion in FY13
Wireless and Wireline revenue increased at a CAGR of 8.91 per cent to USD38.8 billion over
FY0614
Revenues from the telecom equipment are expected to be USD19 billion in FY15 which is
further expected to touch USD30 billion in FY20.

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5.2. WIRELESS SEGMENT DOMINATES THE MARKET

Indias telephone subscriber base reached 1022.61 million in September, 2015.

The wireless segment (97.46 per cent of total telephone subscriptions) dominates the market, while
the wire line segment accounts for the rest.
Urban regions account for 58.58 per cent of telecom subscriptions, while rural areas constitute the
remaining.

5.3. WIRELESS SUBSCRIPTIONS WITNESS ROBUST GROWTH OVER THE

YEARS

During FY07-16*, wireless subscriptions increased at a CAGR of 22.1 per cent to 969.89 million in
FY15 and reached 996.66 million subscribers till September, 2015
In FY16*, urban wireless teledensity stood at 147.35 while rural wireless teledensity stood at 48.11.

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5.4. NUMBER OF INTERNET SUBSCRIBERS INCREASING AT A FAST PACE

The number of Internet subscribers increased at a CAGR of 52.11 per cent to 375 million in 2015
from 8.6 million in 2006.
By December 2015, the number of internet users is anticipated to reach 402 million. This will reach
462 million by the end of June 2016 with the increasing number of subscribers coming online

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specially through mobile device.

5.5. STRONG GROWTH IN BROADBAND DRIVES INTERNET ACCESS

REVENUES

Broadband subscription increased at a CAGR of 20.11 per cent during FY0716 (till September
2015).

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6. STRONG POLICY SUPPORT CRUCIAL TO THE SECTORS

DEVELOPMENT
6.1.To compensate the consumers in case of call drop In October 2015, Telecom Regulatory Authority of India announced an amendment for Telecom

Consumer Protection Regulations 2012 according to which mobile service operators have to provide
compensation to the users in case of call drop.
The formulated regulation would be effective from January, 2016.

6.2. Standards of quality wireline and wireless servicesIn 2015, Telecom Regulatory Authority of India made regulations to amend the Standards of quality
of wireline (telephone service) and cellular mobile telephone services. These regulations has been
laid down to ensure better and effective compliance with the quality of service regulations and to
protect the interest of the customers

6.3.Relaxed FDI norms

FDI cap in the telecom sector has been increased to 100 per cent from 74 per cent; 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
FDI of up to 100 per cent is permitted for infrastructure providers offering dark fibre, electronic mail
and voice mail

6.4. Telecommunication Tariff Order-

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In 2015, TRAI passed the telecommunication tariff (16th amendment) order, according to which,
every service provider should offer a special roaming tariff plan to its prepaid and post-paid
customers and on payment of fixed charge for special roaming tariff plan national roaming should be
free

6.5. Set up internet connections

The Department of Information Technology intends to set up over 1 million internetenabled

common service centres across India as per the National e-Governance Plan

6.6. Reduction in license fees

In January 2015, the Government of India recommended reduction in license fees of telecom
operators by 6 per cent, telecom operators currently pay 8 per cent of adjusted gross revenue as
licence fee
The issuance of several international and national long-distance licenses has created opportunities
and attracted new companies into the market

6.7. Financial support

The USOF is expected to extend nancial support to operators providing services in rural areas and
encourage active infrastructure sharing among operators
TRAI has recommended that USO levy component to be reduced from 5 per cent to 3 per cent of
annual revenues for all the licenses from April 2015

6.8. Enhanced spectrum limit The prescribed limit on spectrum would be increased from 6.2MHz to 2x8 MHz (paired spectrum)

for GSM technology in all areas other than Delhi and Mumbai, where it will be 2x10MHz (paired
spectrum)
Telecom players can, however, obtain additional frequency; there will be an auction of spectrum
subject to the limits prescribed for the merger of licenses

6.9.Telecommunication amendment order for broadcasting and cable services

In 2015, telecom authority issued this order mandating every DTH operator to specify the tariff for
supply and installation of the customer premises equipment. DTH operator should specify the
refundable security deposit, installation charges, monthly rental charge and activation

7. ROLE OF PHARMACEUTICAL INDUSTRY IN INDIA GDP

Contribution of telecom sector revenue to gross domestic product (GDP) increased marginally to
1.94% in 2014-15.

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Telecom sector in 2014-15 increased to Rs 2,42,900 crore, accounting for 1.94% of total GDP,
compared to previous fiscal's figure of Rs 2,19,553 crore (1.93% of the GDP).

In 2011-12, the telecom sector accounted for 2.1% of GDP with revenue of Rs 1,85,930 crore, while
in the next year it stood at Rs 2,07,498 crore (2.07% of GDP).

8. GDP AFFECTS PRIVATE SECTOR MORE OR PUBLIC SECTOR

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Contribution of telecommunication private investment to economic growth was estimated to be

positive but insignificant in the pooled regression analysis.
After controlling for country specific effects and causality, the effect of telecommunication private
investment on GDP was found to be positive and significant.
However, the positive impact on GDP was not substantial. When across sectional carried out, the
contribution of telecommunication private investment was also seen to be statistically significant up
to2002.

9. PROJECTIONS FOR NEXT FEW YEARS

Future Growth Opportunities of Indian Telecom Sector: According to TRAI, two other associated aspects for
market growth are- availability of spectrum and availability of resources for network development and
expansion. According to the report of Department of Telecommunication, Government of India has raised
the Foreign Direct Investment (FDI) limit for this sector to hundred percent on August2013 to ensure
continuous flow of investments to expand the reach of mobile operators. Telecom operators are working on a
segmented approach to know the market potential and then to achieve their forecasts and target. According
to DoT (2013-14), Department of Telecommunication is planning to serve the nation in its diversity, modern
telecommunication facilities will be facilitated to all the rural and remote corners of the country. In this
regard, telecom sector will give special focus on unreserved areas in North-Eastern region and backward
states of the country. At the same time, an all-inclusive legislation is required to encourage healthy
competition, simplify processes and procedures, stimulate innovation and build linkages with other
upcoming sector with the help of facilitating rapid growth of the economy by using communication
technology.

9.1. RISING INCOME FUELS DEMAND FOR TELECOM SERVICES

Incomes have risen at a brisk pace in India and will continue rising given the countrys strong
economic growth prospects.
Nominal per capita income have recorded a CAGR of 8.87 per cent over 200015
Increasing income has been a key determinant of demand growth in the telecommunication sector in
India
The IMF estimates nominal per capita income to expand at a CAGR of 5.43 per cent over 201019
Per capita income is expected to expand at a CAGR of 7.8 per cent for the period 2015-19.

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9.2. INCREASING INCOME AND GROWING RURAL MARKET DEMAND

DRIVERS

The emergence of an affluent middle class is triggering demand for the mobile and internet segments
A young, growing population is aiding this trend (especially demand for smart phones)

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10. INVESTMENT AND LENDING IN THIS SECTOR BY BANKS

Banks okay to lending to big Telcos
Major telecom players may not find it difficult to get loans to pay for the spectrum they won in the auction
even though banks are expected to tread cautiously on extending credit to the debt-laden telecommunication
sector.
Players such as Bharti Airtel, Vodafone India and Idea Cellular are likely to get enough credit because of
their better ratings and relatively healthier balance sheets.
Banks may not have to worry on the big players who were bidding as their balance sheets are healthy.
Hence, I dont see it as a major problem as far as funding is concerned. Also, the payment of over 1 lakh
crore is staggered over a period of time and so about 30,000 crore can be easily funded by banks for now.
The Centre could mobilise over 1 lakh crore (nearly $16 billion) from the spectrum auction, of which a
majority of the funding that the telecom companies will need to raise is expected to come through debt
roughly half would be through loans from banks. Telecom companies have also been allowed by the Reserve
Bank of India to raise foreign currency debt to pay for the spectrum.
The other operators involved in the bidding process were Reliance Communications, Reliance Jio
Infocomm, Uninor, Tata Teleservices and Aircel.
Small players may be hit
A public sector bank official was concerned that the value of the collateral or the loan security could decline
over time. According to a senior State Bank of India official, Yes, smaller (telecom) players may get
affected and banks will not take additional exposure to themWe will assess the credit rating of the telecom
players as different companies have got different external credit rating. Wherever we assess the risk is low,
we will give and if not comfortable we wont. We have our internal policy for telecom companies.
86,000-cr exposure
According to reports, the total telecom sector exposure for all banks is reckoned to be around 86,000 crore.
IDBI Bank, which has an exposure of about 18,000 crore in the telecom sector, has, however, said it is not
enthused in lending to the auction participants.
Analysts said that things could get better for the telecom industry as the Government also plans to announce
reworked merger and acquisition (M&A) guidelines along with spectrum sharing and trading rules, which
could bring consolidation into the sector.
The SBI official doesnt believe that the profits will get affected as the usage will not come down even if
tariffs rise as everyone has become a slave of the system.

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We have seen performance of good companies, the average revenue per unit is going up and also the
average revenue per minute is going up andprofits are not coming down.

11. CONCLUSION

India will emerge as a leading player in the virtual world by having 700 million internet users of the 4.7
billion global users by 2025, as per a Microsoft report. With the governments favourable regulation policies
and 4G services hitting the market, the Indian telecommunication sector is expected to witness fast growth
in the next few years.
It can be concluded that the growth and development of Telecom sector of India has made it a key
contributor in Indias economic and social up gradation. Every functional division and service provider of
Telecom Sector of the country is trying to provide world class telecom infrastructure in its area of operation
to give services to its customers and so, helping the country to progress in the global scenario.

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12. BIBLIOGRAPHY

Journals/newspapers:
Business Standard
The Hindu- business line
The Indian Telecom Services Performance Indicators January - March, 2015
Web sites:

http://indiainbusiness.nic.in/
http://www.ibef.org/industry/telecom-india.aspx
www.wikipedia.com
http://www.dnb.co.in/telecom/overview.asp
Press Release- Telecom Regulatory Authority of India, New Delhi. Retrieved from:
http://www.trai.gov.in/WriteReadData/WhatsNew/.../PR-TSD-Mar13.pdf
Press Release- Telecom Regulatory Authority of India, New Delhi. Retrieved from:
http://www.trai.gov.in/WriteReadData/.../Press%20Release-TSD-Mar,14.pdf
Press Release- Telecom Regulatory Authority of India, New Delhi. Retrieved from:
http://www.trai.gov.in/WriteReadData/.../PR34-TSD-Mar-12052015.pdf