Telecom Industry

By: Ankit Agarwal

Gaurav Kudchadkar
Nitin Gupta
 Overview of Telecom Industry in India

• Fifth largest and fastest growing in the world.

• 110.01 million connections so far.
• Regulated by the TRAI.
• Three types of players involved-

1. State owned companies, eg: BSNL

2. Private Indian owned companies
eg: Tata Teleservices
3. Foreign Invested Companies,
eg: Spice Communications
 Overview continued…

• Currently contributes nearly 1% to India’s GDP.

• Has attracted huge investments which has
accelerated entry of new players.
• Recently had a major M&A with Bharti Airtel’s
acquisition of Zain’s African mobile service
operations.
• RBI has liberalized the investment norms for
Telecom Industry.
Components of Indian Business Environment

• Government
• Money Markets
• Monetary & Fiscal Policy
• Openness of economy
• GDP
• Technology
• Consumer purchasing & spending patterns
• Income
 Components of International Business
Environment
• Social Environment
• Cultural factors comprising of values, customs,
language.
• Political environment comprising of fair trade
decisions, tax programs, legislations.
• Economic factors like GNP, FDI and its sources.
• Legal environment comprising of tariffs, subsidies,
regulatory bodies etc.
• Technology
• Tax System
 Challenges Before Telecom Industry
1. Revenue Growth
- Each circle has 9-10 operators
- New entrants have subscriptions at throw away prices
with loaded free talk time.
- Lead to multiple SIM ownership.
- This forced incumbent operators to have similar offers.
- Finally led to paid minutes getting converted to non
paid minutes.
- Decrease in revenue growth.
 Challenges Before Telecom Industry
2. Subscriber Growth
- Increase in subscribers not proportionately increasing
revenue.

3. Profit Margin
- Due to decrease in revenue growth, achieving desired
profit margin has been a challenge.
- Operators are now trying to reduce operating costs
through business process outsourcing, infrastructure
sharing, IT outsourcing etc.
Challenges before Indian Telecom Industry
4. Number of operators
- Several operators operating at tariffs lower than cost. Eventual
consolidation is inevitable.

5. 3G rollout
- This needs huge funds for spectrum fee and for network roll
out.
- Rolling out new 3G value added services and ensuring
availability of 3G handsets at affordable prices.
- High end customers might switch to 3G operators.
Challenges before Indian Telecom Industry

6. Rural Penetration
- Urban market saturated and rural coverage is
the key to operator’s growth strategy.
- The challenge is to search for new cost
effective ways to roll out network in rural
areas.
- Low ARPU is also a challenge.
Challenges before Indian Telecom Industry

7. Challenge by MNP
- Subscribers in huge numbers can switch to operators
offering better services.
- Move can be beneficial to new operators who can
provide congestion free network and excellent service.
8. Security clearance for procurement equipment
- Indian govt is not easily giving licenses to
operators for importing equipment.
- This has impacted network roll out.
Challenges before Indian Telecom Industry

9. Other challenges
- Choosing proper technology.
- Leverage on the use of available infrastructure
to reduce costs.
- Connectivity of networks.
- Cost of bandwidth.
- Emergence of new applications and
convergence of technologies.
 Opportunities for Telecom
• The telecom opportunities in India have been
growing by 20-40% every year since past 3 years.
• The telecom sector is witnessed by strong
competition that has reduced tariffs.
• The roll out of 3G services is considered as a big
takeoff.
• Tele-density has risen to over 26% from 3.1 % in
2001.
 Opportunities
• The various opportunities for Telecom sector are:
1. Internet users base fast reaching near the English speaking
population base. Local language and content required for
further growth.
2. Infrastructure equipment cost is down to considerably less
amount as compared to a few years ago. Operators
expansion can plan better now.
3. Increased viability for the operators to expand to semi-
urban and rural markets. Hence accelerate growth further.
4. Huge potential for different value added services.
 Opportunities
5. Facilitating availability of adequate
international bandwidth at competitive prices
to drive ITES sector at faster growth.
6. Mobile companies can tie up with tower
companies to roll out the network by
collocating with infrastructure operators (IP)
rather than expanding their own network.
 Strategies for future !!!
• Connecting the unconnected should be the prime
focus. Properly position yourself.
• While connecting the unconnected, have free talk time
and similar offers to capitalize on first mover
advantage.
• Try to reduce operating costs through business process
outsourcing, infrastructure sharing, IT outsourcing etc.
This will improve profit margins.
• With the launch of 3G, focus on new initiatives such as
m-education, m-governance, telemedicine.
 Strategies for future !!!
• Innovate to improve ARPU.
• Manufacturing of telecom industry in India is
supposed to get a boost from the Govt. Of India.
• Have increased utilization of video and data and
other applications along with financial services.
• The tariff plans are expected to be competitive,
hence be innovative.
• Emphasize on the use of alternate energy.
 Hurdles !!!
• Convergence of technology is happening rapidly and
there is need for matching convergence of regulations
by the govt.
• Renewal of licenses taking place in a non transparent
manner.
• Consolidation of country’s crowded telecom market
with new entrants scaling down the rollout plans.
• Price will be the most important determinant with the
launch of 3G.
• Tariff plans to become competitive.
 Hurdles !!!
• MNP is likely to make it challenging for
existing operators to retain their old
customers.
• Spectrum allocation for broadband wireless
access is expected to take up the broadband
penetration to new heights.
• Shift towards smart phones by consumers.