Telecom industry

History:

The history of telephone services in India found its beginning when a 50-line manual telephone exchange was commissioned in Kolkata in the year 1882 in less than five years after Alexander Graham Bell invented the telephone. While India became independent in the year 1947, the country had about 82,000 telephone connections, which slowly rose up to 3.05 million by the year 1984. The telecom sector in India was a government monopoly until the year 1994 when liberalization was gradually unrolled. For the first time, cellular services were launched in India in Kolkata in the year 1995.

An Overview of the Telecommunication Industry in India

A mobile handset

Talking of telecommunications sector in India today, we can primarily identify two segments namely Fixed Service Provider (FSPs) and Cellular Services. Some of the essential and basic telecom services forming part of Indian telecom industry include telephone, radio, television and Internet. Telecom industry in the country lays a special emphasis on some of the advanced and the latest technical innovations like GSM( Global System for Mobile Communications), CDMA(Code Division Multiple Access), PMRTS(Public Mobile Radio Trunking Services), Fixed Line and WLL(Wireless Local Loop ). Especially, India has a flourishing market in GSM mobile service, while the number of subscribers is on rapid and dramatic increase. The Indian telecommunications industry boasts as being one among the most rapidly growing chunks on the globe. Experts around the world estimate that India holds the promise of emerging as the second largest telecom market of the world.

Figures published by the Telecom Regulatory Authority of India (TRAI), reveal that the number of telecom connection subscribers in India reached 562.21 million in December 2009, marking a 3.5 percent increase over the number 543.20 million reported in November 2009. This figure indicates that the average teledensity (number of telephones per 100 persons) has gone up to 47.89.

On account of a dramatic increase in the earnings from mobile and landline connections, the telecom industry in India made revenue of US$ 8.56 billion during the quarter ending on December 31, 2009 thereby witnessing a recovery from the economic downturn.

Business Monitor International has stated that at present, India is adding up about 8-10 million mobile subscribers every succeeding month. Estimates have revealed that by June2012, almost half India’s population will be in possession of a mobile phone. This will result in about 612 million mobile subscribers, making up a teledensity of about 51 per cent by the year 2012.

Over and above, a study undertaken by Nokia has brought out that the communications sector will grow as the single largest chunk of the India’s GDP making up about 15.4 per cent by the year 2014.

Estimates made in February 2009 show that the Indian equipment market valued at US$ 24 billion, while Nokia was glowing as the market leader reporting more than US$ 3.4 billion revenues in 2008-09. Ericsson followed Nokia with revenue of about US$ 2.11 billion.

The latest reports published by Evalueserve state that the availability of the 3G spectrum has given hopes of finding about 275 million Indian subscribers using 3G-enabled services. This will take up the number of 3G-enabled handsets to reach near to 395 million by the end of 2013.

A Frost & Sullivan industry analyst has predicted that by the year 2012, revenues from fixed line subscriptions in India will reach up to US$ 12.2 billion, while the revenue from mobile connections will reach up to US$ 39.8 billion.

In a significant step taken to boost up the auction of 3G spectrum, the Indian Government has permitted prospective bidders to call for short-term funds from the domestic market in the country, while allowing refinancing out of external commercial borrowings (ECBs) within a period of 12 months. Estimates show that the government can mop up US$ 7.53 billion from the auction of 3G spectrum to be completed shortly. The reserve price has been fixed at US$ 753.74 million.

BSNL, the state-managed telecom operator has introduced 3G services in more than 318 cities benefitting 856,000 subscribers. BSNL has been venturing to cross more than 400 cities in the near future eventually rolling this service across 760 cities by September 2010. While the debate on 3G is seen continuing, TRAI has already started consulting on the next higher level of telecom services. 4G or the fourth generation enables downloads faster than all the earlier versions.

Today, India is the largest market in the world adding up a dramatic number of about 20 million mobile subscriber lines every month in an average. On the other hand, the number of landlines is found gradually decreasing. At the end of the first quarter in 2010, we find that the overall telecom subscriber penetration has gone up by more than 52 %. Though this might occur as a relatively low volume compared with a number of other nations, this comes as a quantum leap noting the figures recorded a few years back. Mumbai and Delhi (NCR) enjoy the status among a few other metro areas around the globe boasting of more than 25 m mobile subscribers in each of these regions. At present, The FDI cap in the telecom sector in India is 74 %. In a recent move, UK’s Vodafone Group has purchased a 52 % stake in Hutchison Essar, the fourth largest mobile service provider in the country. Bharti Airtel has the credit of being the first Indian operator to cross a subscriber base of 50 million.

It is predicted that mobile number portability (MNP) will be available throughout India by the second quarter of 2010, initially in the cities of Chennai, Delhi, Kolkata and Mumbai, the four metros of India. Also, 3G (third generation) mobile services are found being introduced in all the major cities across the nation. The country has auctioned three 3G spectrum slots to private bidders. However, the number of subscribers for broadband connections is increasing at a slow pace.

Over the last 3 years, two out of every three new telephone connections were wireless. Consequently, wireless now accounts for 54.6% of the total telephone subscriber base, as compared to only 40% in 2003. Wireless subscriber growth is expected to grow at 2.5 million new subscribers every month in 2007. The wireless subscriber base skyrocketed from 33.69 million in 2004 to 62.57 million in FY 2004 -2005. The wireless technologies currently in use ' Indian Telecom Industry ' are Global System for Mobile Communications (GSM) and Code Division Multiple Access (CDMA). There are primarily 9 GSM and 5 CDMA operators providing mobile services in 19 telecommunication circles and 4 metro cities, covering more than 2000 towns across the country. And the numbers are still growing for 'Indian Telecom Industry '. ' Telecom Industry in India ' is regulated by 'Telecom Regulatory Authority of India' (TRAI). It has earned good reputation for transparency and competence. Three types of players exists in ' Telecom Industry India ' community -

• State owned companies like - BSNL and MTNL.
• Private Indian owned companies like - Reliance Infocomm and Tata Teleservices.
• Foreign invested companies like - Hutchison-Essar, Bharti Tele-Ventures, Escotel, Idea Cellular, BPL Mobile, Spice Communications etc.

The ' Indian Telecom Industry ' services is not confined to basic telephone but it also extends to internet, broadband (both wireless and fixed), cable TV, SMS, IPTV, soft switches etc. The bottlenecks for ' Indian Telecom Industry ' are:

• Slow reform process.
• Low penetration. Service providers bears huge initial cost to make inroads and achieving break-even is difficult.
• Huge initial investments.
• Limited spectrum availability and interconnection charges between the private and state operators.

The Government Broadband Policy 2004, aims at 9 million broadband connections and 18 million internet connections in 2007. ' Indian Telecom Industry ' is currently expected to contribute nearly 1% to India's GDP which is heartening and estimated to grow further and brighten the ' Scenario of Indian Telecom Industry '.