The Indian telecommunications industry is one of the fastest growing in the world and India is projected to become the second largest telecom market globally by 2010.
India added 113.26 million new customers in 2008, the largest globally. The country’s cellular base witnessed close to 50 per cent growth in 2008, with an average 9.5 million customers added every month.
According to the Telecom Regulatory Authority of India (TRAI), approximately 14.25 million telephone connections, including wireline and wireless, were added during July 2009, taking the total number of telecom subscriber base at the end of July 2009 to 479.07 million from 464.82 million a month before.
According to Business Monitor International, India is currently adding 8-10 million mobile subscribers every month. It is estimated that by mid 2012, around half the country’s population will own a mobile phone. This would translate into 612 million mobile subscribers, accounting for a tele-density of around 51 per cent by 2012.
It is projected that the industry will generate revenues worth US$ 43 billion in 2009-10.
Moreover, according to a study conducted by Nokia, the communications sector is expected to emerge as the single largest component of the country’s GDP with 15.4 per cent by 2014.
The Indian equipment market is estimated at US$ 24 billion in FY09. Finnish giant Nokia is the market leader, with over US$ 3.4 billion revenues last fiscal, followed by Ericsson at US$ 2.11 billion.
Growth:
According to a Frost & Sullivan industry analyst, by 2012, fixed line revenues are expected to touch US$ 12.2 billion while mobile revenues will reach US$ 39.8 billion in India.
India has become the second country in the world to have more than 100 million CDMA-based (code division multiple access) mobile phone subscribers after the US, which has 157 million CDMA users.
Telecom operators on the popular GSM-based platform added 9.3 million subscribers in August 2009. India continues to be the world’s fastest-growing mobile market and the total number of GSM users in the country has risen to 335.4 million as of August-end as per data released by the Cellular Operators’ Association of India (COAI).
Value-Added Services Market:
Currently, mobile value-added services (MVAS) in India accounts for 10 per cent of the operator’s revenue, which is expected to reach 18 per cent by 2010. According to a study by Stanford University and consulting firm BDA, the Indian MVAS is poised to touch US$ 2.74 billion by 2010.
Major Investments:
The booming domestic telecom market has been attracting huge amounts of investment which is likely to accelerate with the entry of new players and launch of new services.
* Norway-based telecom operator Telenor has bought a 60 per cent stake in Unitech Wireless for US$ 1.23 billion.
* BSNL, India’s leading telecom company in revenue terms, will put in about US$ 1.16 billion in its WiMax project.
* Vodafone Essar will invest US$ 6 billion over the next three years in a bid to increase its mobile subscriber base from 40 million at present to over 100 million.
* Telecom operator Aircel, which launched GSM mobile services in Bangalore in February 2009, plans to invest US$ 220.58 million over the next year to set up base stations across the state.
* The American Tower Corporation (ATC) has made an offer to acquire Aircel’s tower business, which has about 12,000 towers.
* Reliance Communications has signed a telecom infrastructure sharing agreement with S Tel, a new telecom operator. The deal, which covers telecom towers, transmission and fibre backbone, will be executed by RCom through its tower subsidiary, Reliance Infratel.
* Bharti Airtel will invest US$ 126.5 million to ramp up its networks in the Assam and Northeast circles in 2009-10.
* Etisalat DB Telecom India (erstwhile Swan Telecom) and Reliance Communications have entered into a long-term passive infrastructure sharing agreement worth over US$ 2.1 billion, spread over a period of ten years.
* Loop Mobile, formerly known as BPL Mobile plans to invest around US$ 75 million in its Mumbai operations.
Manufacturing:
India’s telecom equipment manufacturing sector is set to become one of the largest globally by 2010.
Mobile phone production is estimated to grow at a CAGR of 28.3 per cent from 2006 to 2011, totalling 107 million handsets by 2010. Revenues are estimated to grow at a CAGR of 26.6 per cent from 2006 to 2011, touching US$ 13.6 billion.
Rural Telephony:
Rural India had 76.65 million fixed and Wireless in Local Loop (WLL) connections and 551,064 Village Public Telephones (VPT) as on September 2008. Therefore, 92 per cent of the villages in India have been covered by the VPTs. Universal Service Obligation (USO) subsidy support scheme is also being used for sharing wireless infrastructure in rural areas with around 18,000 towers by 2010.
Policy Initiatives:
The government has taken many proactive initiatives to facilitate the rapid growth of the Indian telecom industry.
* 100 per cent foreign direct investment (FDI) is permitted through the automatic route in telecom equipment manufacturing.
* FDI ceiling in telecom services has been raised to 74 per cent.
* Introduction of a unified access licensing regime for telecom services on a pan-India basis.
* Introduction of mobile number portability in a phased manner, starting in the fourth quarter of 2008.
* The government is implementing a program of connecting 66,822 uncovered villages under the Bharat Nirman programme. The government will invest US$ 2 billion to set up 112,000 community service centres in rural India to provide broadband connectivity in 2008-09.
* The Department of Telecommunications (DoT) has stated that foreign telecom companies can bid for 3G spectrum without partnering with Indian companies. Only after winning a bid, would they need to apply for unified access service licence (UASL) and partner with an Indian company in accordance with the FDI regulations.
The Road Ahead:
The target for the 11th Plan period (2007-12) is 600 million phone connections with an investment of US$ 73 billion. Apart from the basic telephone service, there is an enormous potential for various value-added services. In fact, the real potential for telecom service growth is still lying untapped.
According to the CII Ernst & Young report titled ‘India 2012: Telecom growth continues’, revenue from India’s telecom services industry is projected to reach US$ 54 billion in 2012, as against US$ 31 billion in 2008.