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Retailing Sector Analysis Report 

[Key Points | Financial Year '19 | Prospects | Sector Do's and dont's]

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  • India is currently the world's second-largest telecommunications market with a subscriber base of 1.20 billion and has registered strong growth in the past decade and half.
  • 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 Indian mobile economy is growing rapidly and will contribute substantially to India's Gross Domestic Product (GDP), according to report prepared by GSM Association (GSMA) in collaboration with the Boston Consulting Group (BCG). As of January 2019, India has witnessed a 165% growth in app downloads in the past two years.
  • Strong policy support from the government has been crucial to the sector's development. Foreign Direct Investment (FDI) cap in the telecom sector has been increased to 100% from 74%.
  • The role of telecom companies is no longer restricted to just providing the “pipe” and the right price plan. It is now about creating an ecosystem of digital services (music, content, payments and much more) and leveraging data, network, and distribution assets to deliver these services.
  • Global industry evolution gained rapid traction during the year as 4G networks expanded at the great pace and the emerging markets moved forward towards the high speed mobile broadband for all.

How to Research the Retailing Sector (Key Points)

  • Supply
  • Various government initiatives and lower tariff programme expected to increase the supply of services in Indian telecom industry.
  • Demand
  • Availability of affordable smartphones and lower rates of data are expected to drive demand growth in the Indian telecom industry.
  • Barriers to entry
  • Complex regulations, high capital investments, well-established players who have a nationwide network, expensive license fee, continuously evolving technology and lowest tariffs in the world.
  • Bargaining power of suppliers
  • Improved competitive scenario, mobile number portability (MNP), and commoditisation of telecom services has led to reduced bargaining power for services providers.
  • Bargaining power of customers
  • A wide variety of choices available to customers both in fixed as well as mobile telephony has resulted in increased bargaining power for the customers.
  • Competition
  • Competition will increase as Reliance Jio Infocomm (RJio) has entered the industry in 2016. Reduced tariffs have hurt all incumbent operators. Also, customers' low switching cost and price sensitivity are increasing competition among players.
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    Financial Year '19

    • The wireless market segment comprises of 98.2% of the total subscriber base, as of June 2019, compared to 95.9% in FY11. As on July 2019, rural subscribers form 43% of total telephone subscribers and in April 2019, 43.3%, compared to 33.4% in FY11.
    • Gross revenue of the telecom sector stood at US$ 34 billion in 2018-19.
    • FDI inflows into the telecom sector during April 2000 – June 2019 totaled to US$ 37.1 billion. As of January 2019, expenditure on telecom infrastructure and services by Government of India grew six-fold to US$ 8.3 billion between 2014-19.
    • India is also the second largest country in terms of internet subscribers. As of 2019, India holds the world’s highest data usage per smartphone at an average of 9.8 GB per month.
    • During the first quarter of 2018, India became the world’s fastest-growing market for mobile applications. The country remained as the world’s fastest growing market for Google Play downloads in the second and third quarter of 2018. Bharti Airtel is planning to launch 6,000 new sites and 2,000 km of optical fiber in Gujarat in 2018-19.
    • The number of internet subscribers in the country increased at a CAGR of 41.6% during FY06-FY18 to reach 665.3 million in 2018-19.
    • 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).

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    Prospects

    • Revenue from telecom industry is expected to grow to US$ 26.4 billion by 2020. The number of internet subscribers in the country is expected to be double by 2021to 829 million and overall IP traffic is expected to grow 4-fold at a CAGR of 30% by 2021.
    • The Indian Mobile Value-Added Services (MVAS) industry is expected to grow at a CAGR of 18.3% during the forecast period 2015–2020 and reach US$ 23.8 billion by 2020. App downloads in India are expected to increase to 37.2 billion in 2022.
    • To propel the sector on a growth path, the Government of India has launched the National Digital Communications Policy 2018, which envisages attracting investments worth US$ 100 billion in the telecommunication sector by 2022.
    • The Indian Government is planning to develop 100 smart city projects, where IoT would play a vital role in development of those cities.
    • The internet user base in India has crossed 500 million mark and is likely to reach 627 million by end 2019. Total wireless data usage in India grew 119% year-on-year to 1,58,50,560 terabytes between January-March 2019.
    • 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.

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