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Telecom Sector Analysis Report

 

[Key Points | Financial Year '15 | Prospects | Sector Do's and Dont's]

  • India's teledensity has improved from under 4% in March 2001 to around 79.38% by the end of March 2015. The mobile subscriber base (GSM and CDMA combined) has grown from under 2 m at the end of FY00 to touch almost 996.5 m at the end of March 2015. Tariff reduction and decline in handset costs has helped the segment to gain in scale. The cellular segment is playing an important role in the industry by making itself available in the rural areas where the teledensity is far lower (48.37%) than that in urban India (148.61%).

  • The fixed line segment continues to decline in terms of the subscriber base. It has declined to 26.59 m subscribers in March 2015 from 28.49 m in March 2014.

  • As far as wireless broadband connections (>= 512 kbps) are concerned, India's internet users have risen considerably from 50 million in 2007 to 100 million in 2010 and more than 300 million in 2014, with close to 60% users accessing internet via mobiles (as per Internet & Mobile Association of India. This makes India the world's second-largest internet market after China. Consumption of data services continues to grow at an exponential pace.


     Key Points


    Supply

    Intense competition has resulted in prompt service to the subscribers.

    Demand

    Given the low tariff environment and relatively low rural and semi urban penetration levels, demand will continue to remain higher in the foreseeable future across all the segments.

    Barriers to entry

    Complex regulations, high capital investments, well-established players who have a nationwide network, 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 is expected to increase when Reliance Jio Infocomm (RJio) enters the industry in 2016. Reduced tariffs have hurt all incumbent operators.

    TOP

     Financial Year '15


  • After the fall in mobile subscriber base in FY13 due to the cancellation of spectrum licenses of some of the operators in February 2012, the sector continues to bounce back in terms of subscriber additions. The industry added about 63.5 m wireless subscribers in FY15. At the end of March 2015, the country's total telecom subscriber base (fixed plus mobile) stood at about 996.5 m. The tele-density level stood at about 79.38% by the end of the fiscal.

    Telecom Market In FY15
    Indian wireless market in FY15

  • In March, 2015, the Department of Telecommunications (DoT) concluded the auction process for 800 MHz, 900 MHz, 1,800 MHz, and 2,100 MHz spectrum. Of the 470.75 MHz that was put up for auction in 22 circles, 418.05 MHz was sold for a consideration of Rs 1,098,749 million. The licences are valid for a period of 20 years from the date of allotment.

  • In February 2015, the sector regulator, Telecom Regulatory Authority of India (TRAI) came out with final regulation on termination rates for the industry effective from March 01, 2015. Mobile termination charge has been reduced from Rs 0.20 per min to Rs 0.14 per min. Fixed line termination rates have been reduced from Rs 0.20 per min to zero. Termination charge on international incoming calls has been increased from Rs 0.40 per min to Rs 0.53 per min. The cap on carriage charge has been reduced from Rs 0.65 per min to Rs 0.35 per min.
    TOP

     Prospects


  • The fixed line business continues to remain muted despite the low penetration levels in the country. The increasing demand for data based services such as the Internet is the major catalyst in the growth of the sector. The scale of the mobile opportunity in India is therefore immense.

  • Increasing choice and one of the lowest tariffs in the world have made the cellular services in India attractive for the average consumer. The teledensity in urban areas is nearly 150%. Therefore, the main driver for future growth would be the rural areas where wireless tele-density is around 48.37%.

  • The government successfully concluded the auction process for 800 MHz, 900 MHz, 1,800 MHz, and 2,100 MHz spectrum. Out of the 470.75 MHz that was put up for auction in 22 circles, 418.05 MHz was sold for a consideration of Rs 1,098,749 million. Operator will use the spectrum to roll-out high speed 3G and 4G services.

  • The operator's competitive position improved during FY15. Due to reducing competition, tariffs remained stable. However, operators did not see better realizations. In fact, realisations fell due to the aggressive push for subscriber additions. While operators succeeded in achieving good growth in subscriber additions, they will be tested with the imminent entry of RJio.

  • Balance sheets of operators came under additional pressure due to the debt taken for the spectrum auctions. Additionally, capex requirements have increased significantly in recent times as operators have been improving capacity and efficiency of their networks to accommodate the exponential growth in data consumption.
    TOP
    Related Links for Telecom Sector: Quarterly Results  NEW | Sector Quote | Over The Years

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