02-01-2013, 09:31 AM
Telecom Industry in India
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INDUSTRYOVERVIEW
Background
The Indian Telecommunications network is the third largest in the world and the second
largest among the emerging economies of Asia. Today, it is the fastest growing market in the
world. The telecommunication sector continued to register significant success during the
year and has emerged as one of the key sectors responsible for India’s resurgent India’s
economic growth.
Growth
This rapid growth has been possible due to various proactive and positive decisions of the
Government and contribution of both by the public and the private sector. The rapid strides
in the telecom sector have been facilitated by liberal policies of the Government that provide
easy market access for telecom equipment and a fair regulatory framework for offering
telecom services to the Indian consumers at affordable prices.
Wireline Vs Wireless
It has also undergone a substantial change in terms of mobile versus fixed phones and public
versus private participation. The preference for use of wireless phones has also been
predominant in the sector.
Participation of the private entities in the telecom sector is rapidly increasing rate there by
presenting the enormous growth opportunities. There is a clear distinction between the
Global Satellite Mobile Communication (GSM) and Code Division Multiple Access (CDMA)
technologies used and the graph below shows the divide between the two.
Manufacture of Telecom Equipment
Rising demand for a wide range of telecom equipment, particularly in the area of mobile
telecommunication, has provided excellent opportunities to domestic and foreign investors
in the manufacturing sector. The last two years saw many renowned telecom companies
setting up their manufacturing base in India. Ericsson has set up GSM Radio Base Station
Manufacturing facility in Jaipur. Elcoteq has set up handset manufacturing facilities in
Bangalore. Nokia set up its manufacturing plant in Chennai. LG Electronics set up plant of
manufacturing GSM mobile phones near Pune.
The Government has already set up Telecom Equipment and Services Export Promotion
Forum and Telecom Testing and Security Certification Centre (TETC). A large number of
companies like Alcatel, Cisco have also shown interest in setting up their R&D centers in
India. With above initiatives India is expected to be a manufacturing hub for the telecom
equipment.
POLICY AND INITIATIVES
Regulatory Framework
The Telecom Regulatory Authority of India (TRAI) was set up in March 1997 as a regulator
for Telecom sector. The TRAI’s functions are recommendatory, regulatory and tariff setting
in telecom sector.
Telecom Disputes Settlement and Appellate Tribunal (TDSAT) came into existence in May,
2000. TDSAT has been empowered to adjudicate any dispute –
• between a licensor and a licensee
• between two or more service providers
• between a service provider and a group of consumers
• hear and dispose of appeal against any direction, decision or order of TRAI
Tariffs for telecommunication services have evolved from a regime where tariffs were
determined by Telecom Regulatory Authority of India to a regime where tariffs are largely
under forbearance. TRAI intervenes by regulating the tariffs for only those services, the
markets of which are not competitive.
Universal Service Obligation Fund (USOF) exclusively for meeting the Universal Service
Obligation was established in April, 2002. The Universal Service Levy is presently 5 per cent
of the Adjusted Gross Revenue (AGR) of all telecom service providers except the pure value
added service providers like Internet, Voice Mail, E-Mail service providers etc. Indian
Telegraph Act has been amended in October’2006 to provide support for all telegraph
services including mobile and broadband to bridge the digital divide.
With the introduction of the Unified Access Licensing Regime, operators can offer telecom
access services to consumers in a technology neutral manner, subject to fulfilling certain
conditions. Introduction of this regime has also broken the legal/regulatory impasse between
the cellular and basic service providers. Issuance of Intra-Circle Merger and Acquisition
Guidelines provide investors an opportunity to take stakes in existing telecom operations.
Opportunities
The telecom sector has been one of the fastest growing sectors in the Indian economy in the
past 4 years. This has been witnessed due to strong competition that has brought down
tariffs as well as simplification of policy environment that has promoted healthy competition
among various players..
The mobile sector alone has been growing rapidly and has emerged as the fastest growing
market in the whole worlds. Currently of a size nearing 70 million (GSM and CDMA), this
sector is expected to reach a size of nearly 200 million subscribers by financial year 2008.
The government has eased the rules regarding inter circle and intra circle mergers. This has
led to a slew of mergers and acquisitions in the recent past. Also as the sector is moving
closer to maturity, further consolidation is a reality and this will lead to the survival of more
profitable players in this segment
In order to further promote the use of Internet in the country the government is taking
proactive steps to develop this sector with the help of the various players in this segment.
For this purpose, the use of broadband technology is being mooted and this will go a long
way in improving the productivity of the Indian economy as well as turn out to be the next
big opportunity for telecom companies after the mobile communications segment.