TELECOM SECTOR ANALYSIS REPORT

 Tele-density (defined as the number of telephone connections for every 100

individuals) in India, increased from 17.9% in FY07 to 92.9% in FY18 (till
October 2017). India's telephone subscriber base has expanded at a CAGR
of 19.2%, reaching 1,194.6 million during FY07–17. Tariff reduction and
decline in handset costs has helped the segment to gain in scale. The cellular
segment is the dominant segment in the industry by making itself available
in the rural areas where the tele-density is far lower (56.9%) than that in
urban India (171.1%).
 The fixed line segment continues to decline in terms of the subscriber base.
It has declined to 23.53 m subscribers in October 2017 from 26.9 m
subscribers in March 2016.
 As far as wireless broadband connections are concerned, the Indian
wireless broadband industry subscriber base has increased to 243.1 m as of
February 2017, an addition of 110.4 m subscribers in one year; reflecting a
solid growth of 83.1%. This makes India the world's second-largest internet
market after China. Consumption of data services continues to grow at an
exponential pace.

HOW TO RESEARCH THE TELECOM SECTOR (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 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.

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 about 171.1%. Therefore, the main driver for
future growth would be the rural areas where wireless tele-density is around
56.9%.
 India's growth momentum is likely to accelerate in FY18, with continued
focus on infrastructure creation and manufacturing, and trickle-down
impact of past policy reforms. In addition, long-term economic growth will
be driven by major factors: low interest rates; benign inflation; favourable
demographics (half of the population is below the age of 35); and greater
focus on formalisation and digitisation of the economy.
MARKET COMPETITION IN THE INDIAN TELECOM INDUSTRY

The top 10 telecom companies in India comprise a large and ever-expanding

industry in the country with huge revenues generated annually and massive base
of customers. According to sources in the telecommunication industry in India,
there were more than 1,200 million telecom and mobile subscribers in India by
the beginning of 2018.

The telecom sector companies in India are thriving since the past decade since
the emergence of many upcoming telecom companies in India. The top 10
mobile networks in India collectively provide telecommunication service to
more than 1,000 million subscribers across the country.

The Indian telecom sector is becoming more competitive each year. With the
launch of new Reliance Jio, Vodafone-Idea partnership, Bharti Airtel buying
Telenor India, and Aircel filing for bankruptcy, the game is now only for big
players in the market. The merger between Vodafone India and Idea cellular
is most awaited deal in the Indian telecom sector, which may come into place
before 2019. The changing consumer base and increase the use of the internet
will also play an important role in the Indian market. Who will be the top 10
telecom companies in India in the coming years will be based on many of
these market scenarios.

Name Revenue( Ownership Market Customer

in $ Share( as Base(in
Billion) %) Million)
Airtel 15 Bharti Enterprises 24.85 303
(64%) and Sing Tel
(36%)
Vodafone-Idea 12.1 Vodafone Group plc 35.03 408
BSNL 5.1 Government of India 11 100
Reliance 3.5 (Reliance ADAG 0.06 12
Communication 90%) and SSTL (10%)
Jio 0.8 Reliance Industries 15.31 186
PRICING:

There are few things which increases the actual cost of data-
 There is no true 'Cost' of data. The factual data costs very little, as little
as approx to 0 (Zero - Nothing) but there are a lot of things going on
behind the scenes to get that data to you.
 Telecom operators spends a lot of money upfront to build out their
network. Once built, it basically cost them the same every year no
matter how much data flows through it. Then they try and get people to
use their network and charge them. This pays for the Investments,
Maintenance, Variable cost of Electricity & Advertisements.
 As time passes, when the costs of Infrastructures are recovered than
telecom operators can decide if they can lower their prices or they can
make more profits or put it into reserves to pay for future investment.
Actually it’s a very difficult business as the upfront costs are huge, and
you have to pay every few years to upgrade the
technology/routers/radios etc.
 Also, smaller operators (i.e. Uninor & Aircel) have to buy bandwidth
space on infrastructure and networks owned by other telecom
companies.
 Billions of dollars to build the entire wireless system, all the servers,
office space, etc. Then all the costs of running that stuff for almost 24
hours a day.
 It makes sense that you aren't paying for data directly, You're paying
for the things necessary to provide that data to you (electricity,
hardware, and maintenance).
 More bandwidth = More equipment, Man-hours, Towers, Fiber lines
etc. This is near to impossible if a tower is flooded with data.
 Despite all the facts I still think they are making a pretty huge profits.
 Telecom companies aren’t working hard to gain Profits. Each year they
decide what will be their Profit margin this year. That's all just pricing
schemes that they can play with.
 This system has been challenged by Jio. The big sharks of telecom
industry came & conspired together and begged to TRAI (Telecom
Regulatory Authority of India) to stop Jio’s free internet plans.
 The average cost of 1 GB data before Jio came was approx. 250Rs but
now it has been decreased dramatically to Rs 1/ GB.
Before Jio the telecom business was outlined around voice calling service. One
who provides cheaper or free voice calling plans was ruling the Indian market.
Today nobody even talks about calling charges because it’s almost free in every
company.