Road Ahead for Indian Telecom
Road Ahead for Indian Telecom
Road Ahead for Indian Telecom
Road Ahead for Indian Telecom
During the last 15 years, the Indian telecom industry has made the mobile phone a mass market device at affordable rates. We are in the midst of a revolution that is changing the way we communicate, work and live. The penetration has reached 60% and there are 680 million subscribers and the industry is adding 15 million subscribers every month. But the industry is going through a very difficult phase in terms of financial health which is reflecting in enterprise valuation. The unprecedented competition triggered by the entry of new players, resulted in huge fall in tariff and revenue. The industry has borrowed heavily for network roll out and for new acquisitions which in turn adversely affected the profitability of the telecom sector. In order to overcome the profit margin pressure, the industry is struggling to invent new ways to increase the revenue and reduce the cost.
1. Rural Penetration
The telecom industry has covered about 90% of the population and 80% of the geography. More than 50% of the new additions are coming from the rural areas. However the concern is the low ARPU customers from rural areas and the additional cost incurred for network roll out in rural areas. The industry seeks support from the Government for sustaining operations in rural areas.
2. Price wars
Every industry has seen a price war and it is a global phenomenon. But the telecom tariffs in India have fallen to a ridiculous level which is not sustainable any more. The 3G launch and MNP are the two major events and the industry's reaction to these events will decide the future course of Indian telecom price war. It is time now for TRAI to regulate the telecom tariff in the long term interest of the industry. In 2004 it moved to forbearance regime in which there is no prior approval required before launching a new tariff plan. This policy needs review.
3. Shift from Voice to Data
Today voice contributes to 80% of the revenue and data contributes to 20%. Competition and the price wars reduced the share of voice during the last few quarters. To maintain the revenue growth the only option left to the telecom companies is to focus more on the data products. The emerging popularity of the new smart phones and the launch of 3G products will provide a new opportunity to drive growth and revenue in the telecom industry. Data services are already popular in metros and big cities. It will reach smaller towns through its popular products like video streaming and access to social networks.
4. Mobile Commerce
The banking and telecom sectors will come closer to reach the large number of rural population who are yet to avail the banking services. Opening of new branches and ATM are an expensive option and the cost effective and faster way to reach the masses is to introduce mobile banking and mobile based money transfer.
5. Spectrum Management
The recent auction of 3G and BWA has changed the spectrum allocation policy of the Government of India. The industry has moved towards a market based approach for pricing of spectrum which ensured that the government realized true value of this precious resource. There will be a fair pricing of 2G and the operators are expected to utilize the spectrum more effectively to keep their cost low.
6. 3G and 4G
Even though 3G services of MTNL and BSNL are already operational, the launch of 3G by private operators will make a major difference. Tata Docomo is the first private operator to launch the 3G services in its 10 circles in India during November 2010. Availability of 3G enabled handsets, improved customer services and 3G applications are the pre-requisites for a successful launch of 3G services. The 3G services offer huge potential for the VAS industry. In some countries like US, the share of VAS increased to 25% of the revenue after 3G launch. In India the share of VAS is around 7% now. TRAI has already begun consultations with the various stakeholders on 4G and the industry is expecting the 4G roll out by 2013.
7. MNP
The subscribers are expected to move towards the operators who provide better network and customer services. However Indian telecom market is predominantly a prepaid market where the churn is already very high. MNP will not create any major impact in this prepaid segment. However there will be tough competition to retain the existing postpaid subscribers by the old operators and the new operators may take up an aggressive stand to grab these subscribers. Most of the operators lag behind in providing quality customer services in India. This is expected to change in future.
8. Broadband evolution
In India while mobile penetration is 60%, the internet penetration is less than 5%. Even though there is an improvement in the quality of broadband services during the last decade, Broadband growth continues to lag behind due to high cost of network roll out and regulatory hurdles. However the spectrum allocation for Broadband Wireless Access is expected to take up the broadband penetration to new heights in India.
9. Mergers and Acquisitions
There are 14 telecom operators in the country and majority of the new entrants are bleeding after the recent price wars initiated by them. The decline in revenue growth and resultant pressure on the profit margins has forced many of the operators to revisit their future plans. While the strong players with large free cash flow will survive, many other operators will sell their stakes or merge with stronger players. The new players with international partners may also stay. The number of players is expected to come down to 7 or 8 operators in the next 3 years. The consolidation will take place not only among the service providers but also among the tower companies. The tower companies will play a more significant role after the introduction of active sharing of sites. This may also lead to Mobile virtual network operators entering the market, after the Government comes out with policy guidelines.
10. Regulatory Reforms
The open licensing policy of the Government of India resulted in an unprecedented competition. It is a major setback for the government as all these new entrants are finding themselves in a financial mess and many of them planning to quit the industry by surrendering licence. The government should find out a way for these new entrants to merge with other stronger players in the long term interest of the industry. It needs to review its policies on lock in period and M&A guidelines to facilitate faster consolidation.
The other policies which require review are the taxes and levies and the utilization of USO fund. The industry pays approximately 25% of its revenue to the government towards various taxes and duties including revenue share and service tax. The industry is demanding a uniform licence fee.There should be better utilization of USO Fund which is lying unutilized due to rigid rules. This fund should be used for improving the broadband penetration and incentivizing rural penetration.
11. Convergence
The convergence of voice, video and data is called Triple Play. 3G technology will drive the next round of sustainable growth through convergence of entertainment, infotainment and voice communication in one single device. The innovative value added services will bring all services under just one convergent device.
12. Mobile Cloud Computing
Cloud Computing has made an impact on mobile industry also. The increased network connectivity and popularity of the smart phones and tablet devices like iPad have considerably increased the usage of applications on mobile devices. In the next few years Cloud computing is going to bring major shift in the mobile application technology. In Mobile Cloud Computing the data storage and data processing occurs outside the mobile device and results are displayed through screen or speakers. GPRS, Gmail, and Google Maps are some of the mobile cloud computing applications which are already in use.
The major challenge for mobile cloud computing is the limitations inherent to the mobile devices like processing power, memory, network bandwidth and storage capacity as compared to a fixed device like PC. As there is a huge scope for mobile cloud computing, large investments are being made in this technology. It is projected that in the next 5 years mobile cloud computing will become a significant contributor to the revenue pie of the telecom industry.
Conclusion
The telecom industry makes a significant contribution to the country's GDP growth.It has a direct impact on the socio economic growth in India. Telecom is Government's poster boy of economic reforms. The industry has always surpassed the targets set the Government and policy makers. The last 15 years history speaks volumes about the dynamism and capability of the industry leaders. No doubt the Government's policies and support played a major role in this success story. The industy needs more of it now.
2010 California's Cool Adventurer Guidelines Around Vacation Hotel Features Accomodation And Places Southern California's Incredible Trip Secrets In Relation To Vacation Luxurious Hotels Must-do's And California's 2010 Voyager Tips In Relation To Vacation Classic Hotels Must-see's And Parks To Have F The Novice's All-inclusive Recommendations Pro Vacationers Fancying To Go On The Caribbean Voyage California City's Outstanding Trip Secrets To Get The Best Of Vacation Luxury Hotels, Must-do's And Structural Engineering Design Services Project from affordable Structural Engineers Dreaming Of That Chicago Vacation? Follow These Instructions On Ways To Grab Grab Chicago Getaway Bu Know More About a GPS Car Tracker California Smog Check Information – A Smart Way to Preserve Both Your Car and Nature Mexico Car Rental- Offers You Flexibility And Freedom To Travel Planning That Chicago Excursion? Follow This Information On How To Land Land Windy City Vacation Dea California City's 2010 Adventurer Information About Vacation Luxurious Hotels Dining And Sightseeing Search Engine Marketing Techniques for Novice