Telecommunications Industry in India– Business Opportunities and Advantages

India's telecom industry, the world's second-largest, reached a subscriber base of 1.17 billion by September 2022, with a tele-density of 84.86%. Factors such as affordable tariffs, 3G/4G expansion, and government initiatives drove this growth. In 2022, the government auctioned 5G spectrum, generating $18.77 billion. Internet users rose to 839.18 million by January 2023, with rural areas constituting 44.25%. India aims for 100% village broadband, 5G development in engineering institutions, and significant fiberization. The industry's growth led to India becoming a global digital player, ranking second in mobile broadband traffic and international internet bandwidth, driving economic growth and employment opportunities.

Market Overview

The Indian telecom sector experienced a revenue decline from USD 40.29 billion in FY16 to USD 37.36 billion in FY21 but showed improvement with INR 88,166 crore (USD 10.68 billion) in Q3 FY22. Despite challenges, the sector saw 4.16% revenue growth in FY21 due to tariff stabilization and minimum recharge plans. In August 2021, the Department of Telecommunications (DoT) announced plans to reduce the revenue share license fee to 6% of adjusted gross revenue, offering relief to operators. The telecom landscape witnessed significant growth, with a 60% increase in towers and 40% more Base Transceiver Stations (BTS) by February 2023, driven by a growing subscriber base. Telecom companies have been segregating tower assets into separate entities to reduce costs, as seen with Reliance Communications. This model inspired global telecom operators, with Bharti Airtel restructuring in April 2021 to focus on telecom and digital assets. Collaborations within the industry, like Dixon Technologies partnering with Bharti Enterprises, showcase the sector's adaptability and commitment to enhancing connectivity and digital services for consumers.

Why Invest in India?

• Attractive Opportunities: India launched 5G services, part of the Digital India initiative, with significant exports in mobile phones and electronic goods. The country is a global leader in mobile broadband and internet bandwidth, requiring 22 million skilled workers in 5G technologies by 2025. India aims for 350 million 5G subscriptions by 2026, showcasing rapid digital progress.
• Robust Demand: India's rural tele-density reached 57.71%, and wireless internet data usage surged from 4,200 to 32,397 petabytes from 2018 to 2021. Average monthly wireless data usage per subscriber jumped to 17.11 GB in December 2022, indicating substantial growth and increasing connectivity.
• Increasing Investments: The Department of Telecommunications received INR 97,579.05 crore in the 2023-24 budget. Notable allocations include INR 400 crore for Research and Development and INR 5,000 crore for the Bharatnet project. India attracted USD 569.49 million in investments for Large Scale Electronics Manufacturing, ranking third globally in investment in telecommunication services and domestic market size.
• Government Support: The government sanctioned a INR 12,195 crore PLI scheme for telecom and networking products, attracting investments from 42 companies. The FDI limit in the telecom sector increased to 100%, encouraging more investments. Additionally, the DoT established a 6G innovation group, showcasing India's proactive stance in emerging technologies.

Growth Drivers

India's telecom sector has seen substantial reforms, including a INR 12,195 Crore PLI Scheme and INR 4,000 Crore for Design Led Manufacturing. Structural changes have boosted liquidity. The BharatNet Project has connected 1,77,550 Gram Panchayats, with plans to cover all villages. India ranks high in global data consumption, averaging 5 hours daily on smartphones. The PM-WANI initiative facilitates public Wi-Fi expansion through Public Data Offices, promoting widespread broadband internet access.

Recent Industry Trends

India's telecom sector has undergone transformative changes, marked by digital initiatives like Aadhar Pay and UPI, making mobile payments accessible. Invest India has spurred diverse investments, focusing on non-traditional services, 4G/5G ecosystems, and innovations in sectors like Fintech and Healthtech. Government-driven initiatives like BharatNet and Universal Service Obligation Fund have significantly improved rural connectivity. Emerging technologies, including IoT integration in smart cities and satellite-based IoT networks, are reshaping connectivity. Massive investments in optical fiber networks, especially in rural areas, have enhanced digital accessibility. Consumer spending on telecom services surged despite pandemic disruptions, reflecting the sector's resilience. Strategic partnerships and collaborations with global standards organizations like ATSC are enhancing the digital experience, making India's telecom landscape dynamic and innovative.

Government Policies and Support

India's telecom sector has experienced a series of strategic initiatives and policy changes:

• Quality Standards & Call Drops: Regulatory frameworks were modernized to ensure high-quality wireline and wireless services. TRAI's policies significantly reduced call drops, enhancing user experience.
• FDI Boost: Foreign Direct Investment (FDI) norms were liberalized, allowing up to 100% FDI, attracting substantial foreign investments in the telecom sector.
• Tariff Flexibility: Telecom companies gained freedom in offering transparent promotional deals, fostering a competitive market environment.
• Financial Support: Collaborations with banks addressed financial challenges faced by operators, ensuring sector stability.
• International Collaborations: Partnerships with Japan and Inmarsat expanded global telecom footprints, encouraging technological advancements and knowledge exchange.
• Infrastructure Expansion: Projects like BharatNet and increased spectrum limits facilitated widespread internet access, especially in rural areas, promoting digital inclusion.
• Innovation and R&D: Initiatives like the Quantum Communication Lab and the Phased Manufacturing Programme promoted indigenous technology growth, aligning with the vision of 'Aatmanirbhar Bharat'.

National Digital Communications Policy 2018

The Indian government has approved the National Digital Communications Policy (NDCP) 2018, replacing the existing National Telecom Policy-2012, to adapt to modern technological advancements like 5G, IoT, and M2M in the telecom sector. M2M technology allows networked devices to exchange information without human intervention, while IoT creates a seamlessly connected network system of embedded objects/devices enabling communication using standard protocols. India, with strong capabilities in telecommunications and software, aims to leverage digital technologies to boost productivity, reach underserved markets, foster economic growth, create jobs, and ensure access to advanced services. The policy focuses on universal coverage over revenue maximization, considering India's diverse demographic profiles. The proliferation of mobile phones, internet, social media, digital payments, and data consumption signifies the widespread impact of the data economy. Increasing broadband penetration can significantly boost GDP, making a consistent policy framework vital. To expand connectivity, India plans to explore 5G and satellite communications opportunities, aligning with the fourth industrial revolution. The policy emphasizes fair competition, attracting sustainable investments, removing regulatory barriers, and strengthening the sector's institutional mechanisms and legislative framework.

Production Linked Incentive Scheme

The Indian government has introduced the Production Linked Incentive (PLI) Scheme for Telecom and Networking Products, aiming to boost domestic manufacturing capacity in the telecommunications sector. With a budgetary allocation of INR 12,195 crores over five years, the scheme covers a wide range of products, from core transmission equipment to advanced 4G/5G networks. While companies might face challenges in meeting performance criteria and market competitiveness, the scheme offers tailored financial incentives to stimulate production and attract investments. This initiative is expected to generate incremental production valued at INR 2.4 lakh crores, promote exports worth INR 2 lakh crores, and create numerous jobs, aligning with the Make in India vision and enhancing India's manufacturing and technological capabilities globally.

Key Opportunities

India's telecom sector is experiencing significant growth and innovation. With the world's second-largest smartphone market, the mobile subscriber base is expected to reach 1,420 million by 2024, and 4G users are projected to reach 820 million by 2022. Internet penetration is rising, supported by government initiatives and policies, reaching 846.57 million broadband subscribers by March 2023. Rural tele-density stands at 57.46%, indicating untapped market potential. The Mobile Value-Added Services (MVAS) industry is growing at a CAGR of 18.3%, reaching USD 23.8 billion by 2020. Cashless transactions are booming, with services like Paytm and Unified Payments Interface (UPI) recording significant volumes. India's telecom advertising market is set to grow at an annual rate of 11% from 2020 to 2023. Additionally, TRAI's efforts to enhance telecom infrastructure, including tax incentives and essential facility recognition, are driving sector development.

Regulatory Framework

• TRAI Authority: Telecom Regulatory Authority of India (TRAI) governs the industry, ensuring fair competition, consumer protection, and industry growth.
• Licensing and Spectrum: TRAI recommends license terms and manages spectrum allocation, including conducting spectrum auctions.
• Tariff Regulation: TRAI regulates telecom tariffs to prevent anti-competitive pricing and ensures transparency in tariff orders.
• Quality of Service (QoS): TRAI sets and enforces service standards, monitoring parameters like call drop rates and network availability, taking action against non-compliance.
• Interconnection and Interoperability: TRAI regulates interconnection agreements, promoting seamless connectivity between networks and interoperability of services.
• Consumer Protection: TRAI addresses consumer complaints, issues regulations safeguarding consumer rights, and ensures transparent billing and service provision.
• Competition and Market Entry: TRAI promotes competition, reviews mergers, and prevents anti-competitive practices, ensuring a level playing field.
• Broadband and Internet Services: TRAI formulates policies on broadband, net neutrality, data privacy, and OTT services, encouraging broadband expansion.
• Regulatory Framework for New Technologies: TRAI adapts regulations for emerging technologies like 5G, IoT, and M2M communication, recommending policies and standards.
• Universal Service Obligation Fund (USOF): USOF supports extending telecom services to rural areas, ensuring universal access to telecom services.
• Dispute Resolution: TRAI resolves disputes between operators and stakeholders within the telecom industry.
• Research and Policy Recommendations: TRAI conducts research, analysis, and consultations to develop policy recommendations, keeping up with technological advancements and global best practices.

Conclusion

The telecom industry in India has undergone a remarkable transformation, becoming a cornerstone of the nation's digital revolution. Rapid advancements, including the widespread adoption of 4G and the imminent arrival of 5G, signify India's commitment to global technological relevance. Government initiatives such as Digital India and BharatNet have bridged the digital divide, ensuring digital benefits reach every corner. Local manufacturing drives, like Make in India and PLI schemes, have boosted the economy and created jobs. India's thriving startup ecosystem and increased R&D investments promise innovation. The industry's customer-centric approach is evident in the growth of mobile banking and digital payments. Challenges like infrastructure investment, cybersecurity, and affordability persist. Collaboration between government, private sector, and regulatory bodies is crucial to overcome challenges and fully realize the industry's potential. Despite obstacles, the industry's resilience, adaptability, and focus on digital empowerment position it as a key player in India's digital future, fostering economic growth, social inclusion, and technological advancement.


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