Context: Indian telecom sector present challenges
- The telecommunications industry has impact on every aspect of our lives, from the simple reality of enabling telephonic communication between people in different locations to enabling supply-chains to work seamlessly across continents to create products and fulfill demands.
- Telecommunication services are now recognized as a key to the rapid growth and modernization of the economy and an important tool for socioeconomic development for a nation.
Present scenario of Indian telecom sector:
- Growth rate: India is currently considered the world’s second-largest telecom market. It has registered a strong compound annual growth rate (CAGR) of 19.96 per cent in its subscriber base during the last decade.
- Density: The mobile segment’s Tele-density swelled around six times from 14.6 per cent in FY07 to 81.38 per cent in FY16. The number of Internet subscribers in the country increased at a CAGR of 78.81 per cent, with the number reaching 342.65 million in March 2016 from 8.6 million in 2006.
- Generations: The sector is expected to witness an extremely high growth rate in the coming years, given the favorable regulatory support by the government and the introduction of 4G and by 2022 Indian telecom sector is preparing to launch 5G
- Reforms: In the first decade of the 21st century, the government further liberalized the entry of private and foreign investors in the sector, especially in the mobile telephony space. The impact was affordable services for a large number of Indian residents, especially the Indian middle class
- Disruptions: Recent disruption has been witnessed in 2016 with the entry of Jio and it has announced the free voice calls, drop in data tariffs, sharp competition among Indian telecom companies.
- It has brought the telecom industry to a new level in terms of tariffs, services and technology and has also created substantial expectations among mobile customers. This kind of cut-throat disruption by a new player (with huge financial muscle) is expected to bring consolidation in the industry.
Challenges facing by telecom sector in India:
- Technological constraints: To be able to provide access, mobile operators need spectrum, which is a scarce resource. In comparison to other countries the amount of spectrum available for commercial use is low.
- Since the practice of the government is to auction it at an exorbitant cost. Therefore, it becomes difficult for mobile operators to provide services at reasonable speeds and at low prices that encourage adoption and usage.
- Headsets constraints: In order to experience a good Internet browsing, download and Video, it really becomes important for us to provide consumers a phone having advanced features at an affordable cost. Such phones are widely called as smart phones.
- These phones have many other features over and above providing access to the Internet. The current price of smart phones is also a hurdle to adoption. This telecom sector is a technologically dynamic industry as the new products and technologies are being invented and deployed quite frequently.
- Content constraints: More and more contents are to be made available in all of regional languages. Also, these contents should be focused in addressing their local problems or providing knowledge to the prevalent occupation of that region.
- Currently, most of the content that is available on the Internet is in English. This language is still spoken by a small fraction of the people in India. Also, using the Internet or browsing is not a pleasant experience on the small screens of a mobile phone.
- Over the top services: Over the Top (OTT) applications such as WhatsApp, OLA, Viber and so on do not need permission or a pact with a telecommunications company (telco).
- It was necessary earlier for app providers to deal with telecom operators to collect money from customers through billing but now OTTs run on a different business model either funded by business or through revenue earned through advertisements.
- Due to lack of credit card penetration, the app provider will have to go through a telecom operator in the event it has to charge customers. So either a mobile operator has to buy the app or make it available for purchase on its platform.
- Therefore, app developer finds himself squeezed between these two – content provider and the network operator and does not get good returns on his effort.
- Government and regulations: There is a need to examine the role of the government and the various institutional actors in the fray. The government’s prime concern seems to be in the revenue it collects through various auctions of Radio frequency spectrums
- Revenues: Revenues normally grew at a steady clip of 5-9 per cent per annum. In the past four years, however, the industry’s revenues fell by 20 per cent. The telcos debt (excluding the tower business) has tripled and is now a whopping Rs 4.3 trillion.
- The debt is now 2.6 times its annual revenues. Government revenues (licence and spectrum usage fees) have fallen by 36 per cent.
- The telecom sector in India have to deal with various challenges like maintaining the sufficient spectrum, Adoption of new technologies faster to be able to use new features and techniques to serve the customers with better and feature rich service, Government and regulatory agencies, various mobile handsets available from various companies brings lot of issues and content partners etc.
- Also, it is evident from the current scenario that the Voice alone will not be sufficient to generate revenue and hence the focus is required to be shifted towards various data services.