Telecom Industry in India & Abroad
Overview, market size, growth trends, news resources
Here’s an interesting perspective on the telecom industry provided in a working paper published by the Indian Institute of Management, Ahmedabad: In 1995-96, Indian Railways (IR) recorded a revenue of ₹22,418 crore, and the telecom sector ₹12,518. In 2013-14, IR notched up ₹1,40,485 crore, but the telecom figure read ₹2,33,000 crore, 80 percent higher, despite the fact that rail fares had gone up between 1996 and 2014 and telecom rates had fallen.
An unfair comparison? Maybe a little. Much of IR is still old-world, while the telecom industry is at the cutting-edge of technology. While rail travel at 200 km per hour and more continues to be the stuff of dreams in India, surfing the Net at 1-20 GBps on 5G networks may happen soon, perhaps well before the next football World Cup in Russia in 2018.
But first, a little about “telecommunications”—the word was coined by the French engineer Ēdouard Estauniē in 1904 from the French term “telecommunication” (with the Greek prefix “tele,” “distant,” and the Latin word “communicare,” “to share”).
The history of modern telecommunications began in 1792, with the Chappe brothers of France developing a semaphore telegraph system (in which the arms and flags are held in certain positions to indicate the alphabets and send messages). In 1837, Charles Wheatstone and William Cooke obtained a patent for an electrical telegraph, but it was Samuel Morse who sent the first electrical telegraphic message, “What has God wrought?” from the Supreme Court in Washington, D.C., to Baltimore, in 1844.
In 1876, the conventional telephone now in use was first patented by Graham Bell, and in March that year, he spoke the first words ever to be spoken on phone: “Mr Watson [Bell’s assistant], come here. I want to see you.” In 1892, an automatic telephone exchange that allowed direct dialling was developed, and in 1915, the first coast-to-coast telephone conversation in the US was conducted.
More recently, in 1972, the first e-mail message was sent. In 1974, the word “Internet” was used, but the concept of the Web did not evolve until 1992. In 1984, the first cell phones were introduced, and in 2000, the first “Web phone,” a “sort of smart” device, was introduced.
Modern telecommunication is the process of transmission of signals, mainly through electromagnetic waves, by transmitters and receivers. Types of telecommunication networks include computer networks, public switched telephone networks, packet switched networks, radio networks, and television networks. For transmission, analogue, digital, and optics systems are used.
In India, at least, there was a time when the telecom industry meant a big, government-owned enterprise that provided barely adequate services to its customers. Thanks to technology, this has changed, and the once grumbling telecom users are now frequently awed by the quality and range of services.
Telecom, today, is only a little about voice, more about text, and most about video. Technological advances are keeping pace with consumer demand for services, and this is leading to an integration of the Web, information technology, and telecom.
The global telecom industry is riding on the success of mobile broadband, M2M (machine-to-machine) technologies, Big Data management, OTT (over-the-top) services, and cloud computing. However, revenue growth has been stagnant. But use of mobile devices is growing, and mobile broadband use is expanding with the rising popularity of smartphones and tablets.
Quick facts and statistics
The global telecommunications industry was estimated to be worth about $5.6 trillion in mid-2015, including the revenue from telecom services, equipment, and related segments, according to Plunkett Research.
According to Insight Research, the revenue from telecom services (excluding equipment) is expected to grow from $2.2 trillion in 2015 to $2.4 trillion in 2019. The main factors are the growth in the number of wireless subscribers and the expanding data traffic from smartphones and tablets.
The Asia-Pacific region, worth $519 billion, according to 2014 figures, is the biggest telecom market. North America follows with $399 billion, Europe with $374 billion, Latin American with $157 billion, and West Asia with $131 billion.
The global telecom equipment industry is estimated to reach a market size of $214.5 billion by 2017. Here, too, Asia-Pacific recorded the fastest growth, followed by North America and Europe.
In mid-2015, there were over 7.1 billion mobile-phone subscriptions globally (3.7 billion in Asia-Pacific), according to the International Telecommunications Union (ITU). However, the actual number of individual subscribers might be at least somewhat lower, as many have more than one connection. There were 1.1 billion fixed-line phone subscriptions, worldwide.
Unsurprisingly, the broadband numbers are catching up, though they are still much lower. Globally, there are 3.4 billion mobile-broadband subscriptions and 794 million fixed-broadband subscriptions. The demand for more Internet connections and higher broadband speed is likely to multiply with the availability of more high-quality video content and with the development of the Internet of Things. Wireless Internet is set to outgrow wired Internet, with the former taking a more than 50 percent share of IP traffic.
According to Forbes’ list of the top global telecom companies, China Mobile is the top telecom company worldwide, followed by Verizon, AT&T, Vodaphone, and Nippon Telegraph and Tel. China Mobile, Vodaphone, and Bharti Airtel are the top three companies in terms of number of subscribers.
Telecom industry in India
The first telecommunications lines in India were laid in 1851 near Calcutta, though services began only 30 years later. In 1947, after Independence, all foreign telecom firms were nationalised to form the Department of Posts, Telephone, and Telegraph. Until 1986, the government had complete control over telecommunications under the Telegraph Act, 1885. Today, the Telecom Regulatory Authority of India (TRAI) regulates services and tariffs in the sector.
Realising the need for modern telecommunications, the government opened the Centre for Development of Telematics, or C-DoT, and formed a separate Department of Telecommunications. The National Telecom Policy of 1994 and 1999 invited private players. Successive governments have taken liberalisation forward, although the 2G licences scandal was a major setback.
Teledensity, operators, revenue
India has the second highest number of telephone subscribers in the world (landlines and mobile phones) at 1.006 billion, more than 980 million of them mobile-phone users. It has among the lowest tariffs. The teledensity is 80 percent overall and nearly 150 percent in urban areas but below 50 percent in rural areas. As many as 300 million Indians use the Internet. Besides, there are 813 TV channels and 247 radio stations in the country.
According to an article on the India Brand Equity Foundation (IBEF) website, the total mobile-phone services market revenue in the country is expected to touch $37 billion in 2017. A study by the International Data Corporation has found that India will overtake the US as the second largest smartphone market in the world by 2017. About 50 percent of the mobile-phone handsets sold in India in 2012 were smartphones.
The ten private players had a combined 92 percent share of the wireless market, leaving only the rest to the public sector players, BSNL and MTNL, as per figures provided by TRAI for June 2015.
The top companies were Bharti Airtel (market share 23.5 percent), Vodaphone (19.5 percent), Idea (16.5 percent), Reliance (11.2 percent), Aircel (8.4), and BSNL (7.8 percent). However, as many as 160 million subscribers have applied for mobile number portability, according to TRAI, and so these market shares may vary slightly.
According to TRAI, there were over 26 million wireline (landline) subscribers in the country, 81 percent of them in rural areas. The overall wireline teledensity was only 2 percent. BSNL had a share of 60 percent of the wireline market, MTNL and Bharti Airtel 13 percent, and Tata Docomo 6 percent. The number of landline subscribers was declining at 0.44 percent a month.
Quoting figures from service providers, TRAI puts the number of broadband subscribers at about 108.85 million at the end of June 2015 (wired subscribers 15.7 million, mobile 92.7 million, and fixed wireless 0.45 million). The top service-providers were Airtel (24 million subscribers), Vodaphone (22 million), BSNL (18 million), Idea (16 million), and Reliance (9 million).
A PwC website points out that Indian telecom faces the challenges of providing basic services to rural areas and state-of-the-art technology to urban and corporate customers. To improve their stagnant growth rate, companies will have to increase their revenue from data, from just 10 percent now. They also need to improve the customer experience to raise the monthly average revenue per user (ARPU), which was ₹116 in July-September 2014.
India accounted for nearly 7 percent of the global demand for telecom equipment—90 percent of its telecom equipment is imported.
Equipment majors such as Ericsson, Huawei, and Nokia Networks are eyeing the $1 billion revenue likely from 4G services. Ericsson is mulling a radio system that will facilitate 5G.
China’s Lenovo Group is manufacturing mobile phones near Chennai, and Foxconn, manufacturer of Apple devices, is to set up a $5 billion unit in Maharashtra. Samsung and Motorola are also assembling handsets in the country.
The growth has, in no small measure, been aided by the relaxation in regulatory norms, including foreign direct investment (FDI)—telecom attracted FDI worth $18 billion from 2000 to 2015. The rules for spectrum trading now allow companies to trade unused spectrum among themselves. The government is planning to make available free high-speed Wi-Fi in 2,500 cities through BSNL.
Telecom will continue to touch technology, product, and service companies. The Internet of Things will help companies generate $15 trillion in economic value, according to Deloitte.
The telecom industry will also benefit from the “customer obsession” with their devices. Audio and video streaming will become more popular, particularly among smartphone users. Spectrum will become increasingly important with the availability of higher-definition 4K content. Meanwhile, 4G’s contribution will also increase.
Wearables—smart watches, etc.—will see continued growth. As the ability to perceive customer preferences improve, companies will be able to innovate. Simultaneously, there will be a huge demand for cybersecurity solutions.
As Investopedia puts it, size matters in the telecom industry. Only the big players can afford to keep investing in infrastructure that seems to become obsolete every couple of years. Small fish have to ride on them and share revenue.
Bit telecom companies play a pivotal role, but when it comes to boosting their own revenue, they have not succeeded fully. While smaller companies use big networks to improve business, the big operators’ own revenues have been stagnating globally. They incur heavy costs in upgrading their networks, but they are not the biggest revenue earners from the data flow.
PwC’s “Strategy&” points out that the explosion in the use of ecommerce and digital media has largely benefited OTT companies (such as Google, Skype, Facebook, and Amazon) that use the networks, and not the telecom companies themselves.
They better optimise revenue from various customer segments by offering quality data-traffic management, Big Data and consumer analytics, and refined cloud computing platforms, advise experts. But, as new data services roll out, the sector may witness a price war rather than a tariff stabilisation or hike.
The other challenge, besides availability of funds, is customer retention—nearly all operators provide the same types of services, and the differentiating factor may only be the tariff.
Huge funds are required for sustaining progress, and operators in India, after the recent investments in spectrum, may baulk at infrastructure upgrades. The much-hated call drops may continue for some time.
Jobs in Telecom
The Indian telecom sector will be in a position to provide four million jobs by 2019, thanks to penetration of services into rural areas, smartphone demand, and increasing Internet usage, according to IBEF, quoting Randstad India.
Recruiters will be seeking engineers, technicians, installation/maintenance service professionals, besides sales, marketing, and human resources professionals.
Those aspiring to become telecom engineers require engineering degrees in telecommunications or electronics. Career prospects are improving in this flourishing sector.