Monday, September 10, 2012

Analysis for Telecom Service Industry (FY 2011-2012)

Indian Telecom Industry started in 1851 when the first operational land lines were laid by the government near Calcutta (seat of British power) and now driven by wireless revolution, the Indian telecom industry is one of the fastest growing in the world contributing to nearly 2% of the Indian GDP and it’s bound to increase considering huge potential of Indian Urban market and untapped rural market. Needless to say, it also has one of the lowest tariffs in the world enabled by the hyper-competition in the market.

However, over last few years, telecom sector has witnessed several setbacks in terms of various scams, cancellation of 2G licenses of many operators, unsuccessful launch of 3G (not so great customer database), uncertain policy etc.  Considering all these significant negatives, industry did not seem (and certainly is not!) in its healthy state.  And thus, it came as a big surprise when the Indian Telecom Industry actually grew by 7% in the last fiscal.

If you see an industry getting defeated, then you are certainly not looking at the Telecom!! Yes, the telecom service industry revenue went up from 1,71,347 Cr. to 1,82,459 Cr. in FY 2011-12 according to telecom journal Voice & Data. Various telecom services counted in the survey include cellular, fixed line, National Long Distance (NLD), International Long Distance (ILD), broadband and VSAT services. 

SOURCE: VOICE & DATA

1)    Cellular:  It grew by almost 17 % and contributed 65 % of the entire industry’s revenue. The total cellular subscriber base was increased by 117 million during last fiscal and three major players are Bharti Airtel, Vodafone and Idea according to the market share.

2)    Fixed, NLD & ILD: Fixed and NLD segment did not see any growth. People are going wireless and fixed line industry has seen dip in their revenue by almost 19%. Similarly, NLD segment has seen a dip of 15% perhaps because of the fact that tariff for local calls and long distance calls are almost identical. Amongst three, ILD segment has witnessed minuscule growth of 0.27 %. Amongst top 5 players in ILD segment, Tata Comm. grew by 20 % and Vodafone grew by 40 %.

3)    Broadband: Despite the popularity of the Internet in India, broadband segment has seen dip of 0.46 %. It should be noted that the Internet penetration in India is one of the lowest in the world and only accounts for 8-10% of the population compared to OECD counties, where avg. penetration rate is over 50%.

P.S. The Organisation for Economic Co-operation and Development (OECD) is an international economic organisation of 34 countries founded in 1961 to stimulate economic progress and world trade.

4) VSAT: The term VSAT is an acronym for Very Small Aperture Terminals. Any requirement for connectivity in remote areas where other technologies cannot provide services or where dedicated and uninterrupted data connectivity is required (like core banking facility and the involvement of financial transaction) then the answer lies with VSAT services. VAST industry in India saw the growth of 6 % in FY 11-12 and credit goes to the growing demand from banking industry.

The Indian telecom service industry is likely to sustain growth in next fiscal considering the rollout of 4G service by all major telecom players and shall emerge as one of the key sectors responsible for India’s economic growth. 



Kaushal Joshi
Class of 2014