Metamorphosis in Indian Telecom Industry - Free Essay Example

Sample details Pages: 10 Words: 3005 Downloads: 7 Date added: 2017/09/11 Category Advertising Essay Did you like this example? Metamorphosis in Telecom Industry Abstract: Today, Telecommunications is one of the fastest-growing areas of technology in the world. Because of its rapid growth, businesses and individuals can access information at electronic speed from almost anywhere in the world. By including telecommunications in their operations, businesses can provide better services and products to their customers. For individuals, telecommunications provides access to worldwide information and services. India’s telephone network is one of the largest communication networks in the world which continues to grow at blistering pace. The Indian Telecommunications network with 621 million connections (as on March 2010) is the third largest network after China USA and the fastest growing market with a growth rate of 45% in the world and the second largest among the emerging economies of Asia. The telecommunication sector continued to register significant success during the past few years and has emerged as one of the key sectors responsible for India’s resurgent and its economic growth. This rapid growth has been possible due to various proactive and positive decisions of the Government and contribution of both by the public and the private sector. Don’t waste time! Our writers will create an original "Metamorphosis in Indian Telecom Industry" essay for you Create order The rapid strides in the telecom sector have been facilitated by liberal policies of the Government that provide easy market access for telecom equipment and a fair regulatory framework for offering telecom services to the Indian consumers at affordable prices. Indian telecommunication sector has undergone a major process of transformation through significant policy reforms, particularly beginning with the announcement of National Telecom Policy (NTP) 1994 and was subsequently re-emphasized and carried forward under NTP 1999. Driven by various policy initiatives, the Indian telecom sector witnessed a complete transformation in the last decade. It has achieved a phenomenal growth during the last few years and is poised to take a big leap in the future also. Presently, all the telecom services have been opened for private participation. Keywords: Telecommunication, Consumers, Teledensity, 3G Services, Technology In today’s information age, the telecommunication industry has a vital role to play. Considered as the backbone of industrial and economic development, the industry has been aiding delivery of voice and data services at rapidly increasing speeds, and thus, has been revolutionising human communication. The development of the telecom sector has experienced a major process of transformation in terms of its growth, technological content, and market structure in the last decade through policy reforms introduced by the Government. The impetus of these changes is expected to continue, and at a much faster pace. INTRODUCTION EVOLUTION Indian telecom sector is more than 165 years old. Telecommunications was first introduced in India in 1851 when the first operational landlines were laid by the government near Kolkata (then Calcutta), although telephone services were formally introduced in India much later in 1881. Further, in 1883, telephone services were merged with the postal system. In 1947, after India attained independence, all foreign telecommunication companies were nationalised to form the Posts, Telephone and Telegraph (PTT), a body that was governed by the Ministry of Communication. The first wind of reforms in telecommunications sector began to flow in 1980s when the private sector was allowed in telecommunications equipment manufacturing. The government concretised its earlier efforts towards developing RD in the sector by setting up an autonomous body – Centre for Development of Telematics (C-DOT) in 1984 to develop state-of-the-art telecommunication technology to meet the growing needs of the Indian telecommunication network. In 1985, Department of Telecommunications (DoT) was established. It was an exclusive provider of domestic and long-distance service that would be its own regulator (separate from the postal system). In 1986, two wholly government-owned companies were created: the Videsh Sanchar Nigam Limited (VSNL) for international telecommunications and Mahanagar Telephone Nigam Limited (MTNL) for service in metropolitan areas. The actual evolution of the industry started after the Government separated the Department of Post nd Telegraph in 1985 by setting up the Department of Posts and the Department of Telecommunications (DoT). The entire evolution of the telecom industry can be classified into three distinct phases. * Phase I- Pre-Liberalisation Era (1980-89) * Phase II- Post Liberalisation Era (1990-99) * Phase III- Post 2000 Until the late 90s the Government of India held a monopoly on all types of communications – as a result of the Telegraph Act of 1885. Until the industry was liberalised in the early nineties, it was a heavily government-controlled and small-sized market, Government policies have played a key role in shaping the structure and size of the Telecom industry in India. As a result, the Indian telecom market is one of the most liberalised markets in the world with private participation in almost all of its segments. The New Telecom Policy (NTP-99) provided the much needed impetus to the growth of this industry and set the trend for liberalisation in the industry. NATIONAL TELECOM POLICY 1994 In 1994, the Government announced the National Telecom Policy which defined certain important objectives, including availability of telephone on demand, provision of world class services at reasonable prices, improving India’s competitiveness in global market and promoting exports, attractive FDI and stimulating domestic investment, ensuring India’s emergence as major manufacturing / export base of telecom equipment and universal availability of basic telecom services to all villages. It also announced a series of specific targets to be achieved by 1997. NEW TELECOM POLICY 1999 The most important milestone and instrument of telecom reforms in India  is  the New Telecom Policy 1999 (NTP 99). The New Telecom Policy, 1999 (NTP-99) was approved on 26th March 1999, to become effective from 1st April 1999. NTP-99 laid down a clear roadmap for future reforms, contemplating the opening up of all the segments of the telecom sector for private sector participation. It clearly recognized the need for strengthening the regulatory regime as well as restructuring the departmental telecom services to that of a public sector corporation so as to separate the licensing and policy functions of the Government from that of being an operator. It also recognized the need for resolving the prevailing problems faced by the operators so as to restore their confidence and improve the investment climate. Key features of the NTP 99 include: * Strengthening of Regulator. National long distance services opened to private operators. * International Long Distance Services opened to private sectors. * Private telecom operators licensed on a revenue sharing basis, plus a one-time entry fee. Resolution of problems of existing operators envisaged. * Direct interconnectivity and sharing of network with other telecom operators within the service area was permitted. * Department of Telecommunication Services (DTS) corporatized in 2000. * Spectrum Management made transparen t and more efficient. All the commitments made under NTP 99  have been fulfilled; each one of them, in letter and spirit, some even ahead of schedule, and the reform process is now complete with all the sectors in telecommunications opened for private competition. CURRENT STATUS Globalisation has made telecommunication an integral part of the infrastructure of the Indian economy. The telecom sector in India has developed as a result of progressive regulatory regime. The Indian telecom market has been displaying sustained high growth rates. Riding on expectations of overall high economic growth and consequent rising income levels, it offers an unprecedented opportunity for foreign investment. A combination of factors is driving growth in the telecom market, promising rich returns on investments. It has also experienced a rapid growth over the past decade on account of regulatory liberalisation, structural reforms and competition, making telecom one of the major catalysts in India’s growth story. However, much of this growth can be attributed to the unprecedented growth in mobile telephony as the number of mobile subscribers grew at an astounding rate. The year 2009, saw the Indian telecom sector add 170 million phone connections to take the total subscriber base to 550 million. T R Dua, Deputy Director General of Cellular Operators Association of India (COAI), said, â€Å"It is indeed a matter of great satisfaction that the Indian telecom industry continued to grow even when most other sectors grappled with a demand slowdown. † Studies have shown that in India, the telecom sector has been a major enabler of economic growth. An Indian Council for Research on International Economic Relations (ICRIER) study has shown that states with higher mobile penetration are forecast to grow faster. At present, the Indian telecom market is the fastest growing in the world with the lowest tariffs and currently market leaders in the Indian telecom sector are launching plans to compete with new operators. The year 2009 saw telecom players shift from per minute billing to per second billing. The Indian telecom industry is characterised with intense competition, and continuous price wars. Currently, there are around a dozen telecom service providers who operate in the wired and wireless segment. The government has been periodically implementing suitable fiscal and promotional policies to boost domestic demand and to create volumes for the industry. The Indian telecom market size of over US $ 8 billion is expected to increase three fold by 2012. The Indian telecom industry has immense growth potential as the teledensity in the country is just 36 as compared with 60 in the US, 102 in the UK and 58 in Canada. The wireless segment growth has played a dominant role in taking the teledensity to the current levels. In the next few years, the industry is poised to grow further; in fact, it has already entered a consolidation phase as foreign players are struggling to acquire a pie in this dynamic industry. The Indian Telecom Analysis (2008-2012) report by RNCOS Industry Research Solutions shows that mobile telecom segment has surpassed all other segments in the Indian telecom sector. (The mobile telecom market is forecast to grow at a compound annual growth rate of around 15 per cent between 2009-10 and 2013-14. The report also indicates that the advance of services such as Internet Protocol television (IPTV) and 3G are fuelling the growth of the Indian telecom sector. Meanwhile, Bangladeshs telecom regulator granted approval to Indian telecom operator, Bharti Airtel’s US$ 300 million proposed investment for a 70 per cent stake in the Abu Dhabi Groups Warid Telecom of Bangladesh. This a pproval makes the company the first Indian operator from the Indian telecom sector to foray into Bangladeshs mobile market. Indian telecom companies are following the trend of global telecom companies such as France Telecom, AT;T and Vodafone to capitalise on the excitement in the mobile applications space—mobile service provider Aircel has partnered Infosys Technologies to launch the first mobile application in the Indian telecom sector. Also, Airtel is considering partnering software company IBM to launch app stores in 2010. This signals the increasing recognition among operators in the Indian telecom sector that the way ahead for mobile technology lies with independent developers. In another development in the Indian telecom sector, Tata Teleservices Ltd (TTSL) has partnered Novatium Solutions Ltd to launch what is said to be the country’s first cloud computing service over wireless broadband, ‘Nova Navigator. The Navigator is being described as a ‘zero maintenance access device with features such as 3G support and plug and play printer support and multimedia support. In a development that will provide fundamental benefits to services offered by the Indian telecom sector, Tata Communications and China Telecom Corp are to jointly build a 500-km optical fibre cable network between the two countries in 2010. Along with the investments of Tata Communications in other subsea cable investments, the India-China Terrestrial Cable will provide high-speed connectivity between Asia and Europe. FUTURE GROWTH PROSPECTUS OF TELECOM SECTOR IN INDIA Both fixed line and mobile segments serve the basic needs of local calls, long distance calls and the international calls, with the provision of broadband services in the fixed line segment and GPRS in the mobile arena. Traditional telephones have been replaced by the codeless and the wireless instruments. Mobile phone providers have also come up with GPRS-enabled multimedia messaging, Internet surfing, and mobile-commerce. The much-awaited 3G mobile technology is soon going to transform the Indian telecom market. The GSM, CDMA, WLL service providers are all upgrading them to provide 3G mobile services. Along with improvement in telecom services, there is also an improvement in manufacturing. In the beginning, there were only the Siemens handsets in India but now a whole series of new handsets, such as Nokias latest N-series, Sony Ericssons W-series, Motorolas PDA phones, etc. ave come up. Touch screen and advanced technological handsets are gaining popularity. Radio services have also been incorporated in the mobile handsets, along with other applications like high storage memory, multimedia applications, multimedia games, MP3 Players, video generators, Cameras, etc. The value added services provided by the mobile service operators contribute more than 10% of the total revenue. FACTOR S FACILITATING GROWTH OF THE SECTOR The phenomenal growth in the Indian telecom industry was brought about by the wireless revolution that began in the nineties. Besides this, the following factors also aided the growth of the industry. Liberalisation The relaxation of telecom regulations has played a major role in the development of the Indian telecom industry. The liberalisation policies of 1991 and the consequent influx of private players have led the industry on a high growth trajectory and have increased the level of competition. Post-liberalisation, the telecom industry has received more investments and has implemented higher technology. Increasing Affordability of Handsets The phenomenal growth in the Indian telecom industry was predominantly aided by the meteoric rise in wireless subscribers, which encouraged mobile handset manufacturers to enter the market and to cater to the growing demand. Further, the manufacturers introduced lower-priced handsets with add-on facilities to cater to the increasing number of subscribers from different strata of the society. Now even entry-level handsets come with features like coloured display and FM radio. Thus, the falling handset prices and the add-on features have triggered growth of the Indian telecom industry. Prepaid Cards Bring in More Subscribers In the late nineties, India was introduced to prepaid cards, which was yet another milestone for the wireless sector. Prepaid cards lured more subscribers into the industry besides lowering the credit risk of service providers due to its upfront payment concept. Prepaid cards were quite a phenomenon among first-time users who wanted to control their bills and students who had limited resources but greater need to be connected. Pre-paid cards greatly helped the cellular market to grow rapidly and cater to the untapped market. Further, the introduction of innovative schemes like recharge coupons of smaller denominations and life time incoming free cards has led to an exponential growth in the subscriber base. Introduction of Calling Party Pays (CPP) The CPP regime was introduced in India in 2003 and under this regime, the calling party who initiated the call was to bear the entire cost of the call. This regime came to be applicable for mobile to mobile calls as well as fixed line to mobile calls. So far India had followed the Receiving Party Pays (RPP) system where the subscriber used to pay for incoming calls from both mobile as well as fixedline networks. Shifting to the CPP system has greatly fuelled the subscriber growth in the sector. Changing Demographic Profile The changing demographic profile of India has also played an important role in subscriber growth. The changed profile is characterised by a large young population, a burgeoning middle class with growing disposable income, urbanisation, increasing literacy levels and higher adaptability to technology. These new features have multiplied the need to be connected always and to own a wireless phone and therefore, in present times mobiles are perceived as a utility rather than a luxury. Increased Competition ; Declining Tariffs Liberalisation of the telecom industry has fuelled intense competition, especially in the cellular segment. The ever-increasing competition has led to high growth of subscribers and has put pressure on tariffs, which have seen a sharp drop over the years. When the cellular phones were introduced, call rates were at a peak of Rs 16 per minute and there were charges for incoming calls too. Today, however, incoming calls are no longer charged and outgoing calls are charged at less than a rupee per minute. Thus, the tariff war has come a long way indeed. Increased competition and the subsequent tariff war have acted as a major catalyst for attracting more subscribers. Apart from these major growth drivers, an improved network coverage, entry of CDMA players, growth of value-added services (VAS), advancement in technology, and growing data services have also driven the growth of the industry. CONCLUSION The telecom industry in India has experienced exponential growth over the past few years and has been an important contributor to economic growth; however, the cut-throat competition and intense tariff wars have had a negative impact on the revenue of players. Despite the challenges, the Indian telecom industry will thrive because of the immense potential in terms of new users. India is one of the most-attractive telecom markets because it is still one of the lowest penetrated markets. The government is keen on developing rural telecom infrastructure and is also set to roll out next generation or 3G services in the country. Operators are on an expansion mode and are investing heavily on telecom infrastructure. Foreign telecom companies are acquiring considerable stakes in Indian companies. Burgeoning middle class and increasing spending power, the government’s thrust on increasing rural telecom coverage, favourable investment climate and positive reforms will ensure that India’s high potential is indeed realised. The government has eased the rules regarding inter circle and intra circle mergers. This has led to a slew of mergers and acquisitions in the recent past. Also as the sector is moving closer to maturity, further consolidation is a reality and this will lead to the survival of more profitable players in this segment. In order to further promote the use of Internet in the country the government is taking proactive steps to develop this sector with the help of the various players in this segment. For this purpose, the use of broadband technology is being mooted and this will go a long way in improving the productivity of the Indian economy as well as turn out to be the next big opportunity for telecom companies after the mobile communications segment. References www. indiatelecom. org www. trai. gov. in www. telecommindia. com www. telecomindiaonline. com/ www. dot. gov. in/