2015 India - Telecoms, Mobile and Broadband

Telecoms in India looks towards a fresh period of growth

After a major hiccup back in 2012, India’s mobile market had sorted itself out to a large extent by 2015 and subscriber growth looked to be running at a steady 7% per annum. By March 2015 there were 970 million subscribers representing a mobile penetration of 77%. Mobile penetration was likely to reach 100% by 2020.

The overall economic impact of mobile technology in India amounted to approximately US$115 billion in value-added terms in 2014, this representing an economic contribution of around 5.5% of the country’s GDP for the year. Looking forward, mobile broadband was set to grow exponentially throughout India, driving digital inclusion and economic growth for India’s consumers and businesses. Into 2015 4G and other data services were shaping as a key battleground. The entry of a new operator Reliance Jio into the market was expected to see even more intense competition in an already hotly competitive market.

By mid-2015 there was already considerable progress in the roll-out of 4G services:

• Bharti Airtel was operating a TD-LTE network;
• Bharti had also launched a trial FDD LTE network in 20 cities;
• Aircel had launched 4G services;
• Vodafone was planning to launch 4G in Calcutta, Mumbai and Delhi by December 2015;
• Reliance Jio was set to introduce its 4G network by the end of 2015;
• Idea Cellular was reported to be set to launch LTE services in January 2016;
• BSNL was preparing to launch 4G by March 2016.

On the regulatory front there were positive signs of a market improving on the back of restructuring. Figures from the TRAI showed that Mobile Number Portability (MNP) was working well. The process of auctioning spectrum was also working well – despite criticism that the reserve prices had been set to high. The removal of the cap on foreign investment in the telecom sector was yet another strong signal to the market of the government’s intentions. The telecom market was still waiting on regulatory guidance with respect to mergers and acquisitions, however; this was important for the process of market consolidation to continue.

In the meantime, the fixed-line market, which had grown strongly over a number of years, began experiencing zero and then negative growth. Fixed-line subscriber numbers stood at around 26 million by early 2015. With less than 3% fixed-line penetration, India had nevertheless achieved a remarkable national coverage, with 99% of the population having some form of access to a telephone. The heavy investment in telecoms infrastructure over the last decade or so, plus a number of key regulatory initiatives that have combined to see India’s huge population delivered at least some level of telephone service.

In terms of the internet and online access, there have been a number of efforts by the government to promote broadband internet throughout the country; broadband development had long been languishing, but there was new hope for a serious expansion phase in this segment of the market. By early 2015 there were around 15.5 million fixed broadband subscribers – a lowly penetration (by population) of slightly more than 1%. Meanwhile, mobile broadband was finally having an impact on the market and in the medium term this was expected to lift broadband penetration significantly. By March 2015 there were already more than five mobile broadband subscribers for every fixed broadband subscriber.

Although still facing serious functional and regulatory challenges, there is much that is positive to be found in India’s telecom industry. Sweeping reforms introduced by successive governments over the last decade or so have dramatically changed the nature of telecommunications in the country. A number of factors have been responsible for the amazing growth in India’s telecom sector; apart from the obvious booming economy and the rapid expansion in the country’s middle class, the growth drivers include low tariffs, low handset prices and most notably a highly competitive market created by the government and the regulators.

Key developments:

• overall growth in India’s telecom market remains fundamentally strong; but the huge mobile market has been going through a period of uncertainty;
• the consequences of the 2G corruption scandal have continued to impact on the industry;
• mobile broadband services have breathed fresh life into the broadband sector, helping increase broadband penetration across the market;
• the government removed the Foreign Direct Investment (FDI) cap on telecom investment;
• spectrum fees continued to be a controversial issue with a major argument about the impact of the March 2015 auctions on tariffs and the financial situation of the operators;
• India’s mobile subscriber base grew by 7% in 2014 and was growing at a similar rate in 2015;
• mobile penetration had reached 77%, with room for considerably further growth;
• mobile ARPUs appeared to be stabilising and was even seeing modest growth;
• India has overhauled Japan to become the world’s third largest smartphone market;
• new player Reliance Jio was preparing to launch its 4G network by early 2016;
• Bharti Airtel cancelled its plans to purchase the assets and subscribers of Loop Mobile;
• this left Loop in an impossible situation, inevitably exiting the market.

Companies mentioned in this report:

Aircel/Dishnet, Bharti Airtel, Loop Mobile (BPL Mobile), Quadrant (HFCL), Idea/Spice, Reliance Communications, Tata Teleservices, Vodafone Essar, Telewings (Uninor), Videocon, S Tel, Bharti Telenet, Reliance Infocomm, Reliance Jio Infocomm (RJI), Tata Teleservices, Sistema (Shyam Telelink), Swan Telecom, Videsh Sanchar Nigam Ltd (VSNL), Bharat Sanchar Nigam Ltd (BSNL), Mahanagar Telephone Nigam Ltd (MTNL), Data Access, Hughes Telecom, Videocon, AT&T, France Telecom, SingTel, Hathway Cable, Datacom.