Pyramid Research Predictions 2014
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This report provides a comprehensive overview of the trends and developments in the telecommunications and digital media markets in India. Subjects covered include:
- Key statistics;
- Market and industry overviews;
- Regulatory environment;
- Major players (fixed and mobile);
- Infrastructure development – national and international;
- Digital media;
- Mobile voice and data market;
- Internet, including VoIP and IPTV;
- Broadband services;
- Regulatory environment;
- Telecom market forecasts for selected segments/years to 2020.
India’s telecom market feels the mobile sector turmoil as the shake-out from 2G scandal continues
India’s massive mobile market entered a period of uncertainty in 2012 and this had continued into 2013. Whilst maintaining its ranking as one of the two largest telecom markets in the world (not surprisingly the other being China), India has looked anything but the strong market it was two years earlier. A number of factors have contributed to this situation. The Supreme Court decision in February 2012 that saw the large scale cancellation of operator licences and the subsequent response of the regulators to the court orders set the scene for the market uncertainty that followed. In the wake of the court decision and specifically the directive to re-auction the cancelled licences, a number of operators exited the market, whilst others were looking to rationalise their businesses. After a number of delays, the all-important re-auctioning of the cancelled 2G mobile licences took place in late 2012. This saw a disappointing outcome for the government with much of the spectrum on offer not even attracting bids, the high reserve prices clearly frightening off potential buyers. A further auction was held in March 2013 to sell off the remaining spectrum. Again the lack of bidder interest forced further postponements.
In the meantime a different kind of ‘shake-out’ was impacting on the mobile market. Operators had begun culling inactive prepaid subscribers from their customer databases; by mid-2012 this process had caused a major dislocation in the subscriber statistics and it was evident that the market would need time to adjust. The mobile sector had passed the 900 million subscriber mark by early 2012; by end-2012, however, the total subscriber numbers had fallen to around 860 million as the combined net effect of growth and culling was felt. Despite this dislocation, overall growth in the national subscriber base in the medium to long term was expected to continue at a strong rate; by mid-2013 the net subscriber numbers were increasing once more.
One of the reasons for the operators culling their databases was to lift Average Revenue Per User (ARPU). Mobile ARPU in India had been steadily declining over the years as competing operators offered cheaper tariffs; at the same time usage levels have remained reasonably high thus slowing the decline in revenues. At the same time, there had been a major push in recent years to take mobile services into the poorer and rural areas of the country; this inevitably weighed heavily on ARPU. Countering this trend, the long-awaited 3G licensing has seen networks across the country finally delivering mobile data services to customers. Although still struggling with coverage issues, 3G has started to see operators boosting revenue. By 2012 and into 2013 there were positive signs that the decline in ARPU was ‘bottoming out’ as operators began reporting increased ARPUs.
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 31 million by early 2013. With less than 3% fixed-line penetration, India has nevertheless achieved a remarkable national coverage, with 99% of the population having some form of access to a telephone. It has been the heavy investment in telecoms infrastructure over the last decade, 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 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 2013 there were around 15 million fixed broadband subscribers – a lowly penetration (by population) of slightly more than 1%. Meanwhile, the impact of mobile broadband was finally starting to hit the market and in the medium term this was expected to lift broadband penetration significantly.
Although 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. The government continued its commitment to opening up the market to more and more competition and investment. The launch of Mobile Number Portability (MNP) in 2011 added yet another dimension to what was already an intensely competitive market. The anticipated removal of the cap on foreign investment in the telecom sector in 2013 was yet another strong signal to the market of the government’s intentions. The government has been continuing to push on a broad front to advance the restructuring of the telecommunications regulatory regime.
- The year 2012 saw a significant ‘correction’ in India’s mobile market, as operators removed inactive subscribers from their databases;
- By end-2012 the country had 865 million mobile subscribers, for a penetration of 69%;
- This was down from 895 million (penetration 72%) at end-2011;
- By April 2013 there were 867 million subscribers as the market finally returned to positive growth;
- GSM had further strengthened its position as the dominant mobile technology over CDMA with 91% of the mobile subscriber market coming into 2013;
- The number of fixed broadband internet subscribers was steadily increasing, reaching 15 million for a penetration of just over 1% by population by the start of 2013;
- DSL continued to hold the major portion of the local fixed broadband market: 85% by end-2012;
- The market had witnessed a large scale roll-out of 3G networks by operators across the country following the long-delayed licensing;
- However, 3G had not immediately delivered the expected boost to the market in terms of large scale adoption of mobile data services;
- Nevertheless, mobile broadband was expanding rapidly and had quickly been established as a key form of broadband access;
- Following the Supreme Court decision cancelling operator licences in February 2012, the re-auction of the vacant spectrum took place in late 2012 and early 2013;
- The process was generally seen as a failure for the government as the auctions failed to attract the level of bids and bidders;
- The licence cancellations and subsequent re-auctioning of spectrum had been a major upheaval for India’s telecom market place.