Project Report on

“Telecom Industry in India its SWOT and PESTAL Analysis and Impact
of Covid 19 on Telecom Sector.”

Submitted to

Vicky Khandelwal

Finance Trainee

Praedico Global Research Pvt. Ltd.

By

Abhishek Patil

VBS Mumbai

PGDM 2021-23

ON

24-06-2022

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 TABLE OF CONTENT

Sr. no. Topic Page Nos.

1 Introduction to Indian Telecom Industry 3

2 Market Structure of Telecom Industry 3

3 Market Size of Telecom Industry 4

4 Key Players in the Indian Telecom Sector 5

5 Investment and Major Development 6

6 Government Initiatives 7

7 Road ahead for Telecom Industry in India 8

8 SWOT Analysis 9

9 PESTAL Analysis 10

10 Covid 19 Impact on Telecom Sector in India 11-12

11 Reference 13

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Introduction to Indian Telecom Industry :-
Indian telecom industry world’s fastest growing industry (last three years 42%) and adding
millions of customers monthly and reach to mark of more than 700 million customer mark in
the end of year 2010. It is the most dynamic industry and based on the tough competition,
price war emerged in the 3rd quarter of 2010. It has lowest tariffs in the world and highest
telephone density. It also suffers from highest churn rate 2% and 5% for post-paid and
prepaid respectively. It also has lowest ARPU (average revenue per user). It is second largest
network in the world (in terms of number of subscribers #1st China) The wireless sector has
become so dominant that it is has almost made the landline part dormant with no new
happenings/activities/technology in that domain of telecommunication services. A look at
their contribution to the total telephone services shows the rapidly change face of the
telecommunication industry in India. This sea change has been caused by a number of factors
varying from reduction in tariffs and cost of mobile handsets to change in government
policies to mindset of the general public.
Currently, India is the world’s second-largest telecommunications market with a subscriber
base of 1.16 billion and has registered strong growth in the last decade. The Indian mobile
economy is growing rapidly and will contribute substantially to India’s Gross Domestic
Product (GDP) according to a report prepared by GSM Association (GSMA) in collaboration
with Boston Consulting Group (BCG). In 2019, India surpassed the US to become the second
largest market in terms of number of app downloads.

The liberal and reformist policies of the Government of India have been instrumental along
with strong consumer demand in the rapid growth in the Indian telecom sector. The
Government has enabled easy market access to telecom equipment and a fair and proactive
regulatory framework, that has ensured availability of telecom services to consumer at
affordable prices. The deregulation of Foreign Direct Investment (FDI) norms have made the
sector one of the fastest growing and the top five employment opportunity generator in the
country.

Market Structure of Telecom Industry :-

Indian telecommunication market is divided into a total of 23 circles, which include 4 metros,
and 19 other circles. These circles are further classified into A, B and C type of circles base in
the certain economic parameters and revenue potential. Circles were categorized as A,B, & C
based on the revenue potential as per the 1st auction in 1995.

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Market Size of Telecom Industry :-

India is the world’s second-largest telecommunications market. The total subscriber base,
wireless subscriptions as well as wired broadband subscriptions have grown consistently.
Tele-density stood at 85.91%, as of December 2021, total broadband subscriptions grew to
792.1 million until December 2021 and total subscriber base stood at 1.18 billion in
December 2021.

Gross revenue of the telecom sector stood at Rs. 64,801 crore (US$ 8.74 billion) in the first
quarter of FY22.

The total wireless data usage in India grew 16.54% quarterly to reach 32,397 PB in the first
quarter of FY22. The contribution of 3G and 4G data usage to the total volume of wireless
data usage was 1.78% and 97.74%, respectively, in the third quarter of FY21. Share of 2G
data usage stood at 0.48% in the same quarter.

Over the next five years, rise in mobile-phone penetration and decline in data costs will add
500 million new internet users in India, creating opportunities for new businesses.

By 2025, India will need ~22 million skilled workers in 5G-centric technologies such as
Internet of Things (IoT), Artificial Intelligence (AI), robotics and cloud computing.

Telecommunication Services can be broadly classified under 3 heads: Telephone,

Broadcasting and Internet.

An exponential growth in the number of subscribers has been witnessed over the recent years
with the annual growth going as high as 47%.

Indian tariffs are very low in comparison to world standards.

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Key Players in the Indian Telecom Sector :-

1. Reliance Jio Infocomm Limited :-

a. Total Broadband Subscribers: 420.28 million

b. Wireline Subscriber Base: 4.57 million

c. Market Share of Broadband Services: 53.06%

2. Bharti Airtel Limited :-

a. Total Broadband Subscribers: 210.07 million

b. Wireline Subscriber Base: 4.20 million

c. Market Share of Broadband Services: 26.52%

3. VODAFONE IDEA Limited :-

a. Total Broadband Subscribers: 122.62 million

b. Wireline Subscriber Base: 0.56 million

c. Market Share of Broadband Services: 15.48%

4. Bharat Sanchar Nigam Limited :-

a. Total Broadband Subscribers: 25.54 million

b. Wireline Subscriber Base: 4.07 million

c. Market Share of Broadband Services: 3.22%

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Investment and Major Development :-
With daily increasing subscriber base, there have been a lot of investment and development
in the sector. FDI inflow in the telecom sector stood at US$ 38.25 billion between April
2000-December 2021.

Some of the developments in the recent past are:

i. In January 2022, Google made a US$ 1 billion investment in Airtel through the India
Digitization Fund.
ii. In October 2021, Vodafone Idea stated that it is in advanced talks to sell a minority
stake to global private equity investors including Apollo Global Management and
Carlyle to raise up to Rs. 7,540 crore (US$ 1 billion) over the next 2-3 months.
iii. In October 2021, British satellite operator Inmarsat Holdings Ltd. announced that it is
the first foreign operator to get India’s approval to sell high-speed broadband to
planes and shipping vessels. Inmarsat will access the market via Bharat Sanchar
Nigam Ltd. (BSNL) after BSNL received a license from the Department of
Telecommunications.
iv. In October 2021, Dixon Technologies announced plans to invest Rs. 200 crore (US$
26.69 million) under the telecom PLI scheme; this investment will include the
acquisition cost of Bharti Group’s manufacturing unit.
v. In September 2021, Bharti Airtel announced an investment of Rs. 50 billion (US$ 673
million) in expanding its data centre business to meet the customer demand in and
around India.
vi. In August 2021, Tata Group company Nelco announced that the company is in talks
with Canadian firm Telesat to sign a commercial pact for launching fast satellite
broadband services in India under the latter’s Lightspeed brand, a move which will pit
the combined entity against Bharti Enterprises-backed OneWeb, Elon Musk’s SpaceX
and Amazon.
vii. In March 2021, Vodafone Idea Ltd. (VIL) announced that the acquired spectrum in
five circles would help improve 4G coverage and bandwidth, allowing it to offer
‘superior digital experience’ to customers.
viii. In March 2021, Advanced Television Systems Committee (ATSC) and
Telecommunications Standards Development Society, India (TSDSI) signed a deal to
boost adoption of ATSC standards in India in order to make broadcast services
available on mobile devices. This allows the TSDSI to follow ATSC standards,
fostering global digital broadcasting standard harmonisation.
ix. In the first quarter of FY21, customer spending on telecom services increased 16.6%
y-o-y, with over three-fourths spent on data services. This spike in consumer spending
came despite of the COVID-19 disruption and lack of access of offline recharges for a
few weeks
x. India had over 500 million active internet users (accessed Internet in the last one
month) as of May 2020.

Government Initiatives :-

The Government has fast-tracked reforms in the telecom sector and continues to be proactive
in providing room for growth for telecom companies. Some of the key initiatives taken by the
Government are as follows:
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 i. In Union Budget 2022-23 the Department of Telecommunications was allocated Rs.
84,587 crore (US$ 11.11 billion) out of which Rs. 30,436 crore (US$ 3.99 billion)
was revenue expenditure which was 36% of the total expenditure and Rs. 54,150
crore (US$ 7.11 billion) was capital expenditure which is 64.01% of total expenditure.
ii. To drive the development of 6G technology, the Department of Telecommunications
(DoT) has developed a sixth generation (6G) innovation group.
iii. In August 2021, the Department of Telecommunications (DoT) officials stated that it
is working on a package, which includes reducing the revenue share licence fee to 6%
of adjusted gross revenue (AGR) of the operators from the current 8%. This would be
done by reducing the 5% universal service obligation levy by two percentage points
and provid
iv. In July 2021, Bharat Broadband Network Limited (BBNL), on behalf of the
Department of Telecommunication, invited global tender for the development of
BharatNet through the Public-private Partnership model in 9 separate packages across
16 states for a concession period of 30 years. Under this project, the government will
provide a maximum grant
v. The Rs. 12,195 crore (US$ 1.65 billion) production-linked incentive (PLI) scheme or
telecome is expected to bring in investment of around Rs. 3,000 crore (US$ 400.08
million) and generate huge direct and indirect employment.
vi. The Union Cabinet approved Rs. 12,195 crore (US$ 1.65 billion) production-linked
incentive (PLI) scheme for telecom & networking products under the Department of
Telecom.
vii. In 2021-22, the Department of Telecommunications has been allocated Rs. 58,737.00
crore (US$ 8 billion). 56% allocation is towards revenue expenditure and the
remaining 44% is towards capital expenditure.
viii. Under Union Budget 2021-22, the government allocated Rs. 14,200 crore (US$ 1.9
billion) for telecom infrastructure that entails completion of optical fibre cable-based
network for Defence services, rolling out broadband in 2.2 lakh panchayats and
improving mobile services in the North East.
ix. On January 15, 2021, India and Japan signed an MoU to enhance cooperation in the
field of Information and Communications Technologies. The MoU was signed
between the Union Minister for Communications, Electronics and IT, Ravi Shankar
Prasad, and the Japanese Minister for Internal Affairs and Communications, Takeda
Ryota.

x. On September 21, 2020, Prime Minister, Mr. Narendra Modi launched a project to
connect all 45,945 villages in Bihar with optical fibre internet service. This project
will be completed by March 31, 2021 at a cost of Rs. ~1,000 crore (US$ 135.97
million); Rs. 640 crore (US$ 87.01 million) of capital expenditure will be funded by
Department of Tel
xi. FDI cap in the telecom sector has been increased to 100% from 74%; out of 100%. In
October 2021, the government notified 100% foreign direct investment (FDI) via the
automatic route from previous 49% in the telecommunications sector. FDI of up to
100% is permitted for infrastructure providers offering dark fibre, electronic mail and
voice mail.

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Road ahead for Telecom Industry in India :-

Revenue from the telecom equipment sector is expected to grow to US$ 26.38 billion by
2020. The number of internet subscribers in the country is expected to double by 2021 to 829
million and overall IP traffic is expected to grow four-fold at a CAGR of 30% by 2021.

According to a Zenith Media survey, India is expected to become the fastest-growing telecom
advertisement market, with an annual growth rate of 11% between 2020 and 2023.

The Indian Government is planning to develop 100 smart city projects, and IoT will play a
vital role in developing these cities. The National Digital Communications Policy 2018
envisaged attracting investment worth US$ 100 billion in the telecommunications sector by
2022. App downloads in India is expected to increase to 18.11 billion in 2018F and 37.21
billion in 2022F.

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SWOT Analysis :-
It denotes STRENGTH -WEAKNESS-OPPERTUNITY-THREAT and this technique used to
analyze a company during strategic planning. This technique is credited to Albert Humphery
who led a convention at Stanford University in the 1960s and 1970s using data from Fortune
500 companies.

1. STRENGTH :-

a. Robust Demand
b. Attractive Opportunities
c. Policy Support
d. Increasing Investment
e. High return on Investment

2. WEAKNESS :-

a. Late adopters of new Technology

b. Most Competitive Market
c. Market strongly regulated by Government
d. Difficult To Enter Because It Requires Huge Financial Resources

3. OPPORTUNITY :-

a. Increasing mobile subscribers

b. Untapped rural markets
c. Rising internet penetration
d. Development of telecom infrastructure
e. Growing Cashless Transactions

4. THREAT :-

a. Government policies
b. Partiality on the part of the government

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PESTAL Analysis :-

1. POLITICAL FACTOR :-

a. Environmental Concerns
b. Internet Regulation
c. Concerns Over Radiation From Mobile Telephones
d. Converged Regulation

2. ECONOMICAL FACTOR :-

a. Fluctuations In The Economy

b. Overall Economy Of India

3. Social Factor :-

a. Shift Towards The Information Society

b. Mobile Society
c. Commercialization Of The Home
d. Increasing Need For Communications
e. Internet At Home
f. Changing Population Demographics

4. Technological Factor :-

a. Wireless And Mobile Communications

b. Convergence
c. Residential VoIP
d. Real-Time And On-Demand Communications

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Covid 19 Impact on Telecom Sector in India :-

A. Implementation of exemptions for the telecom industry :- Although the MHA had clarified
that telecommunications, IT and ITeS were exempted from the lockdown, there were
instances of local authorities asking personnel of telecom service providers at NOCs (network
operation centres) and call centres to shut down operations. In response, the Department of
Telecommunications (DoT) had written to chief secretaries of states on March 21, urging
them to allow movement of field staff of telecom companies.

It is therefore essential that appropriate instructions are received at the field level so that the
services can continue without interruption. The DoT had also written to chief secretaries of
all states on March 24, requesting them to designate a nodal officer who can be contacted by
service providers and telecom licensees in the event of any difficulty.

This is critical given that on-ground staff need continued access to towers for maintenance, to
identify potential risks, and refuelling. This move may help mitigate some of the issues seen
at the local level, in ensuring that there are no obstructions in the working of the telecom
sector.

B. Rising demand and current infrastructure

While demand for services continues to spike, given India’s dependence on wireless traffic,
there is increased pressure on cellular infrastructure.

Industry analysts have stated that as far as telecommunication networks are concerned, fears
of network choking are unfounded since there is sufficient additional capacity. However, the
switch in network usage to residential networks as opposed to enterprise networks may
present another set of challenges on managing network load. This trend may result in deeper
broadband penetration for residential use. In order to meet demand, going forward, the COAI
has written, vide letter dated March 20, 2020, to the Government to ease norms and expedite
approvals for providing services, setting up towers and to instruct state-owned firms (MTNL
and BSNL) to not terminate any interconnection points.

C. Impact of the lockdown restrictions

Admittedly, while there is increasing demand for telecom services, the telecom sector is
dependent on several other industries, which have been adversely affected by the lockdown.

1. Impact on Manufacturing of hardware and other systems

According to reports, handset and network equipment manufacturers will be impacted due to
global disruption in supply chains, which will lead to increased costs and lack of availability.

According to industry body Indian Cellular and Electronics Association (ICEA),

manufacturers may incur losses to the tune of nearly INR 15,000 crore due to suspension of
production. Market analysts have recommended easing taxes and levies and relaxing costs on
financial aid to ease the burden on the manufacturing sector, which will have a domino effect
on the telecom industry.

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2. Addition of new subscribers

Given the movement restrictions during this lockdown, there has been a sharp dip in the
number of customers purchasing new sim cards (including for migration to 4G networks).

COAI has indicated that during a regular month, the average net addition is 3 million
subscribers, but due to COVID-19, the number in March may be below 1 million. We are
likely to see impact on revenues only in the first quarter of FY 2020-21. COAI has stated that
it takes around 30-45 days for new subscriptions to impact revenue and therefore the impact
of a dip in new subscriptions will be seen only around April end or early May.

Additionally, the lockdown is also likely to delay 5G spectrum auctions and its consequent
rollout as network operators are currently focused on meeting increased demand without a
dip in service quality. Due to restrictions on manufacturing and movement of goods, this will
also limit the ability to roll out 5G enabled handsets.

3. Impact on tariffs

Even after the last round of tariff hikes late last year, India continues to have the lowest tariff
rates in the world.

The lower tariffs, as a result of increased competition due to new entrants in the market, led
to a situation where the revenues of the incumbent Telcos were considered almost
unsustainable for their balance sheets.

Reports indicate that a second round of tariff hikes had been planned in the April-June
quarter of 2020, however, given

(i) the impact of COVID-19 on spending ability (especially of low income subscribers),

(ii) the benefits required to be extended by Telcos

(iii) the dip in subscriptions, the planned tariff hikes may be delayed to the second half of
2020.

4. Subscriber Retention

Market share is one of the most important performance metric held closest to the chest by
Telcos. Given the challenges of increasing market share in such times, focus would
automatically move towards preserving the existing subscriber base. This is most challenging
with respect to low ARPU (Average Revenue Per User) subscribers. During this lockdown
period, there are reports that Telcos have granted dispensations to their subscribers – like
extended validity, additional talk time benefits, etc., as attractions to continue service. TRAI,
raising concerns around price discrimination, has, on April 7, 2020, written to Telcos,
alleging that they were selectively increasing validity of prepaid users during the lockdown.
However, the Telcos have written back to the regulator, contending that they have provided
benefits worth at least INR 600 crores to subscribers who are at the bottom of the pyramid to
ensure connectivity during this time. These initiatives would be towards reducing drop-outs
for low ARPU subscribers, who otherwise would not necessarily have be in a position to
make timely recharges, either due to monetary reasons or access to online recharging
facilities. This initiative also helps towards ensuring connectivity of larger masses and for
widespread information dissemination, which is critical at this point. This is consistent with

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the representation by the Telcos to TRAI, where they have stated that if these benefits were
offered to an extended pool, this would amount to “an unjustified subsidy” to the customers
who can afford these services and cause a steep loss to the industry.

Subsequently, TRAI has undertaken a detailed review and has decided not to issue any
further directives at present.

Reference :-

1. https://www.ibef.org/industry/telecommunications
2. https://www.ukessays.com/essays/marketing/analysis-of-telecom-sector-
marketing-essay.php
3. https://www.scribd.com/document/193208678/SWOT-Analysis-of-Telecom-
Industry
4. https://corporate.cyrilamarchandblogs.com/2020/05/covid-19-its-impact-on-the-
telecommunications-sector-in-india/

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