Tuesday, June 14, 2011

Indian Telecom Sector - Growth Momentum Continue



The telecommunications sector in India has grown phenomenally in the recent years. In fact, it is the rapid growth in the telecom infrastructure sector that Indian IT and ITES sectors have established them as the global force. Buoyed by booming demand, India surpassed the US in April, this year, to become the second largest wireless network in the world, after China. The number of total wireless subscriber has grown to more than 277 million, as on May 31, 2008. As a result, the teledensity increased from 12.7 per cent in March 2006 to 23.9 per cent in December 2007 and has further improved to 27.6%, as on May 31, 2008.

Like elsewhere in the world, in India too mobile telephony continues to dominate the traditional landlines. Improved affordability of wireless phone has been major a factor which has triggered a kind of wireless telephony phenomenon in the country. The sudden explosion in the subscriber base has also led to dramatic fall in telephone tariffs in recent years. According to the ES 2007-08, the National Long Distance (NLD) tariffs have dropped from Rs.1.20-Rs.4.80 per minute in 2003 to a rupee per minute under One India Plan, w.e.f. March 1, 2006.


Rural connectivity too has improved significantly. According to the ES 2007-08, out of more than 2.27 million Public Call Offices (PCOs) functioning in the country, 0.2 million are in the rural areas. The Mobile Grameen Sanchar Sewak Scheme, which is providing telephone at the doorstep of villagers in about 12,000 villages, is also in place. More than 0.56 million villages have been covered with Village Public Telephones (VPTs) to provide universal access to telecom facilities in the rural area

Several reports suggest the strong growth momentum to continue further in India, in particular, and BRIC region, in general. According to the report, Mobile BRIC: Extreme Growth Ahead, by research firm, eMarketers, India along with other BRIC countries is likely to have over 1.7 billion mobile users by 2012, driven by emergent middle class. The report said that out of the 1.7 billion expected subscribers in BRIC (Brazil, Russia, India and China) nations, China is expected to top the chart with 800 million, followed by India with 560 million mobile users, Russia with 189 million users and, Brazil at 176 million. It says further, in India, out of the 560 million mobile users, about 53 per cent or about 298 million subscribers would use mobile internet. In case of China, the report forecasts the country would have 40 per cent or 320 million mobile internet users. The report further predicts that BRIC region will drive the market for both mobile and interactive marketing industries, fueled by an emerging middle class population of about 1 billion by 2015.

Mobile Technology – 1G to 3G and Beyond
Since Bell Systems introduced its Improved Mobile Telephone Service technology in the 1960s, the mobile or wireless phone standards have undergone significant changes. These phases are divided into four generations viz., 1G, 2G, 3G and, 4G, which is currently under the development stage. However, some even suggest of 0G (zero generation), which represents the technology used in the period just after the World War II. ‘The big boom in mobile phone service really began with the introduction of analog cellular service called AMPS (Analog Mobile Phone Service) starting in 1981. This generation is 1G, the first for using cell technology that let users place their own calls and continue their conversations seamlessly as they moved from cell to cell.’26 It used FDM or frequency division multiplexing wherein each phone call used separate radio frequencies or channels. It was succeeded by what is called digital cellular. This saw emergence of two competing standards, one that used a digital version of AMPS called D-AMPS using TDMA (Time division Multiple Access), while the other was based on Code Division Multiple Access or CDMA. While the two standards became popular in the US, Europe opted for a third standard called GSM, launched in Finland in 1991, which however, was based on TDMA. Digital transmissions not only allow for efficient usage of spectrum but also facilitate non-voice services such as data and video downloads, Internet browsing, text messaging etc. It was probably during this phase that the ‘G’ thing became pronounced.

As mobile phones evolved from just being a tool offering voice services to one offering a plethora of services such as data downloads, video, music, gaming, TV etc., it has spawned a new generation of standards called 3G, work on which began in 2001. The 3G ‘subscribers will have expanded functions to include videoconferencing, file sharing and faster audio and video downloads.’27 However, operators have found it hard to launch 3G successfully so far. In the meanwhile several intermediate generations such as 2.5G (mainly East Asia) and even 2.75G have  been launched in many countries. Then there are other standards such as GPRS (General Packet Radio Services) which is an extension of the GSM (Global System for Mobile Communications), and EVDO (EVolution Data Only). And even before 3G could see a full-fledged launch, mobile operators in Japan and elsewhere are busy developing a new standard of wireless technology termed, 4G.

Nonetheless, Japan became the first country to implement 3G. Today, 3G is a standard of choice in about 25 countries. Some of its types include International Mobile Telecommunications (IMT-2000), Wideband Code Division Multiple Access (W-CDMA), Time Division-Code Division Multiple Access (TD-CDMA), CDMA 2000 and CDMA 2001.

Bright Future Ahead
According to experts, mobile telephony is going to further consolidate its dominance of the global telecommunication landscape. And in fact, it would be the key driver fueling the growth of the industry in the near future. Nevertheless, VoIP is going to be the technology to watch out for and will see significant spurt driven by strong growth in broadband penetration across the globe as tariffs fall and PC penetration rises.

According to the report, “Global Telecom Market Status and Forecast,” broadband, which is expected to grow at a CAGR of 14% over the next five years, will continue to be the fastest growing segment of the global telecommunications sector, driven in particular by low broadband penetration regions such as Middle East and Africa (MEA), Latin America and Eastern Europe. In another report by, a Report Buyer, a business intelligence firm, forecasts that, between 2007 and 2011, the industry is expected to grow at a compounded annual growth rate (CAGR) of 4.2% and revenue is expected to increase by $347 billion to reach almost $1.9 trillion. The report further suggests that an increasing percentage of the world’s telecom revenue will be generated by mobile and Internet services and that mobile will surpass the fixed market, in terms of revenue. All this suggests for a bright future ahead for the global telecommunications sector.

N Janardhan Rao, Senior Economist.

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