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Knowledge At MET

Knowledge At MET

Telecom Sector: A catalyst in The Growth of Indian Economy

Businesses do not exist in vacuum and so do the societies. Businesses operate in the social domain and establish their identity and image through their conduct while operating in the social domains of the territories whether it’s good or bad, ethical or exploitative. Telecom companies have revolutionised the way people communicate with each other, through phone, messaging, e-mails, social media websites, video conferencing or over digital communication. The complete scenario of the communication has been changed thereby saving billions of dollars and massive amount of physical energy thus changing the way people interact and do business. The Governments have also been able to benefit by using the telecommunication facilities in handling the disaster incidents by sending the relief operations, weather forecasts by the satellite pictures, monitoring of social health and welfare programmes, education and sharing of knowledge has become very easy. The Governance has become more effective with the revolution in the telecom sector and its technology which has led to the meaningful contribution in the GDP of the country’s economy.

Keywords Telecom sector, communication, economic growth, technology

1. Introduction

In today’s information age, the telecommunication industry and its technology have a vital role to play in bridging the huge massive data with the end user and in turn the businesses. It is 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. Since time immemorial the communication has played vital role in progressing the human lives across continents, in the local and global communities. Communication works as a peace maker and also sets the stage on blaze when gone wrong leading to serious conflict even to the extent of going to wars.

Indian telecom sector is more than 165 years old and was first introduced in 1851 in India, when the first operational land lines 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 Indian telecom sector was entirely under government ownership until 1984, when the private sector was allowed in telecommunication equipment manufacturing only. The government made its strong efforts by developing R&D 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. The actual evolution of the industry started after the Government separated the Department of Post and 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

Now with the opening of the Indian telecom sector for the private sector since the late 90s the entire scenario is of communicating changed, the communication to millions of the people in India is a reality now with a wide spectrum of media. The communication process itself has undergone sea change. With the services offered by Telcos i.e. advent of internet, web sites and blogs, Digital Social Media, the world has shrunk bringing people closer, becoming like a small village. Today one can find about the company, its services and products through the web search engine like Google, Bing, etc., sitting in any corner of the world and also get the products delivered within few days. Then big companies was wanting to communicate in the local languages with the consumers as technology is changing very fast and the new entrant can make rapid inroads into the existing players market. Gone are the days when companies and brands used to dictate the terms, now customers demand value for money and want to be informed to the maximum.

Today there are close to 15 operators operating in India and our country has the fastest growing telecom network in the world with its high population and development potential. Major operators in India are Bharti, Airtel, Vodafone, Idea, Uninor, Reliance, Tata Docomo, Spice, BSNL, Aircel, Unitech, Sistema, Loop, Videocon, Quadrant, S Tel, Etisalat and MTNL.

The telecommunications system in India is the 2nd largest in the world. Competition has caused prices to drop and calls across India are one of the cheapest in the world. The total number of telephones in the country stands at 957.61 million, while the overall tele-density has increased to 76.75% as of 30 September 2014 and the total numbers of mobile phone subscribers have reached 930.20 million as of September 2014. The mobile tele-density had increased to 74.55% in September 2014. The wire line segment subscriber base stood at 27.41 million.

Further, the urban tele-density stood at over 146.67%, while rural tele-density was at 41.02%, and this gap is increasing. As majority of the population resides in rural areas, it is important that the government takes steps to improve rural tele-density. No doubt the government has taken certain policy initiatives, which include the creation of the Universal Service Obligation Fund, for improving rural telephony. These measures are expected to improve the rural tele-density and bridge the rural-urban gap in tele-density. “Private operators hold 90.05 per cent of the wireless subscriber market share whereas BSNL and MTNL, the two PSU operators hold only 9.95 per cent market share”.

Similarly Businesses do not operate in the vacuum and like individuals they also exist and breathe in the society, they communicate with the society at large and also within their own house. In the modern times term Corporate Communication has assumed great importance, as many factors decide its success and failure can hit the business if they are not active and alert. Businesses need to communicate with their stakeholders in a very systematic and effective manner.

The Telecom Services

  1. Landlines In India landline service is firstly run by BSNL/MTNL and after there are several other private players too, such as Airtel, Reliance Communications, Tata Teleservices. Landlines are facing stiff competition from mobile telephones. The competition has forced the landline services to become more efficient. The landline network quality has improved and landline connections are now usually available on demand, even in high density urban
  2. Mobile Cellular The mobile telephone network has aggrandized greatly since 2000. The number of mobile phone connections crossed fixed-line connections in 2004. India primarily follows the GSM mobile system, in the 900 MHz band, whereas the recent operators also operate in the 1800 MHz band. 3G operations are carried out in 2100 MHz band. The dominant players are Airtel, Vodafone, Idea Cellular, Tata DoCoMo, Reliance Communications and state run BSNL/MTNL. There are many smaller players like Aircel, Videocon, MTS, Uninor with operations in only a few states. International roaming agreements exist between most operators and many foreign carriers. The data reported by service providers indicates that rural India is emerging as the growth driver. Mobile services subscriber base in rural areas increased to 382.50 million in September 2014 from 374.96 million in February 2014.
  3. Dialling System On landlines system, intra circle calls are considered local calls while inter circle are considered long distance calls. Government is now working to integrate the whole country in one telecom
  4. Visitor Location Register (VLR) Out of the total 20 million wireless subscribers, 812.11 million were found active in September, 2014. The total active VLR number excludes the CDMA VLR figure of BSNL, as the service provider has not provided the VLR figures corresponding to their total CDMA subscriber base. The proportion of VLR subscribers is 87.30% of the total wireless subscriber base reported by the service providers.
  5. Internet Users Number of Internet users in India is the 3rd largest in the world next only to China and the United States of Though the number of internet users is high, internet penetration is still much lower than most countries round the globe. In total there are 24.3 million subscribers at the end of 2014 which is third largest in the world after China & USA.
  6. Broadband Subscribers Broadband in India is defined as 512kbit/s and above by the government regulator (New definition of Broadband notified on 18 July 2013). Total subscribers (wireline + wireless combined) were 73 million (Sept 2014).
  7. Internet Service Providers (ISPs) & Host: 86,571 (2004)

Telecommunication has emerged as a key driver of economic and social development in an increasingly knowledge intensive global scenario. Sustained adoption of technology offers viable options in overcoming developmental challenges in education, health, employment generation, financial inclusion, infrastructure and much more. The unprecedented increase in tele-density and sharp decline in tariffs in the Indian telecom sector have contributed significantly to the country’s economic growth. Besides contributing to about 3% to India’s GDP, Telecommunications, along with Information Technology, has greatly accelerated the growth of the economic and social sectors.

The last decade is characterised by significant penetration of telecommunications in India. The number of telephone connections has increased to 893 million in January 2013 as compared to 41 million in December 2001. This growth has been primarily fuelled by the cellular segment (mobile phones) which alone accounted for 862 million connections at the end of January 2013. The composition of the telecom sector too has witnessed a structural change, with the private sector accounting for around 88 % of the total connections. While urban tele-density has risen to 148%, rural tele-density has also increased significantly to 40%.

To arise from the challenges in terms of consumer needs, technology and structure of the industry, Government has adopted the National Telecom Policy (NTP) 2012, to drive the next revolution in growth of telecom services and provide a stable policy regime for the years to come.

The policy has set ambitious targets of 100% rural tele-density and 600 million broadband connections by 2020. NTP- 2012 outlines various measures envisaged to develop a conducive ecosystem to achieve these lofty aspirations. To spur this phase of growth of the sector, Government has already launched a National Optical Fibre Network project called NOFN. NOFN will connect over 250,000 gram panchayats through high speed, high capacity optical fibre medium. This network in conjunction with private sector participation at the last mile would result in provision of a range of innovative services to rural India. At the same time, this would enable people in rural areas to participate in, contribute to and derive benefits from the information economy.

Process to implement the various provisions of NTP-12 has already been initiated. Spectrum has been delinked from the Licenses. While auction was adopted as a methodology for allotment in 2010, the principle has been further refined to allocate spectrum for commercial services through auctions, which were conducted in November, 2012 and March, 2013. To simplify the licensing regime, a Unified Licensing Regime through which the licensee can offer multiple services through a common process has been initiated and expected to be concluded soon.

Conscious of its responsibility towards parts of the country where diffusion of telecom services needs to be accelerated further, the Government is in the process of finalising development plans for extending the reach of telecommunication facilities in Left Wing Extremism (LWE) affected areas. Focus is being given towards implementation of similar plans for the North East Region (NER) and the Islands.

Factors Facilitating Growth of the Telecom 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.

1)     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.

2)     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.

3)     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.

4)     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.

5)     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.

6)     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 has 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.


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 the telecom 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.

In today’s information age, the telecommunication industry has a vital role to play. Below is the key impact as quoted by (Chris Williams):

  • A doubling of mobile data use leads to a growth in the GDP per capita growth rate of 5 percentage points
  • Countries characterised by a higher level of data usage per 3G connection have seen an increase in their GDP per capita growth of up to 4 percentage points.
  • A 10% rise in 3G penetration increases GDP per capita growth by 15 percentage points. In developing markets, a 10% expansion in mobile penetration increases productivity in the long run by 4.2 percentage points.

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.

Telecommunication is pivotal to a country’s socioeconomic growth. It is one of the main architects of the accelerated growth and progress of different segments of the economy. Narrowing access gaps and removing barriers to information dissemination are prerequisites for promoting equitable and sustainable development as well as political and social cohesion. Increasing connectivity is highly instrumental in improving governance, business communication, security, response to emergencies and in the overall strengthening of the sociocultural ethos of the country. The advantages of the advent of telecommunications are manifold and explicitly verifiable from the phenomenal success of the sector.


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General Bibliography

Authored by:

Mr. Randhir Lamba


7 Tips for Finance Managers From Ram Charan

Ram Charan has real-world advice for business leaders who want to thrive in disruptive times.

Ram Charan’s skill in translating complex business theory into plain English has proved useful to business leaders in the real world. In recent times, Forbes magazine has dubbed him “the most influential consultant alive”. The former Harvard Business School professor has spent more than 35 years advising some of the world’s top executives.

Here are seven tips from Charan for senior finance managers who want to stay on top in disruptive times.

1.   Forget the comfort zone

In a globalised, internet-connected world, “business as usual” quickly leads to having no business at all. Looking for incremental improvements, such as small gains in operational efficiencies or slightly better margins, is not enough anymore. While change has long been a factor in the business environment, disruption has now become structural and ongoing. This requires a new style of leadership, focused not on coping with change but on anticipating, creating and exploiting changes in the environment.

2.   Do the maths

A key change of the past decade has been the “maths revolution”, in which complex algorithms and related software are used to build direct connections with customers, build and manage global supply chains, and map possible future paths. Business leaders must become familiar with the language and capacities of maths- based tools, even if it means doing some short courses.

“We have barely scratched the surface of the potential uses,” says Charan. “The task is to understand the future.”

“The growth opportunities can be immense for those who seize the opportunity.”

3.   Build agility into the organisation

There is a natural tendency to see an organisation’s existing core competencies and competitive advantages as intrinsic to its future, but in reality they have a decreasing shelf life. Leaders have to be on the lookout for new opportunities for profitable growth, even if it means a thorough reform of the company.

Charan’s advice: at least four times a year, leaders should ask themselves what new developments can they utilise to create a new need or give the customer a more compelling experience?

4.   Look to the long term

An emphasis on quarterly results pushes a company into a reactive, incremental pattern. What is needed is an offensive mindset, even if it means sacrificing short-term profits while a reform program is underway.

A communications strategy has to be built into the re-structuring campaign, to explain to both employees and investors why change is not just desirable but necessary. New metrics to act as “stepping stones” might be needed to make the direction clear and to judge the results of the campaign.

5.   Follow through on execution

Corporate leaders cannot focus solely on strategy; they must ensure that a reform program is executed in line with goals. This requires that they identify areas within the company that are likely to be resistant to change, and then use their authority to push reform in these sectors. Issuing edicts from the corner office is not enough; personal involvement is also needed.

“Once you know where the organisation must go, define the steps that must be taken,”

Charan says.

“It’s a matter of working backwards to the present and identifying the steps that will move you along.”

6.   Look for change signals

Indications of paradigm shifts need to be seen early. Leaders should aim to pick up on anomalies, contradictions and emerging trends in society, business and technology by reading widely and by expanding their information networks. Regularly bringing together people from across the organisation to discuss the future can be a positive step.

But while any person, including a corporate leader, might find it easier to interact solely with people who agree with them and come from a similar background, this tendency should be resisted. Charan recommends that a leader should make a deliberate effort to also communicate with and learn from people unlike themselves in ideology, tastes and origin.

7.   Top-level team

To anticipate and positively respond to structural uncertainty, there should be a team of senior people that meets at least several times a month, with the chief executive as the chair. The work of the team must be transparent, so people can see how decisions affect each part of the business and how resources are allocated towards common goals. Team members can better organise their part of the company if they can visualize the progress of the whole, and coordinate responses to any challenges that arise as part of the reform process.

“This cannot be just another committee,” Charan emphasises.

“The point of this group is to consider the external environment, and how the company can best move to exploit disruptions. The task is to understand the future.”

Compiled by:

Dr. Nirmala Joshi

Research and MET SEVA Head

MET Institute of Management, Mumbai


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