India is the world’s second largest telecommunications market with about 1.17 billion subscribers as of 2022. According to Forbes India, this industry contributes about 6% to the Indian GDP. The third-largest industry in terms of FDI inflows, the telecom sector supports 2.2 million jobs directly and indirectly and accounts for 7% of all FDI inflows. The amount of FDI entering the telecom sector between 2014 and 2021 increased by 150% to $20.72 billion from $8.32 billion between 2002 and 2014. The automatic approach currently permits 100 percent Foreign Direct Investment (FDI) in the telecom industry.
It is really weird to learn that there are only four mobile operators who are dominating in such a big market. The four companies include, Jio, Airtel, Vi and BSNL.
Here are the challenges faced by this industry in India:
- High Right-of-Way (ROW)
In many cases, Indian Government (especially the state governments) tend to charge heavy funds for permitting the laying of fiber and setting up the network towers. Also, the government is widely criticised for corruption and taking too much time for paperwork and implementations.
- Limited Availability of spectrum
The radio frequencies allotted to the mobile industry and other industries for wireless communication are referred to as spectrum. According to a research, India’s available spectrum is less than 40% compared to other nations like China having more than 50%. Mobile companies struggle to offer services at acceptable speeds due to the government’s expensive auctions of spectrum.
- Lack of telecom infrastructure
The amount of network towers, dishes, office buildings etc. is unjustified for this second-largest market in India where an overall tele-density is of 84.88 percent, of which the rural market’s tele-density, which is largely untapped, is 58.16 percent and the urban market’s tele-density is 134.70 percent.
- Average Revenue Per User is declining
The Indian telecom industry is presently seeing a sharp and sustained reduction in ARPU, along with declining profits and occasionally significant losses, which is forcing it to consider consolidation as its only option for increasing revenues. Recent Supreme Court approval of the government’s request to collect from telcos adjusted gross income of approximately Rs 92,000 crore has added to their concern.
- Devusinh Chauhan, a minister of state for communications, claimed that by auctioning off Rs 1.5 lakh crore worth of 5G spectrum, the government has advanced the introduction of 5G technology. Devusinh Chauhan, a minister of state for communications, claimed that by auctioning off Rs 1.5 lakh crore worth of 5G spectrum, the government has advanced the introduction of 5G technology.
- India will require 22 million skilled people in 5G-focused industries by 2025, including cloud computing, robots, and the Internet of Things (IoT).
- 500 million more Indians will have access to the internet over the next five years because to increased mobile phone adoption and falling data costs, opening up new business options.
- The Department of Telecommunications received Rs. 84,587 crore (US$ 11.11 billion) in the Union Budget 2022–23, of which Rs. 30,436 crore (US$ 3.99 billion) went toward revenue expenditures, accounting for 36% of total expenditures, and Rs. 54,150 crore (US$ 7.11 billion), representing 64.1% of total expenditures.
- The report claims that the challenging scenario for the industry may improve in the future as tariff increases and continuous growth in data consumption would lead to an increase in revenue of 6–8%by the end of FY22. Revenues for FY22 would rise as a result of the 20–22% tariff increases in November 2021; however, the full impact wouldn’t be felt until FY23.
- The size of the worldwide telecom market, which was estimated at USD 1.74 trillion in 2019, is anticipated to increase at a CAGR of 5.0 percent from 2020 to 2027.