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Key Challenges of Telecom Sector in India

Niha Sayyad
MBA Student, II Semester
Aishwarya Institute of Management & IT

ABSTRACT: The Indian telecom sector has come to an interesting phase of its evolution.
All Telecom operators are currently in the process of consolidation especially after Jio’s
launch in the market and looking at each cost expenditure for its optimization. The primary
reason of this sudden shift is because of the entry of a big time player Jio in India. It is
evident from the current scenario that the Voice alone will not be sufficient to generate
revenue and hence the focus is required to be shifted towards various data services.

I. INTRODUCTION
The Indian telecom sector has come up as one of the leading potential markets in the
global perspective and has witnessed high-paced growth over the past 25 years. The telecom
industry of India has experienced dramatic changes over the years. Technological innovations
and regulatory changes have been the two major factors responsible for setting the stage right
for the evolution in this space. The sector was liberalized in 1994 with the introduction of the
National Telecommunications Policy. The Telecom Regulatory Authority of India or TRAI,
an independent regulator for the Indian telecom sector, was set up in 1997 to reduce the
interference of the Indian government in operational matters of telecom companies.

India is currently considered the world's second-largest telecom market. India’s

telephone subscriber base expanded at a CAGR of 17.44 per cent, reaching 1,206.22 million
during FY07–18. As of 2017-2018, the wireless segment (98.10 per cent of total telephone
subscriptions) dominated the market. During FY07-18, wireless subscriptions in the country
increased at a CAGR of 19.62 per cent, with the number of subscribers reaching 1,183.41
million in FY18. The top five players in the sector are Bharti Airtel, Vodafone, Idea, Reliance
and Bharat Sanchar Nigam Ltd or BSNL.

The recent disruption has been witnessed in 2016 with the entry of Jio and it has
announced the Free voice calls, drop in data tariffs, sharp competition among Indian telecom
companies. It has brought the telecom industry to a new level in terms of tariffs, services and
technology and has also created substantial expectations among mobile customers. The
launch announcement offered the lowest rate (worldwide) for the Internet data at Rs 50 per
gigabyte (GB). Also, all its services were offered free, on promotional basis, till December
31, 2016 (which was further extended till March 31, 2017). This kind of cut-throat disruption
by a new player (with huge financial muscle) is expected to bring consolidation in the
industry.

These developments in the Indian telecom sector shook all major telecom operators.
Jio has proved to be a game-changer and the company's pricing strategy has disrupted the
entire market and forced all the telecom companies to devise ways and means to survive and
face this stiff competition. Jio's strategy is to focus on the data business aggressively instead
of the voice as the data business offers high growth rate potential. While the voice market has
already matured in India, data relating to voice and non-voice service revenues of the top
three industry players (Bharti, Vodafone and Idea) reflect this trend as well. Apart from its
unique pricing proposition, Jio's network is technologically more advanced and sophisticated
for high-speed data business compared to other existing players in the market.
 Key Challenges of Telecom Industry

This can be witnessed by evaluating the falls in Revenues and Customers of Vodafone:

 Market Position and Competition after Introduction of Reliance JIO Network

Source : The Economic Times

After introduction of Jio Network, The Total Gross Revenue of Vodafone was decreased
by 4.8%.

Source : The Economic Times

Due to rapidly increasing No. of Customers of Reliance JIO, Increase in the Total No. of
New Customers of Vodafone India has decreased i.e. 3.20 million.

After deregulation and liberalization in the telecom sector in India, it has seen a
spectacular success. It was possible to achieve with consistent efforts from Operators and
regulators (TRAI) and Government sides. To further fuel the growth, it is further expected
that smart phones will be made available at lowest prices and Internet data plans will further
be slashed to a new lower level. These smartphones has got to be equipped with various Apps
in various regional languages covering local issues / utilities like information, health,
financial and entertainment of their importance. The smartphones with these applications are
expected to interest and fuel the growth of various data services.

II.KEY CHALLENGES
The primary responsibility to come out of the situation lies with the telecom
operators. However, other companies like Mobile handset manufacturers, equipment
companies, contents providers and mobile apps producing companies, social media firms
such as Facebook / WhatsApp and video game manufacturers also have to play a very
important and critical role.
 Key Challenges of Telecom Industry

1. Technological Constraints
To be able to provide access, mobile operators need spectrum, which is a scarce
resource. In comparison to other countries the amount of spectrum available for commercial
use is low. Therefore, it becomes difficult for mobile operators to provide services at
reasonable speeds and at low prices that encourage adoption and usage.

2. Handsets Constraints
Availability of affordable smartphones and lower rates are expected to drive growth in
the Indian telecom industry. In order to experience a good Internet browsing, download and
Video, it really becomes important for us to provide consumers a phone having advanced
features at an affordable cost. Such phones are widely called as smartphones. These phones
have many other features over and above providing access to the Internet. The current price
of smartphones is also a hurdle to adoption.
This telecom sector is a technologically dynamic industry as the new products and
technologies are being invented and deployed quite frequently. Smartphone prices are
expected to decline further and new technologies related to network & handsets are being
used to make more efficient use of the available spectrum.

3. Variety of Products and increased financial overheads

With millions of subscribers, a variety of new products, bundled and customized
solutions, the operational support services like service configuration, order fulfillment,
customer care, and billing are becoming increasingly complex. Hence, the cost of handling
these operations requires resources and different tools, thus, increasing the financial
overhead.

4. IT and New Technologies

Telecommunication providers need to upgrade their IT and connectivity infrastructure
and focus on providing data and voice services that are high quality, reliable, and affordable.
Security of the networks has become a major priority for the Telcos and they are facing
challenges with the emergence of new threats that are powered by new technologies. So, a
number of operational and technical innovations are needed to meet customer expectations of
complete system security from network till the device level.

5.
1. Active Role of Government and Regulator
There is a need to examine the role of the government and the various institutional
actors in the fray. The government's prime concern seems to be in the revenue it collects
through various auctions of Radio frequency spectrums. The only agency that seems to be
interested in the daily travails of the telecommunications industry is the Telecom Regulatory
Authority of India (TRAI). It is because TRAI shares a close relationship with the industry.
Whatever may be the reason, its workings are fairly transparent and in fact, often provides an
insight into the thought process of operators.

III. TOP TRENDS IN THE TELECOMMUNICATION INDUSTRY IN 2019

The telecommunication industry is going through a transformational phase of
development – to acclimatize itself per the new technological and cloud trends.

1. 5G Networks
The telecom carriers are working on providing the 5G networks to spark an enormous
wave of faster internet. While the technology has not yet been fully defined, carriers are
proceeding with the lab and field trials in their race to stay competitive.
The full, mass-market 5G coverage is expected by approximately 2020.
 Key Challenges of Telecom Industry

2. Secure and reliable services

Modern telecom environment offers a rich set of services that need reliable and secure
authentication. The number of smartphones equipped with biometric fingerprint readers is
increasing. This technology is also being used by retailers, financial institutions, government,
and even schools, to verify identities.

Other biometric mechanisms like facial or retinal recognition, are also telecom trends
and are likely to pick up steam in the coming years. An increasingly large number of telecom
companies are adopting biometric SIM cards for curbing crimes related to mobile phones and
terrorist attacks as well.

3. Artificial Intelligence (AI)

AI allows smartphones to perform highly sophisticated functions such as augmented
reality (remember Pokémon Go), speech recognition, indoor navigation, and even learning
the daily tasks and preferences of an individual to enable digital assistants like Siri and Alexa.

4. Mergers & Acquisitions

With cut-throat competition, new technological innovations disrupting the existing
customer base, the year doesn’t seem to be very easy for the telecommunication sector. That’s
why a number of companies are looking to partner with media and content firms. Like
Vodafone India and Idea Cellular Merger.

IV. CONCLUSION
The telecom sector in India have to deal with various challenges like maintaining the
sufficient spectrum, Adoption of new technologies faster to be able to use new features and
techniques to serve the customers with better and feature rich service, Government and
regulatory agencies, various mobile handsets available from various companies brings lot of
issues and content partners etc. Also, it is evident from the current scenario that the Voice
alone will not be sufficient to generate revenue and hence the focus is required to be shifted
towards various data services.

V. SUGGESTIONS
In order to gain a competitive edge, organizations should adopt the following
practices:

1. Retain new mobile broadband users

Mobile broadband users tend to churn a lot because most of the new users using pre-
paid mobile services are either trying out internet for the first time, or are migrating from
another service. TRAI can go ahead with its plan to extend validity of prepaid data packs
from 90 days to 365 days to counter this, and can take more steps to encourage new
broadband users.
2. Use Cable Service providers
Digitizing cable service providers is acting as a catalyst in increasing broadband
penetration. Telecom service providers have tied up with local cable service providers to
use their understanding of the local urban and rural features to set up telecom
infrastructure.
3. Encouraging Virtual Network Operators
The government has recently framed guidelines for VNOs based on recommendations
by TRAI. These will have the ability to resell bandwidth, with or without value addition,
which will increase the competition and reduce the prices for the end user. VNOs can
provide services from more than one operator, and consolidate these services for the end
user.
 Key Challenges of Telecom Industry

4. Regulate mobile towers in urban areas

These measures include sealing of towers, physical dismantling or cutting of
electricity supply. Once a tower is taken down it can take up to two years for it to be
replaced. These problems can be taken care with the implementation of a single national
policy for telecom infrastructure in urban areas, along with regulations that allow better
use of this infrastructure. One way in which the existing infrastructure can be used more
economically is to allow for infrastructure sharing between telecom companies.
5. Encouraging service providers
Setting up infrastructure is costly, and there are many ways that the government can
reduce the financial burden on service providers. There can be a single point for
clearances and licenses, which require multiple submissions for various agencies. There
can be subsidies for importing of equipment needed for improving broadband
infrastructure. The government can take measures to encourage funding for telecom
projects, and alternative sources of such funding.
6. Other Suggestions :
  Availability of sufficient spectrum.
 Technology to enable faster connections and availability by new compression and
 other techniques
  Making available more innovative and interesting applications for customer’s usage.
 The government and the regulators (TRAI) must provide the right mix of policy to
help in making all that happen.

REFERENCES

 Reliance Jio added 8.74 million users in February: TRAI - ET Bureau , Updated: Apr 25,
2018, 08.22 AM IST - https://economictimes.indiatimes.com/news/company/corporate-
trends/reliance-jio-added-8-74-million-users-in-february-trai/articleshow/63893396.cms
 Vodafone Group Plc Annual Report 2018 -
https%3A%2F%2Fptop.only.wip.la%3A443%2Fhttps%2Fwww.vodafone.com%2Fcontent%2Fannualreport%2Fannual_report18
%2Fdownloads%2FVodafone-full-annual-report-
2018.pdf&usg=AOvVaw0B_9X590Ht0UAT9F0fm3Ks
 IBEF Report – Telecommunication - June 2018 – Source : Telecom Regulatory
Authority of India, Aranca Research -
https://www.ibef.org/download/Telecommunications-Report-Jun-2018.pdf
 Vodafone India and Idea Cellular have come together to create India's #1 Telecom
company - https://discover.vodafone.in/about-us/awards-achievements?section=consumer
 Munesh Jadoun - Top 5 challenges and trends in the telecommunication industry in 2019 -
March 16, 2018 - https://www.racknap.com/blog/top-5-challenges-trends-
telecommunication-industry/