Macroeconomic Factors Affecting Telecom Industry
- 1. MACROECONOMIC FACTORS AFFECTING TELECOM INDUSTRY
- 2. •India is currently the world’s second-largest telecommunications market with a subscriber base of 1.20 billion and has registered strong growth in the past decade and half. •As of January 2019, India has witnessed a 165 per cent growth in app downloads in the past two years. •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 •With 604.21 million internet subscribers, as of December 2018, India ranks as the world’s second largest market in terms of total internet users. •Further, India is also the world’s second largest telecommunications market, with total subscriber base of 1,183.51 million at the end of March 2019 •The telecommunications sector consists of three basic sub-sectors: telecom equipment (the largest), telecom services (next largest) and wireless communication. Telecom is growing less about voice and increasingly about video, text, and data. INTRODUCTION TO TELECOM INDUSTRY
- 5. ● Increased personal disposable income -> greater purchasing power -> greater network usage ● As per Economic Times, 10% rise in internet usage leads to 1.3% increase in GDP but in India last year, a similar rise in internet led to about 3.3.% growth in GDP. PERSONAL DISPOSABLE INCOME
- 6. ➢ Any fall in the interest rates will lead to greater investment by the businesses in the telecom industry. ➢ The government says carriers haven’t invested enough in their networks to keep pace with their surging data-hungry subscriber growth. ➢ Quality of service has been a burning issue for telcos who have faced immense pressure from the government and consumers to improve their offerings, especially call services INTEREST RATE
- 7. Increasing Subscriber Base ● As on March 2019, number of telecom subscribers was 1186.63 million in India. ● Reliance Jio dominates the market having subscriber base of 348 million(highest growth) followed by Bharti airtel at 327 million (losing subscribers) and Vodafone Idea at 375 million(losing subscribers) . 1186.63 1163.13 1120 1140 1160 1180 1200 1220 Total Subscribers Wireless Subcriberes (98.02%) inmillion Subscribers Number of wireless subscribers 1186.63 499.45 0 500 1000 1500 Total Subscribers Rural users (42.09%) inmillions Subscribers Rural Subscribers
- 8. FDI Inflows ● In December, 2017, Indian Govt. changes the policy to 100 percent FDI in Telecom Industry for the growth purpose. ● However, FDI Inflows in telecom sector has plunged to $2.66 billion in FY’19 from $6.21 billion in FY’18. ● Reasons are Jio domination which led to exit of foreign networks and also, the increase of stressed assets in Bharti Airtel and Vodafone Idea ( a debt of Rs 8 lakh-crore)
- 9. UPCOMING 5G TECHNOLOGY ● 5G network makes higher transfer speed and lower network latency possible. ● Improves connectivity and communication significantly. ● Would bring in era of interconnected smart devices on massive scale. ● Indian government plans to make India 5G-ready by 2020 ● GDP is estimated to reach 8.2% by 2020 by leveraging 5G technology. ● Upcoming 5G technologies is set to contribute to global economy as well by $2.2 trillion over next 15 years. source : economictimes.com
- 10. INFLATION ● Inflation unfavourably effects telecom spending. ● Households spends less on telecommunication devices and services due to lesser purchasing power. ● Slump in performance of telecom companies.
- 11. POLITICAL FACTORS ● The traditional political risks for telecom are the ones related to regulations, network licensing, national radio spectrums and in case of certain nations trade barriers. ● Favourable factor : privatization and deregulation ● The telecom industry enjoyed relative freedom based upon its importance in the process of globalization ● Increased focus is on the growing markets like China and India. ● The Government of India aims to develop the nation as a global telecommunication hub.
- 12. SOCIAL FACTORS ● Horizontal Growth is Limited ● Telecommunication corporations are monopolies ● Telecommunication has become a vastly important aspect of daily life of the average person. ● China is now the world’s largest telecom market and according to analysts’ figures, there are more than 1.25 million cellular subscribers signing up every week .
- 13. FUTURE OF TELECOM INDUSTRY ● The 5G Factor: The introduction of 5G will change how the telecom operators earn their revenue. ● For example, Right now only 30% of their net revenue comes from enterprises, it is expected to grow to 70% once 5G is introduced. ● The Population Growth: Although the operators are on loss, the silver lining is that there is an average 9% annual growth rate of subscriber base. ● The Data Usage: The population of internet subscribers is expected to double by 2021 to 829 million, which has already trumped the traditional voice-based revenue stream. ● Further, the telecom operators are trying to monetise through content to streamline data users.