In a move that could help consolidation, the government, just this September, approved rules for spectrum trading, allowing companies to buy and sell spectrum among themselves.
India´s telecom sector has grown at breakneck speed over the last decade and shows no signs of stopping. If anything, the growth in subscribers, tele-density, internet users, data usage and adoption of smart-phones continue at a heady pace. They all add up to a potent combination. India´s juggernaut of a telecom industry keeps rolling on.
Not that the sector isn´t suffering from long-standing issues. There are over 10 telecom companies here compared to the five that are usually considered healthy for any market. Therein lies the the problem. With scarce resources (spectrum) available for communication, along with fears of radiation from telecom towers, the industry is struggling to match up to the demands of its customers. The Narendra Modi-led government, having come to power in 2014, promising business growth, employment opportunities and ease of doing business, has been sympathetic to the needs of the sector.
In a move that could encourage much-needed consolidation, the Union cabinet, just this September, approved the rules for spectrum trading, allowing companies to buy and sell spectrum among themselves. Amendments to the rules for mergers & acquisitions (M&A) are awaited (you can read about that in the next pages). Earlier in September, Baidu´s CFO Jennifer Li said about India´s telecom industry, ¨They have a lot of characteristics that mimic China´s development. There is no legacy of PC user behaviour and probably, mobile is going to have a very speedy development.¨
Baidu, China´s largest web search provider is aiming to boost investments in India as it tries for a greater presence on smart-phones. To put that in perspective, sample this. China saw its first decline in smart-phone shipments in six years in the first quarter while India´s surged 44 per cent in the second quarter. By May 2015, the rural subscriber base accounted for 42.1 per cent of the total subscriber base. Considering 70 per cent of India´s population stays in rural areas combined with the fact there are still over 62,000 villages that are uncovered so far, it would appear that growth prospects are fairly huge.
Already in 2015, 340 million mobile banking transactions were reported, up 75 per cent from a year ago. With such rosy growth prospects, can investors be far behind? The industry attracted FDI worth $17,058.03 million during the period April 2000 to March 2015, according to data from the Department of Industrial Policy and Promotion (DIPP).
To boost research and manufacturing the government has proposed $32.2 bn investment.
The Make in India campaign has attracted considerable interest. While Samsung, Micromax and Spice have been assembling handsets in India from before, more recent entrants include Xiaomi, Motorola and Lenovo. In fact, Lenovo is now the largest Chinese company under the Make in India campaign. HTC, Asus and Gionee have also shown interest. Foxconn, the world´s largest contract-manufacturing firm for consumer electronics and manufacturer for Apple products, has signed a Memorandum of Understanding (MoU) with the Maharashtra state government to invest $5 billion to set up a manufacturing unit.
Out of the total number of smart-phones shipped in India during the June 2015 quarter, 24.8 per cent were made locally- a significant rise compared to 19.9 per cent in the previous quarter. No doubt, it will grow further with the announcements just mentioned.
It is little wonder, then, most studies on the Indian telecommunication industry are upbeat. Having come from zero to being the second largest telephony market in the world in just over a decade, it beggars belief that you can still say you ain´t seen nothing yet!
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