Thursday, April 20, 2017

Monthly update on the Indian telecommunications market - Part 1

Full article: Part 1Part 2 , Part 3Part 4

Preamble 

The Indian telecommunications market continues to go through tremendous changes which, though occurring in parallel with have been largely independent of, were already happening well before the more general national level social and economic changes instigated (or accelerated) by the reformist government of Narendra Modi.

According to data assembled by the World Bank, in 2014 India with a monthly ARPU of $2.80 was the sixth cheapest nation in the world for phone charges after Sri Lanka, Bangladesh, Iran, Pakistan and Nepal, and in that year its people spent only 2.14% of their average income on mobile phone costs. However, since the dramatic full commercial entry into the Indian mobile broadband market in September 2016 of the Mukesh Ambani-led RJIO operator, whose level of initial investment in its national 4G network, content and services is reported as being around a staggering $20 billion, mobile rates have fallen even further and the absolute value of the market has declined.

According to the Indian Telecommunication Services Indicators Report published by the Indian regulator TRAI for the October to December quarter of 2016 (published April 7th), despite a steep sequential quarter on quarter rise of 7.22% in fixed and wireless subscriptions, from 1,074.24 million to 1,151.78 million as of December 31, 2016, total services revenue for the quarter fell 6.79% to INR 66,532 crore ($9.688 billion). The major factor in that was an amazing decline in monthly ARPU for GSM service (including LTE) of 14.10% from INR 121 in the quarter ended September 2016 to INR 104 ($1.50) in the quarter ended December 2016. On a year-on-year basis monthly ARPU for GSM service (including LTE) declined by 15.32% in the fourth quarter.

Despite radical restructuring and temporary decline of telecoms market, Indian economy beginning to develop long term momentum Despite these surprising local fluctuations in the telecoms sector the national level changes referred to in the first paragraph are still important because they directly and indirectly support a high economic growth rate in India, currently predicated by the IMF at 7.2% in 2017 and 7.7% in 2018. This is a longer-term sustaining platform for further growth in the telecommunications sectors. Macroscopic economic programs include:

Agreement for the implementation of an uniform Goods and Services Tax across all the states; this will to some extent help to support a single integrated national market, which is a crucial advantage for technological development and catch-up, and is supposed to be implemented across India by July 2017.

The effective introduction, by administrative organisation the Unique Identification Authority of India, of the Aadhaar biometric personal identity card, carrying a unique 12 digit number, for well over 1.133 billion Indian citizens as of March 31, 2017. Although more than 150 million Indian citizens are still excluded from the system these are mostly infants. Although this project was initiated in 2010 well before Modi was elected his government has fully supported the program and claims to have already saved around $8 billion through more accurate distribution of food and fuel support to impoverished families.

The energetic pursuit and rooting out of 'black money', which has included Mod's controversial national removal and replacement of high value currency.

Key infrastructure programs including the National Optical Fibre Network (or BharatNet), designed to link 250,000 small villages to the national network, 100 smart cities and high speed rail programmes including the Diamond Quadrilateral project to connect the cities of Chennai, Delhi, Kolkata and Mumbai. In February India announced record spending of INR 3.96 trillion ($59 billion) to build and modernise its railways, airports and roads in a drive to upgrade the strained infrastructure in Asia’s third-largest economy; already under way is the construction of the 1,500 km Mumbai-Delhi Industrial Corridor which includes 24 industrial regions, eight smart cities, two airports, five power projects, two mass rapid transit systems, and two logistical hubs and has an initial budget of $90 billion.

Numerous other less specific programs including national self-sufficiency, morale and capability strengthening programs such as Make in India, the Clean India initiative, the drive to improve the technical competence of the Indian workforce (Skill India), the People’s Bank Plan the Crop Insurance Program.

7-8% growth rate insufficient to prevent India continuing to fall further behind China 

These programs, not all of which are fully funded and active, are all aimed at increasing India's capacity for economic growth, which as noted earlier is currently in the range 7% to 8%. This is a fast rate, around twice the global rate of 3.5%, however, looking back over the last 30 or more years of Chinese economic expansion, when China was at the same economic level as India is now it was growing well over 10% for a decade or more. Over the 28 years from 1989 until 2017 China has grown an average of 9.74% a year, reaching an all time high of 15.40% in the first quarter of 1993

Part 1
Part 2
Part 3
Part 4

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