This report profiles India’s telecommunication industry, discussing market trends through 2013 and outlook for 2014 and beyond. The report also highlights leading players in the sector including Bharti Airtel Ltd, Idea Cellular Ltd and Reliance Communications Ltd.

The telecommunication industry has played an important role in the development of the country’s economy over the last few years. Not only has it increased connectivity across the country, it has also helped in stimulating other sectors of the economy. The telecommunication sector in India comprises several segments, namely wireless services, wire line services, internet and broadband services and mobile valued added services.

FY14 was a better year for the Indian telecommunication sector, after the controversies and regulatory issues that marred the sector in the previous two years. Telecom carriers saw some pricing power return in FY14. After four successive quarter of decline, the mobile subscriber base finally recorded a growth in Q3FY14.

The reduction of 2G base spectrum prices in February 2014 auction brought some relief to the government. Reliance Industries Ltd backed Reliance Jio bagged 1800 MHz band in 14 circles out of the 22 on offer. This is expected to revive the intensity of competition and might result in yet another price war.

Wireless penetration rate is on the downward trajectory in urban areas after peaking in FY13. It is the rural parts which are driving the new subscriptions in the country. Wireline segment contracted while data and internet usage continued to grow during the year. Low penetration rates in rural India as well as internet and broadband segment will drive sector growth in the next few years.

Key Points:

• According to the Telecom Regulatory Authority of India, the contribution of telecom sector to India’s GDP was around INR 2.1tn in FY13. The sector recorded a y/y growth of 9.4% in 9MFY14 in terms of gross revenues.

• In Q3FY14, the wireline subscriptions saw a y/y contraction of 5.8%. The contraction was acute in urban markets while rural markets recorded a gradual decline.

• Voice over internet protocol (VOIP) service is also gaining traction in the Indian telecom market. 33 ISPs were providing internet telephony services as of December 2013. Total outgoing minutes of usage for internet telephony recorded 22% y/y growth in Q3FY14.

• After four successive quarter of y/y decline, the mobile subscriber base finally grew by 2.4% y/y in Q3FY14. Mobile cellular market consolidated further during FY14. Big three players accounted for 55% of the subscriber base in Q3FY14.