Missed Call: A Case Study of the Indian Telecom Industry in the Post Liberalization Era

The Mobile Revolution has Transformed Indian Society and Economy

When compared to the other sectors that flourished in the post liberalization phase starting from the 1990s, the Indian Telecom Sector is perhaps the biggest success story as far as its role as an enabler of connectivity and helping the rural residents as well as the poor people connect to each other and ensure all round transformation.

Indeed, the spread of mobile phones in India can be likened to the ushering in of a revolution in the way the Indian Economy and Society operates since mobile phones have made fisherpersons deal directly with buyers and farmers interact with their customers without being cheated by the middlemen.

Apart from that, migrants from other states who have come to the regional metros for jobs and livelihood now have a way of reaching out to their relatives and family members back home as well as ensure that they do not feel homesick or lost in an alien city.

In addition, mobile connectivity has spawned an entire generation of entrepreneurs to lead firms and businesses whose entire business model is built on mobile based operations. Moreover, the ubiquitous “Delivery person” who delivers everything from medicines to masalas uses his or her mobile phone to take orders and reach the customers without hassles.

How the Indian Telecom Sector has Become the Backbone of the Indian Economy

Research has shown that mobile phones in India number more than the population of the country and this is reflected in the way the government’s flagship identification number initiative, Aadhar, is now entirely mobile number driven along with physical and biometric identification details.

Having said that, the success story of the Indian Telecom Sector is punctured by the practices of successive governments in awarding licenses and scarce spectrum ostensibly with a view to facilitate ease of connectivity but at the same time following a flawed and overpriced mechanism.

Moreover, the fact that the telecom operators do flout rules especially when selling prepaid connections to customers without background checks has given rise to security concerns and other problems.

In addition, despite massive investments in physical infrastructure in the form of mobile towers and other installations, connectivity is a major issue with the quality of calling and receiving calls being marred by call drops and punctuated by “noise” in the form of poor quality of conversations.

This is the reason why the title of this case study is Missed Call both to signify the opportunistic entrepreneurs who ask their patrons to give them a missed call to record their requests and numbers and the many lost opportunities by all the stakeholders as far as the development and the growth of the sector are concerned.

The Game Changing Entry of Reliance Jio

No discussion on the Indian Telecom Sector is complete without an assessment of the impact of Reliance Jio which has not only upended the existing norms prevailing in the sector but has also ensured game changing technological introductions in its offerings in addition to providing cheap and mouthwatering services that have become the envy of its rivals.

More importantly, the entry of Jio has been a game changer as far as the Indian Telecom Sector is concerned what with its advanced technology and a ruthless price war that has ensured that there is a consequent Race to the Bottom in the sector with rivals coming up with competitive offerings to an extent that the whole Indian Telecom Sector has been disrupted in ways that could not have been foreseen a few years ago.

What more, Jio has made the Indian Telecom Market one of the most competitive in the world and has ensured that rivals have to either consolidate or risk being left behind in the aforementioned Race to the Bottom.

Apart from this, Jio with its entry has raised questions as to whether the Indian Telecom Sector is going the eCommerce way since at the moment, Telecom firms are “throwing cash” and splurging on ever lucrative offerings to the consumers without much attention to profitability.

In other words, with its deep pockets, Reliance has made the Indian Telecom Sector as a Free for All races to grab as many consumers as possible and this has had effects on the way other firms have to either match its offerings or perish.

PESTLE

Political

Politics impacts heavily on the workings of the Telecom Sector as it is politicians who set the laws and frame rules and policies as well as regulations. Indeed, among the factors being considered in this analysis, it can be said that politics is perhaps the most important determinant of how the Indian Telecom Sector operates.

This is mainly because the scarce spectrum is auctioned by the Central Government and considering the fact that spectrum is the lifeline of the Indian Telecom Sector, it is inevitable that telecom operators have to be cognizant and mindful of the governmental policies related to this aspect.

Apart from this, the other reason why politics impacts the Indian Telecom Sector to a great extent is that the infamous 2G Scam where spectrum allocation was done in dubious circumstances casts its long shadow on the past and the future workings of the Indian Telecom Sector.

This is the reason why Indian Telecom firms often tread cautiously as far as their dealings with the ruling dispensation at the center are concerned.

Economic

Subscribers and consumers are the lifeblood of the Indian Telecom Sector and hence, the economic forces at work determine how many and to what extent consumers opt for the choices among the existing Telecom operators.

While in the pre-liberalization era, consumers had just BSNL to choose from, now the situation is vastly different with a plethora of choices and a palate of options before them.

Indeed, with the improvement in the disposable incomes of the Indian Consumers, there has been a tendency to splurge on consumer goods and services and the Indian Telecom Sector is a prime recipient of the largesse showed by the aspirational consumers.

Moreover, with rising incomes and aspiration levels, Indian Consumers are increasingly spending on VAS or Value Added Services apart from their basic mobile plans which mean that they do have the capacity to pump up the revenues for the operators who anyway have reduced the amount they charge for basic services and instead, are focusing on VAS for their profits.

Social

Perhaps next to the political factors impacting the Indian Telecom Sector, the sociocultural dynamics of the changing Indian Consumer segments impacts the Indian Telecom Sector to a great extent.

Indeed, along with rising incomes and aspirations to Western standards of living, Indian Consumers have begun to use their Mobile Phones and more importantly, their Smartphones as the One Device that Counts in their lives and this translates into better revenues for the operators since they can focus on adding more options to their plans and business models built around the Smartphone revolution.

Indeed, the emergence of the Smartphone era can be said to have truly transformed the Indian Telecom Sector as it is now focused heavily on tapping into the segment of consumers who own Smartphones.

Technological

Given the fact that technology determines the deployment and rollout of the services enabling the Indian Telecom firms and their offerings means that technological factors do have a major role to play in their impact on the sector.

Right from the software that is needed in the mobiles and the services of the Telecom firms and the hardware in the form of the actual devices as well as the physical infrastructure such as towers and servers, technological advances speed up the pace at which the Indian Telecom operators provide such services to their subscribers as well as determine the extent to which such services capture the imagination of the consumers.

Indeed, as can be seen from the successive rollout and deployment of the 2G, 3G, 4G, and other cutting edge generational spectrum and services, the Indian Telecom Sector is indeed ahead of the technological curve as well as in a position to offer world class broadband speeds for the consumers.

Legal

As mentioned in the political factors section, the Indian Telecom Sector is indeed heavily dependent on the various rules and regulations that govern it as well as skewed by the many legal disputes and policies which according to some experts have stymied the further development of the sector.

Indeed, given the fact that the notoriously slow Indian Judicial System takes many years to resolve legal disputes, the Indian Telecom Firms are naturally wary of the litigation that arises with each successive round of spectrum auctions and allocations.

This is the reason why investors in recent years have stayed away from the Indian Telecom Sector for fear of being bogged down in long winding and labyrinthine legal disputes which dent their profitability.

Apart from this, politicians do not help matters as they bring in extraneous considerations into the equation when allocating spectrum as well as when making policies which are often subject to legal disputes by the losing firms. In addition, the Indian Telecom Sector is one of the most heavily regulated in the world and this adds another layer of complexity to an already complex sector.

Environmental

While concerns related to environmental impacts of telecom operations do persist, it is also the case that apart from the impact of the mobile towers and the radiation emanating from them on the residents who live near them, the Indian Telecom Sector is largely free from activism related to environmental factors.

Indeed, having said so, it is also the case that the Indian Telecom Sector usually abides by the prevailing laws governing these aspects except in the case of the locations of the mobile towers which given the constraints of physical space and land and capacity, are often contentious between the service providers and the residents who live near the towers.

Many More Missed Calls?

The preceding discussion has analyzed the Indian Telecom Sector from multiple perspectives and has provided many insights into its working. Having said that, it is also the case that the sector faces headwinds as it matures and where subscriber addition is not the only thing that matters.

In other words, with the Indian Telecom Sector reaching saturation levels in terms of subscriber numbers, the focus would increasingly be on providing VAS or Value Added Services which are higher revenue generating for the firms.

Whether the Indian consumer is ready for such VAS or not is besides the point since once the subscriber base is saturated, there are diminishing returns from such sources of revenues, which means that consumers do not have to pay more for the VAS as well as for basic services as well.

While the latter might not be an immediate priority for the firms and the operators, sooner or later, the party has to end in terms of how many goodies they can offer cheaply to the consumers and this is when the real fun starts as the after effects of the current binge would result in a hangover leading to much disruption and a further round of consolidation in the sector.

To conclude, it is our view that the Indian Telecom Sector and the firms that make up the sector would sooner or later have to decide what next to do once they hit the plateau in terms of basic revenues and this is when the real innovative capabilities would kick in as far as remaining in the hunt is concerned.


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Authorship/Referencing - About the Author(s)

The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.


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