Indian Telecom Industry PESTLE Analysis
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The document provides an overview of the Indian telecom industry and analyzes it using PESTLE and National Diamond frameworks. It discusses the political, economic, social, technological, environmental, and legal factors influencing the industry. Key political factors included liberalization policies from the 1990s. Economically, tele-density grew from 5.1% in 2005 to 24.04% in 2010. Socially, the industry led to changes in lifestyle and regional population shifts. Technological advancements increased research spending and adoption of new technologies. Legal frameworks governing the industry include acts on telegraphs and cable television. The industry is supported by both public and private sector firms competing locally.
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Indian Telecom Industry PESTLE Analysis
- 4. POLITICAL FACTORS The Beginning Liberalization Mid phase 90’s-Present
- 6. SOCIAL FACTORS Change Regional in lifestyle shift in population Employment opportunities
- 7. TECHNOLOGICAL FACTORS Total spending on Research & Development Technology sector used in the Tele-com
- 9. LEGAL FACTORS Legal frameworks are provided by:The Indian Telegraph Act 1885. The Wireless Telegraphy Act 1933. The Telegraph Wires (Unlawful Possession) Act 1950. The Cable Television Network (Regulation) Act 1996.
- 11. FACTOR CONDITIONS INDIA has created its own important factors such as skilled resources and technological base for expanding BPOs / KPOs INDIA is upgrading / deploying resources over time to meet the demand. new innovations. new methods has given the local industry the comparative advantage.
- 13. RELATING & SUPPORTING INDUSTRIES Public sector BSNL MTNL ITIL TCIL Private sector Reliance Communication Tata communication Aircel Bharti Airtel
- 14. FIRM STRATEGY, STRUCTURE & RIVALRY Local conditions have affected various firms strategy. Local rivalry have forced firms to move beyond basic advantages
- 15. BIBLOGRAPHY
Editor's Notes
- INTRODUCTIONThe telecom services have been recognized the world-over as an important tool for socio-economic development for a nation. It is one of the prime support services needed for rapid growth and modernization of various sectors of the economy. Indian telecommunication sector has undergone a major process of transformation through significant policy reforms, particularly beginning with the announcement of National Telecom Policy 1994 and was subsequently re-emphasized and carried forward under NTP 1999. Driven by various policy initiatives, the Indian telecom sector witnessed a complete transformation in the last decade. It has achieved a phenomenal growth during the last few years and is poised to take a big leap in the future also. The Indian Telecommunications network with 621 million connections (as on March 2010) is the third largest in the world. The sector is growing at a speed of 45% during the recent years. This rapid growth is possible due to various proactive and positive decisions of the Government and contribution of both by the public and the private sectors. The rapid strides in the telecom sector have been facilitated by liberal policies of the Government that provides easy market access for telecom equipment and a fair regulatory framework for offering telecom services to the Indian consumers at affordable prices. Presently, all the telecom services have been opened for private participation.
- PESTLE AnalysisPESTEL analysis of any industry sector investigates the important factors that are affecting the industry and influencing the companies operating in that sector. PESTEL is an acronym for political, economic, social, technological, legal and environmental analysis. Political factors include government policies relating to the industry, tax policies, laws and regulations, trade restrictions and tariffs etc.The economic factors relate to changes in the wider economy such as economic growth, interest rates, exchange rates and inflation rate, etc.Social factors often look at the cultural aspects and include health consciousness, population growth rate, age distribution, changes in tastes and buying patterns, etc.The technological factors relate to the application of new inventions and ideas such as R&D activity, automation, technology incentives and the rate of technological change.The industry's major service is the practice of law, which is providing legal services to individuals, businesses, government, and non profits which is Legal analysis.Environmental analysis of an industry studies whether the industry is working environmental friendly and following the ethics or not.
- POLITICAL FACTORSThe beginningTelecom reforms in India began in the 1980s with the launch of a “Mission Better Communication” program.Private manufacturing of customer premise equipment was allowed in 1984 and the Centre for Development of Telematics (C-DOT) was established for the development of indigenous technologies. Private franchises were freely given for public call offices (PCOs) that offered local, domestic and international calling services.Two large corporate entities were spun off from the Department of Telecommunications, e.g. Mahanagar Telephone Nigam Limited (MTNL) for Delhi and Mumbai and Videsh Sanchar Nigam Limited (VSNL) for all international services. Liberalization phaseThe second phase of reform commenced with the general liberalization of the economy in the early 1990s and announcement of a New Economic Policy (NEP)-1991.1991 telecom equipment manufacturing was de-licensed and value-added services were declared open to private sector.1992 radio paging, cellular mobile and other value added services were opened to private sector.1994 National Telecom Policy was announced and enhanced growth of private sector.Mid 90’s- PresentThe most important landmark in telecom reforms came with the New Telecom Policy 1999 (NTP-99).There were major developments on the policy front post year 2000. Establishment of Bharat Sanchar Nigam Ltd (BSNL) (2000), privatisation of VSNL (2002).Increase in FDI limits from 49% to 74% (2005) and proposal for mobile number portability (2006) which paved way for the remarkable growth in the sector.
- ECONOMIC FACTORSThe Indian Telecom industry has been playing an important role in the world economy and global revenues in 2008 were USD 4 trillion, expected to grow at a steep 11% p.a. CAGR over the next 2 years.India's telecom service revenue was ~USD 30 billion in 2008, and Ernst and Young analysts believe it is projected to almost double to ~USD 55 billion by 2012. GDP contribution – 2%.Output per annum - ₹ 136,833 crores per annum & Increasing 20% for every month.DriversIncrease in disposable incomes.Greater network coverage.Greater affordability.Falling mobile phone prices.Falling call charges.Domestic and Export shareThe Indian Telecom Industry manufacturing contributes about two-thirds of the total exports of the country.It has been estimated that manufacturing exports would increase from US$ 40 billion in 2002 to US$ 300 billion in 2015, simultaneously increasing its share in world manufacturing trade from 0.8 % to 3.5 %.Economic policies that brought about reformsNew Telecom Policy 1999Key features of the NTP 99 include:Strengthening of Regulator.National long distance services opened to private operators.International Long Distance Services opened to private sectors.Private telecom operators licensed on a revenue sharing basis, plus a one-time entry fee. Resolution of problems of existing operators envisaged.Direct interconnectivity and sharing of network with other telecom operators within the service area was permitted.Department of Telecommunication Services (DTS) corporatised in 2000.Spectrum Management made transparent and more efficient.Broadband Policy 2004Foreign Direct Investment (FDI)FDI upto 74% (49% under automatic route) is also permitted for the following: -· Radio Paging Service. Internet Service Providers (ISP's)FDI upto 100% permitted in respect of the following telecom services: -· Infrastructure Providers providing dark fibre (IP Category I);· Electronic Mail· Voice Mail3G spectrum LawThe government recently concluded the 3G and BWA auctions in June, 2010. The auctions were initially estimated to raise INR 350 billion and help the government contain the fiscal deficit. However, the government received approximately INR 1,060 billion as spectrum fees for 3G and BWA, cumulatively.Subject to the conditions that such companies would divest 26% of their equity in favor of Indian public in 5 years, if these companies were listed in other parts of the world.In telecom manufacturing sector 100% FDI is permitted under automatic route.The Government has modified method of calculation of Direct and Indirect Foreign Investment in sector with caps (para 4.1 of consolidate FDI Policy circular 1/2010 of DIPP) and have also issued guidelines on downstream investment by Indian Companies. (para 4.6 of consolidate FDI Policy circular 1/2010 of DIPP)
- SOCIAL FACTORSChange in lifestyleFast-changing lifestyles are forcing telecom companies to enlarge the breadth and depth of their services.joint ventures in the entertainment sector to add more services. For instance, Verizon now offers Verizon FiOS, a basic fiber-optic service which includes digital television, voice and high-speed internet services.Regional shift in populationThe rural Indian consumer managed to remain an attractive proposition, especially in the demand for consumer goods and telecom services3 lakh PCOs are providing community access in the rural areas. Further, Mobile Gramin Sanchar Sewak Scheme (GSS) � a mobile Public Call Office (PCO) service is provided at the doorstep of villagers.Employment opportunitiesSeveral career paths lead to the Indian Telecom Industry. The telecom sector offers a variety of career options where there is room for everyone a degree holder or a diploma holder, a candidate with a part-time certification course or one with a full-time degree.The Certificate Courses for employment in the industry are:Certificate in Telecom Engineering.Certificate in Information Technology.Certificate in Computer Science.Certificate in Management Information Systems.Certificate in Computer Forensics.
- TECHNOLOGICAL FACTORSWith over 900 million telephone connections, India remained the world's second-largest telecommunications market in 2013 (Business Today, 25th December,2013)Technologies used in the telecom sectorGlobal system for mobile communication (Gsm)Code division multiple access (Cdma) Wireless local loop (WLL)2G Technology 3G TechnologyMobile Number Portability (MNP)
- The strong growth of the telecom industry, and increased equipment obsolescence have caused a dramatic rise in the amount of electronic waste worldwide.Today, environmental issues have become one of the most important factors to be considered in the telecom industry. Operators are paying increasing attention to their environmental performance, and are cooperating more closely with telecom equipment manufacturers.International regulations on environmental protection, especially those for telecom operations and manufacturing, are widely recognized and followed.ISO 14004:2004 provides guidelines on the elements of an environmental management system and its implementation.The process includes choosing the proper products and networking solutions to reduce negative impact on the environment.
- LEGAL FACTORSThe Indian Telecommunication sector has seen remarkable growth and is designated as one of the fastest growing markets in the world. It is also the second largest wireless network across the globe, after China. Telecommunication falls under the legislative competence of the Union and not the States. Consequently the Legal framework governing Telecommunication Sector is within the control of the Union Government and the Parliament.In India Legal framework, covering telecom sector include various services like internet, radio paging, voice mail, V sat communications, E Commerce, broadcasting services etc. Indian Legal framework with respect to telecom infrastructure is made up of five main actsThe genesis of the Telecommunication Regulatory Authority of India (TRAI) lies in the bidding process for the grant of cellular licenses. First major dispute, entered into by TRAI, was between itself and The Central Government.The question of grant or amendment of a license by the Central Government acting in its capacity as the licensor falls outside the jurisdiction of the powers of TRAI.The TRAI Act which was amended and passed in 2000 and the framework relating to the TRAI currently in force have been analyzed subsequently
- Porter (1990a), disillusioned by the economic theories of trade, evolved a new theory to explain national competitive advantage. Four classes of country attributes (which he calls the National Diamond) that provide the underlying conditions for the determination of the national competitive advantage of a nation are mentioned in this model. These include factor conditions, demand conditions, related and support industries, and company strategy, structure and rivalry. He also proposed two other factors, namely government policy and chance that support and complement the system of national competitiveness but do not create lasting competitive advantages. Organizations may use this model to identify the extent to which they can set up on home based advantages to create competitive advantage in relation to others on a global front for their business. On national level, governments can (and should) consider the policies that they should follow to encourage national advantages, enabling industries in their respective countries to develop a strong competitive position globally. According to Porter, governments can foster such advantages by ensuring high expectations of product performance, safety or environmental standards, or encouraging vertical co-operation between suppliers and buyers on a domestic level etc.
- FACTOR CONDITIONSFactor conditions include those factors that can be exploited by companies in a given nation. Factor conditions can be seen as advantageous factors found within a country that are subsequently build upon by companies to more advanced factors of competition. Factors not normally seen as advantageous, such as workforce shortage, can also be seen as a factor potentially strengthening competitiveness, because this factor may heighten companies' focus on automation and zero defects. Some examples of factor conditions;Highly skilled workforce ,Linguistic abilities of workforce ,Rich amount of raw materials ,Workforce shortage .-a country creates its own important factors such as skilled resources and technological base.-these factors are upgraded / deployed over time to meet the demand.-local disadvantages force innovations. new methods and hence comparative advantage.
- DEMAND CONDITIONSIf the local market for a product is larger and more demanding at home than in foreign markets, local firms potentially put more emphasis on improvements than foreign companies. This will potentially increase the global competitiveness of local exporting companies. A more demanding home market can thus be seen as a driver of growth, innovation and quality improvements. -a strong trend setting local market helps local firms anticipateglobal trends.Existing demand conditions of the Indian Telecom industry are as follows:-A more demanding local/ global market has given INDIA the international / national advantage.A strong trend setting local market has helped local firms anticipateglobal trends.
- RELATED AND SUPPORTING INDUSTRIES.When local supporting industries and suppliers are competitive, home country companies will potentially get more cost efficient and receive more innovative parts and products. This will potentially lead to greater competitiveness for national firms. For instance, the Italian shoe industry benefits from a highly competent pool of related businesses and industries, which has strengthened the competitiveness of the Italian shoe industry world-wide.-Local competition has created innovations and cost effectiveness for the INDIAN BPOs AND KPOs.This has also put the pressure on local suppliers to lift their game.
- FIRM STRATEGY , STRUCTURE AND RIVALRY.The structure and management systems of firms in different countries can potentially affect competitiveness. Ifrivalry in the domestic market is very fierce, companies may build up capabilities that can act as competitive advantages on a global scale. Home markets with less rivalry may therefore be counterproductive, and act as a barrier in the generating of global competitive advantages such as innovation and development. Local conditions affect firm strategy. The interdependence of the external dynamic environment and the firm strategy determine in which types of industries a nation's firms will excel.In Porter’s Five Forces model, low rivalry made an industry attractive. While at a single point in time a firm prefers less rivalry, over the long run more local rivalry is better since it puts pressure on firms to innovate and improve. In fact, high local rivalry results in less global rivalry.Local rivalry forces firms to move beyond basic advantages that the home country may enjoy, such as low factor costs.