India telecom predictions for 2014 and update on 2013 by PwC

Mohammad Chowdhury, leader, Telecom PwC India, has shared predictions for Indian telecom industry for 2014 and update in 2013.

India telecom 2014 predictions

PwC says data consumption would grow across 2G, 3G, fixed broadband and 4G. Wi-Fi rollouts by major operators may facilitate growth. Challenges remain with introducing localised content en masse, but with smartphone penetration rising and network quality set to improve, many of the requirements for data growth are being met.

The year 2014 will be the year of the SMAC (Social Media, Analytics and Cloud). Indian telecom operators will attempt to integrate services more closely with social platforms, and start introducing advanced analytics through Big Data to get a 360 degree understanding of customer behaviour. Enterprise players could increase focus on collaborating for solutions in Healthcare, Logistics and Financial Services though we see this as a 2-3 year play. 2014 will see the beginnings of a long journey in SMAC.

With new revenue growth to come from rural voice and customers demanding better quality, network expansion and upgrade will pick up. Several operators have announced investment  plans, some will buy spectrum in the auctions of early 2014, and we may even see LTE trials in the liberalised 1800 MHz band. PwC’s recent customer value survey shows that 52 percent of users regard the network as more important to their mobile experience than the handset (even though only 11 percent have network as top of mind recall).

Some uncertainty will always remain but Indian regulators are introducing more clarity on spectrum pricing for the upcoming auctions, and attempting the same on spectrum trading, usage charges, re-farming and M&A. While we may not expect any more new entrants, additional clarity may bring new investments and action into the sector. However, we must hope that regulation won’t stifle new growth, for example in M2M.

With licenses coming up for extension and more liberal M&A guidelines expected soon, in 2014 we see the prospect of some operators buying stakes in other players across numerous circles. This industry has an appetite for 3-5 national players and a small number of regional players and we may see initial action in this space following the general elections.

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India telecom in 2013

Subscriber numbers de-grew at the end of 2012 due to new customer information regulations which forced millions of disconnections, but even in 2013 the subscriber base will grow by only 5 percent, compared to 19 percent in 2011 and over 40 percent in 2010.

Capex was estimated to shoot up by 40 percent this year compared to the doldrums of 2012, but capex/sales are still low at 12 percent. This is way below the 20 percent to be expected for a country where network roll out is still underway.

Despite Capex constraints and debt reduction the industry is still relentlessly pursuing growth. Return on invested capital increased from around 3 percent last year to forecast 5 percent this year. EBITDA margins are at 29.5 percent, approaching the emerging Asia average of 35 percent.

Indian mobile users did not see exciting offers since the Indian telecom industry is moving slowly, partly due to a lack of investment but also due to the challenges of executing difficult strategies to combine innovation, technology and business transformation.

For 2014, we see positive steps to streamline the regulatory and legal landscape. This is going to be a multi-year journey. From 3G roaming to arbitrary penalties and fines, sometimes in 10 year old cases, all fuelled uncertainty for operators.

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