Analysis of the Business Environment of the Telecommunication Industry in India

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India is the second largest telecommunications market in the world with around 900 Million subscribers at present. Since its liberalization in 1994, the industry has seen considerable growth with enactment of different regimes and entry of new players. However, in the last few years, the industry has been affected by the constant regulatory disputes and intense business environment leading to price war.
The objective of this study is to analyse the impact of New Economic Policy, 1991 on the Telecommunication (Voice) industry. However, as the major developments in the industry have taken place only from 1994, we have analysed the impact of National Telecom Policy, 1994 and New Telecom Policy, 1999 for our study. The purpose of this study is also to analyse the business environment of the industry, find out growth drivers for the industry, the market attractiveness for new entrants and incumbents.
3. INDUSTRY ANALYSIS

3.1. Evolution of Telecommunication Industry in India

New Economic Policy of 1991
In 1991, India had only 5,000,000 telephone subscribers and the services were provided in the country by MTNL and DoT. However, delicensing of telephone manufacturing equipment in 1991 led to most of the telecommunication equipment being manufactured in India. This development paved way for the establishment of telecom infrastructure in India for future years.
National Telecom Policy – 1994
A major breakthrough in the Indian Telecommunication industry was liberalization of the industry in the National Telecom Policy in 1994 (NTP-94) when two private service providers were given licenses in each service area (Government being the third telecom player in the area). The licenses were initially given for 10 years which could be extended b...

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...he substitute providers may give a probable competition.

4. Incumbent acquiescent: There are lot of incumbent players in the industry. Most of them are at economic loss. In order to avoid such losses after entry price, a new entrant need to enter as a huge size. So that they can breakeven easily.

5. Access to distribution channel: There are many rules and regulations set by the government which provides barriers to the new entrant in accessing distribution channels. Willing parties to industry may be discouraged due to the domestic regulations. The regulations forbids concentration of seller.

6. Access to suppliers: With so many suppliers, new entrants will have their freedom to choose their suppliers in establishing their infrastructure. But there is lot of cost involved in setting up the billing and operational support systems. It is moderate for the industry.

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