India’s Telecom Sector: Moving Towards a Duopoly and the Role of Digital Transformation

The telecommunications sector in India is at a critical juncture, with a shift towards a more consolidated market structure. Recently, there has been much discussion about whether the sector is moving towards a duopoly, with a few key players dominating the market. This article explores the current state of the Indian telecom sector and the role of digital transformation in shaping its future.

Can the Telecom Sector Become a Duopoly in India?

The latest developments in the Indian telecom sector suggest a significant shift towards a duopoly. BSNL (Bharat Sanchar Nigam Limited), the national telecom service provider, continues to play a crucial role in covering rural areas that are often ignored by major players. At the same time, Vodafone Idea, a major player in the Indian telecom market, is struggling and may face difficulties in sustaining its growth. Some stakeholders view Vodafone Idea as a likely candidate for write-off, emphasizing the need for consolidation in the sector.

Current Players and Challenges

While the telecom sector is consolidating, other players continue to face challenges, particularly in the face of digital transformation. Recent discussions about the impact of the Facebook-Jio deal on the Indian economy during a lockdown recession have shed light on the ongoing debates and challenges in the sector.

The Impact of Digital Transformation

The key question is not just about whether the market will become a duopoly, but also about the readiness and agility of service delivery systems. Digital transformation (DX) remains an important factor in the telecom sector, and while progress has been made, particularly in the manufacturing segment, the extent of these advancements varies.

Despite the potential benefits of DX, such as automation and process improvement, the telecom sector has lagged behind in adopting these changes. The dominance of content services and the benefits provided by e-commerce players have not been sufficient to address the challenges faced by telecom service providers (CSPs). Issues such as policy delays, technology costs, and uncertainties in expected growth have hindered the widespread adoption of DX in the sector.

Future Threats and Potential Solutions

A significant threat to CSPs is the growing inclination of corporations to seek their own bandwidth to enable autonomy in their operations. This raises concerns about the consolidation of the service provider market and the potential for monopolistic practices.

However, the broader picture is not as skewed as it may initially appear, as many of the corporations seeking bandwidth are also likely to seek permission from the same service providers. The solution to this issue lies in enabling a more open service provider domain and ensuring that digital transformation reaches a larger audience within the Indian industry.

The government's role is crucial in this regard, as it should step up to strengthen the presence of other service providers, such as the state player BSNL, to enable digitalization. This is important not only for reducing monopoly limitations but also for reaching a larger segment of the manufacturing and service provision industries with low-cost digitalization services.

Conclusion

To address the challenges and move towards a more dynamic and competitive telecom sector, several key actions are needed. These include accelerating digital transformation, reducing policy delays, and enabling state players to play a significant role in digitalization. By doing so, the Indian telecom sector can achieve a healthier balance between consolidation and competition, ultimately benefiting the broader economy.