Market Concentration and Competitiveness in Indian Telecom Industry

Abstract

The importance of telecommunication services is increasingly growing as an integral part of the infrastructural base for socio-economic development of an economy. In order to efficiently provide communication services with improved quality at the lowest price, it demanded a shift of market structure from a government monopoly to a more competitive structure. We are analyzing the changes in the market structure and competition of telecom service industry in India. The major data source of this study is Centre for Monitoring Indian Economy (CMIE) Prowess firm level data, from which the telecommunication service data of firms are taken. The major methodology which followed to measure competition in a market, the concentration ratios is computed, due to their ability to capture structural features of the market. It is found that almost all the concentration indices exhibit the same trend in the concentration level of the market. Concentration level is decreasing year by year and thus, competition is increasing. Even though there are many players in the market, the Indian telecom industry is controlled by a few. Through accuracy measures of index, it is found that the GRS index is the ideal index which indicates a moderate level of competition compared to other indices. As far as telecom industry is concerned, moderate level of competition exists with the oligopoly market structure