The mobile telecom industry in India has seen an astonishing growth in the last decade and a half. It is one of the fastest growing telecom sectors in the world with an annual growth of 12% to 13 % [BCG INDIA]. The sector has been given due importance by the government, as it caters to develop a nation socially and economically. In recent years the industry has undergone some serious changes and has been supported by significant policy reforms. The country’s total mobile subscriber base is over 908 million [Telecom regulatory authority of India]. Its phenomenal growth is propelled by drivers such as newer technology like 3G and 4G, better devices and most importantly change in consumer behaviour. The market share is dominated by a few larger firms. A few smaller firms are also there but larger firms have a major chunk of the total market share. According to the research [Boneless Group, 2012] the market share is as follows : Bharti telecom ‘s AIRTEL leads the market share with 24.4% followed by Vodafone India with 19.5% Reliance 14.9%, Idea 15.3%, BSNL 8.2%, Tata 7.0%, Aircel 5.3% – the remaining share being held by smaller operators such as Uninor, Videocon, MTS, Loop and some more. The above mentioned figures depict that over 80% of the market is held by 7 operators.

With this information, it can be deciphered that the nature of economic structure of mobile telecom industry in India can be described as an OLIGOPOLY. It is supported by further analysis in this work.

Oligopoly can be defined as a market structure with a small number of large players also called as Oligopolists. These large players have a significant share of the total market size. Immense competition is concentrated within these competitors. The other competitors are small and have a minor market share; they are also called niche players of the market. In quantitative terms, oligopoly can be described as a structure which has very less number of highly influential and strong competitors sharing market dominance.

ASSUMPTIONS TO OLIGOPOLY and INDIAN TELECOM IN LIGHT OF OLIGOPLY

Few Sellers – There are few strong and influential firms operating in an oligopoly and are competing against each other. The other few firms operating in the market are not dominant and have an imperceptible share of the market. The smaller firms in the market do not have the power to retaliate to the interdependency of the larger firms. It suggests that firms in oligopoly are interdependent on each other for decision making. Each firm measures, predicts or assumes its potential competitor’s reaction when it chooses any business strategy. These decisions could be regarding setting up / change in prices, output or product lines.

In a nation, where population is more than 1.3 billion, lies a huge market potential. As mentioned in the introduction, the fact that there are just 10-12 active players in the market, 7 of which constitute more than 80% of the markets share, substantiates the few sellers assumption of oligopoly.

Interdependence – It is one the most highlighted feature of oligopoly. Interdependence in terms of decision making processes. This happens because, the number of influential competitors is few, and the change in price or output by any of the firm causes direct effect on the income of its competitor. So demand of the product by the market is not the only criterion that sets up the price of the service. It is also the ruthless non-price competition that affects the setting up of prices.

The firms in the industry are dependent on each other over matters like pricing, policy making, advertising and other issues. As a result of this interdependency the firms have constituted an association called Cellular Operators Association of India (COAI), which protects the common and collaborative interest of its members. Example – One of the reports of COAI dated 21st October, 2011 raises the issue of levying of huge penalties by department of telecom on the telecom operators for minor technical and compliance issues, which was dealt by COAI. The competitors dealt with this case as one organisation. The establishment of this association actualizes the interdependency of the firms.

Entry and exit barriers – The barriers are very high to enter and exit the industry. It is one of the many reasons; firms