Policy

According to Telecom Regulatory Authority of India (TRAI) figures, India has 899 million subscribers. However, its month on month growth is less than one percent. Tele-density is upwards of 70 percent, which means that 75 out of every 100 Indians had a phone.

Indeed, India has seen a more than two-fold jump in 12 years though half of these phones are in the urban centres while the majority of Indians live in rural areas.

The Indian telecom sector, which had registered up to 20-30 percent growth at its peak, has now been reduced to less than one percent growth. The sector, being projected as the biggest success story of India’s economic reforms, is now literally at the crossroads of development. The ongoing investigations and arrest of the former telecom minister and other issues  have not affected the actual growth of the sector. Trouble has been caused by the inherent policy aberrations that ensured such rapid growth.

As per the latest TRAI statistics, which are  always six months old, India crossed the impressive 70-75 percent mark in tele-density, with the figure being more than 150 percent in the urban centres. Its tele-density has grown from 1 percent in 1991 to 75 percent today. India is regarded as the fastest growing telecom market in the world, next sometimes only to China.

India is also one of the world’s cheapest markets in terms of telecom tariffs in the world. Profitability wise as well, India was on the top of the chart. An international brand like Vodafone paid $19 billion to acquire over 60 percent of Hutchison to ensure its presence here. The total revenue generated by 15 service operators was to the tune of Rs.45,513.05 crore for the first quarter of this year. Of this about 15-20 percent went to the government as licence fee and other statutory payments.

However, in the Rs 250,000-crore telecom equipment market, Indian players lagged way behind Chinese companies, which have captured over 60 percent of the market.

The National Telecom Policy of 2011 launched recently vows to take the telecom market to the next level. Interestingly, the policy no longer talks about just tele-density. It is concerned about new generation IPV 6 switching technology, broadband on demand, fibre to home, one nation one licence and free roaming, etc. It almost accepts the fact that India, which initiated the telecom equipment revolution in the 1980s, has lost ground to the Chinese, raising cyber security issues.

While admitting that only one-third of the rural population is among the telecom haves, the policy makers state that 95 percent of rural areas are covered by telecom beams thanks to the competing private telecom companies.

The Indian telecom sector threw up new world class entrepreneurs but also became a headache for all governments in the last 20 years, the latest being that of Prime Minister Dr. Manmohan Singh. The sector created not just a few entrepreneurs but opened up whole new areas in the service sector, with even M-Commerce becoming a reality. Even internet connections, which stood at about 2 crores, went up to that figure courtesy the mobile phone bandwidth.

But the issue is with scams, one of the lowest monthly average revenues per line in the world (Rs 100) and a non-existing high tech equipment market, can India climb to the next level of telecom development? Will the telecom service companies, which offered per second billing, be able to continue in the same vein if they switch over to 3G and then 4G with huge bandwidth and faster applications?

There was lot of excitement when over a lakh of crores was pledged as license fee at the major auction of service licences. The excitement continued after the 3G spectrum auctions when the lakhs of crores were pledged to the government for spectrum. The diminishing excitement at the announcement of monthly additions by telecom companies along with the talk of new policy structures for merger and acquisitions point to the hard facts awaiting the otherwise thriving telecom companies. They have hit a plateau and need innovations to reach the last mile of subscribers who are low on revenue, while upgrading the existing urban high revenue yielders in 3G and 4G technologies.

The important question is will the scam-tainted government facing investigations monitored by the Supreme Court be able to provide the much-needed policy initiatives for boosting the sector? In all likelihood, the government has to go slow thereby further delaying the smooth take off the sector.  How many of the 15 licence holders will survive this policy slowdown will depend on how deep their pockets are and the general economic growth. Whichever way one looks at it, it is merger and acquisition time for telecom service companies in India.

 (The views expressed by the author are personal)