Indian Telecom Vision 2015... !!! A Gesture in Adv.

A mix of wireless broadband, spectrum road map, moderate taxes and consolidation will help the sector enter next phase of growth.

As Bharti Airtel prepares for its major international initiative in Africa, by far the least explored continent in the world of telecom, I find it worthwhile to reflect on the most exciting years in telecom in India.

More so for the simple reason that India’s telecom journey is only halfway through. I strongly believe that the most impact full years of the industry are still lying ahead of us.

In terms of sheer numbers, the country can easily scale up to a billion consumers before 2015. Qualitatively, the industry can usher in an entirely new high both in terms of customer experience and transformational economic impact to achieve double-digit GDP growth.

But before I venture into the future, let me dwell on the events that shaped Indian telecom to its present scale and architecture.

Looking back, the choice of GSM technology in 1992, which was still at a fledgling stage across global markets, was a brave decision.

Choosing to go digital when analog technology was the prevailing standard in majority of the markets also proved to be a big decision with clear long term dividends.

As things turned out, it saved a lot of capital, which would have drained out during a possible technology migration at a later day.

The year 1999 was another remarkable one. After years of stagnation, the government gave the sector a new lease of life by doing away with fixed license fee regime.

Revenue-share arrangement became the new mode, giving more financial freedom to the operators to expand. Introduction of wireless in local loop and CDMA during the early part of the present decade did shake the operators a bit.

But the environment largely settled down making India one of the few markets with multiple technologies.

The next milestone year was 2007 when new mobile licenses were issued. Entry of these new operators contributed to the already high competitive intensity in the market.

Coming in this backdrop, the recent recommendations of the Telecom Regulatory Authority of India (Trai) on 2G spectrum allocation will disturb the growth trajectory of the industry. The real danger is that their implementation not only can make the sector unhealthy and quality of service decline but may well push it back by several years.

Today, IT and telecom sectors have been rightfully given the pride-of-India tag. Both have played extremely powerful roles in the dramatic turnaround from the pre-liberalisation Hindu rate of growth of 3-4% to the 8-9% today.

If you look closely at these two sectors, you would realise a fundamental difference in the way they have impacted the society. IT companies, by their very nature, are global in orientation, catering largely to the needs of developed economies. On the contrary, telecom is inclusive to the Indian society and economy.

The sector has well and truly catalysed India by connecting people and propping up productivity and speed in the most remote parts of the country.

Economic research has now conclusively proved mobile connectivity’s impact on GDP growth in developing and emerging economies. More important in the Indian context is its ability to usher in inclusive growth.

With more than 600 million mobile customers, India is the no. 2 mobile market in the world today. But amidst this euphoria, we should not lose sight of the weaknesses that could hamper the future growth possibilities of the sector.

Here are a few priorities that all stakeholders in the sector should be aware of as we move to the next phase of growth.

Rollout of 3G wireless broadband is critical. In one big leap, the internet will shift from the PC and the laptop to the mobile phone.

In fact, many first-time internet users will simply leapfrog to mobile internet, completely bypassing PCs and laptops; quite similar to the way millions gave fixed-line phones the pass to go mobile.

A clear, long-term spectrum road map is essential for healthy growth of the sector. Globally, the average spectrum allocation per operator is 17-18 MHz.

In India, it is less than half of it despite highest minutes of use (MoU) at over 450 minutes per month and the huge growth expected in future.

In view of the above, it is surprising that Trai has recommended reduction in spectrum per operator, which can adversely impact both the growth momentum and quality of service.

Government taxes and levies on the sector at their present level, over 30%, are substantially higher than the global average. A moderate level of levies and taxes could better serve the twin objectives of government revenue growth and market expansion.

With 12-13 operators in the market, it is clearly an unviable situation today, neither in the interest of the customer nor the service providers.

It is time the government encourages consolidation in the sector. It is also important to realise that healthy margins for the operators and the objective of affordability are not opposed to each other.

To drive in this point, Trai needs to evolve into a more developmental role. Its focus needs to shift steadily from affordability to orderly and healthy development of the industry.

Revival of BSNL, a true jewel in the public-sector crown, needs urgent attention. It is important both for the sheer number of people it employs and the wide reach of its services. Listing of the PSU major and professionalisation of its management would be critical.

Despite rapid rise in penetration, we still have over 1,50,000 villages beyond the reach of mobile signals. Many of them may not qualify for network extension purely on financial viability grounds, and left alone, may remain beyond our reach for a considerable period.

The Universal Service Obligation Fund worth $3-4 billion today could come handy to bridge the viability gap.

Another imminent revolution is m-commerce and financial inclusion. I saw the revolution in full swing in Kenya and Tanzania during my recent visit.

All kinds of citizens, from the labour class to the white collar office staff, were utilising this service for receiving salaries, paying bills, transferring money to friends and family, etc.

I am sure people in India living in the rural and remote areas, who do not have access to bank branches and ATMs, can be empowered to perform all these transactions on their phones.

Another major weakness lies in manufacturing. I often wonder why can’t we replicate the fantastic success of our six sigma auto components manufacturing to produce telecom equipment and handsets.

Today, though all manufacturers have huge capacities in China, only Ericsson and Nokia have established plants in India. With half of my experience in manufacturing, I can assure that with the support of government, India can create a huge telecom manufacturing base.

I see two vital enablers already present here: one, telecom software development capability and, two, lot of engineering talent to provide managed services for operations as far as LatAm, Australia, US, Africa and Europe.

Telecom is primarily an enabler. Its capacity to catalyse economic activity is phenomenal. Indian economy’s ability to hit the double-digit growth path could be critically dependent on extension of the telecom revolution to the hitherto untouched sections of the population.

I strongly believe 2-3% of this GDP growth could entirely be fuelled in future by this anytime-anywhere connectivity factor.

I also believe expansion of this revolution at the bottom of the pyramid could be the most potent antipoverty programme ever.

India crossed the target of 500-million mobile customer mark well ahead of the target date of 2010. I firmly believe Telecom Vision 2015 will be no different.

China, with 750 million mobile customers today, may well beat us to the target. Obviously, we may not be the largest telecom market in the world even then.

But we definitely want to be the finest telecom industry in the world making the most profound impact on the lives of common people — farmers, street vendors, carpenters, construction workers and the like — ever experienced anywhere in the world.
This is one peak that every Indian telecom stakeholder — from professionals to policymakers to entrepreneurs — will be proud to scale