Untitled Document

Indian Telecom Industry



Q. What value proposition (advantages/benefits) does AUSPI offer its members?

A. AUSPI identifies common problems of the CDMA operators, provides consultation to them and represents them before the government organisations. AUSPI also plays very important role in framing of policies. AUSPI has always taken very progressive view of the telecom regulations and has always sought for changes which would help the telecom sector. AUSPI commences litigation against any other lobby or the government on a common platform, wherein all the members of the association will be part of it. The legal expenses arising out of such litigation is shared by all members. This helps in creating a strong representation before the judiciary, as it emphasises the fact that certain problems are faced by the industry as a whole.

Thus IBM Smart Business was designed to address these concerns. We have also been expanding our geographic coverage beyond the tier I cities in India and enhancing our partner relationships to be able to address more of the mid-market opportunity. We have a dedicated team at IBM to serve SMEs and this team provides everything to SMEs from technical assistance, marketing, order handling to fulfilling their needs by providing customised solutions.

Q. What are the issues and challenges faced by Indian telecom sector with special reference to CDMA sector?

A. Even though the CDMA technology is very efficient, it has certain disadvantages such as limited roaming or lack of direct roaming facility in other countries. Right from the initial stage, CDMA technology has not been the choice of high ARPU customers in India; as there is a limited choice of handsets supporting CDMA technology as opposed to GSM that is supported by a wider variety of handsets. Globally, however, CDMA technology is used by high revenue subscribers, especially for data applications, unlike the case in India.

Another issue that is confronted by all the telecom operators in the country is the low revenue share of value added services (VAS) in India. The share of VAS revenue is about 8-9% of total revenue (including SMS charges) in India as compared with 30% in other countries.

The telecom operators are also facing spectrum-related issues like majority of the spectrum still lies with non-telecom users while 93% of the total subscribers in India use wireless services. Furthermore, spectrum inadequacy has led to operators getting sub-optimal initial allocations of 4.4+4.4 MHz for GSM and 2.5+2.5 MHz for CDMA operations leading to higher capex and not so great QoS.

There is no defined growth path for CDMA in India as unlike USA, spectrum in 1900 band has not been opened for CDMA. This is so despite very successful trials conducted by AUSPI in 2008 with full involvement of WPC and DoT. It is feared that CDMA may be excluded from 3G auctions thus depriving 130 million CDMA customers of 3G benefits.

Q. What in your opinion will drive the teledensity and broadband penetration In India?

A. India has a total teledensity of 45%. While in metros it is 100% in rural areas it is less than 20%. The first task which needs to be undertaken towards improving the teledensity in rural areas is to create a need or a desire to own a phone. Further, rolling out network in the rural areas is very costly because the utilisation is very low which is around 5% or 7% of the network as the houses and villages are scattered resulting in lot of wastage in the rural areas. Thus, the industry needs to come up with rather specialised VAS for the rural markets; for instance, the farmer can be provided mandi bhav on his phone so he can select the tehsil or taluk place to sell his produce where he will have highest realisation.

In the Broadband Policy 2004, the target for broadband penetration was set at 20 million connections by 2010, but India has achieved only around one-third of this target currently; thus to accelerate broadband penetration in India proper content needs to be developed and made available at an affordable rate. Nonetheless the content will have to be in a regional language.

Q. What strategies should the players adopt to increase their ARPUs?

A. The only strategy the operators' world over adopted to face falling ARPU is that they have offered a single tariff across the country and Indian operators cannot be an exception. In developed countries, where the tele-density is high or the Mr Madhav Joshi President, Association of Unified Telecom Service Providers of India (AUSPI) 70 ARPUs are very high, the percentage of revenue from VAS is as high as one-third of the total bill. In India, however, the VAS component in revenue ranges in between 8% to 11% and out of this 5% to 6% is obtained through SMS. Now, if the SMS services are made available at as low as 1 paise per SMS then the VAS component will further decrease to 5% or 6%.

Telecom operators need to develop good VAS applications, such as money banking and other m-commerce applications, which will help the operators earn more commission. Besides, operators also need to develop good content like good games that can be downloaded by users; however, not only good content but also good marketing of that content is also important. Besides, every customer using either a GSM or a CDMA technology should be able to download the content and hence not only the network but good and affordable handsets with vernacular instructions and icons need to be developed.

Q. What according to you should be the course of action that the government should take to develop the Indian telecom industry?

A. Spectrum is a critical component for growth of mobile services and as some operators are still waiting for the initial GSM spectrum allocation of 4.4 MHz, the Government needs to take radical steps for withdrawing all spectrum that is in excess of the limits of 6.2 MHz for GSM and 5.0 MHz for CDMA as laid down under UASL (Unified Access Service Licence). The spectrum then needs to be redistributed on an equitable basis amongst all operators in all circles after ensuring an allocation of 6.2 MHz band spectrum for all. However, auction is not the ideal method to resolve the issue as the top 2-3 incumbent operators who have lot of cash may corner the spectrum and deprive the new operators. 900 MHz band spectrum is much superior to 1800 MHz band spectrum; hence, the re-farming of 900 MHz needs to be carried out to allocate it equally amongst all operators in tranche of 2.2 MHz per operator. This will bring about a level-playing-field between new and old operators and promote effective competition. There is an urgent need to review the universal service obligation (USO) levy being charged and to revise it from 5% to 2% or less of the adjusted gross revenue (AGR). Promotion of telecom services in rural area needs to be taken by taking measures such as treating telecom as a public utility and providing power at concessional tariffs. Moreover, the government needs to rationalise the multiple levies (aggregating about 30%) currently being imposed on the telecom sector. National Right of Way Policy needs to be framed to facilitate creation of infrastructure in the form of towers and laying of fibre.

Q. Do you think the Indian telecom industry is poised for consolidation? Why?

A. Currently, India has 13 operators in one circle and soon there will be 14 operators; so, the question that arises is how many of them are really going to survive and will there to be an exit route available to them? To answer that, I would say consolidation should be left to market economics rather than making any artificial attempts. The valuation of 14 operators will depend on the spectrum they own. Consolidation will happen not for the number of subscribers but for the spectrum that is available with that particular licensee, which means that the operator that does not have enough spectrum probably will look out for a partner.

Q. What services/technologies do you think will drive the future in telecom industry?

A. While we are talking about 3G, 4G already has been launched in two countries in Europe. Japan and the US are also going to launch 4G in the next few months. 4G, which will have a 100 MB speed, is a much superior technology as compared with 3G. However, 4G will not happen in the near future, as 3G is yet to be launched in India.

Q. Where do you see the Indian telecom industry 5 years from now?

A. The difficult times have passed; however, there has been unprecedented subscriber growth in the sector. The sector has witnessed no slowdown, even though the global economy has slowed down. I am convinced that the future of telecom is very bright and Next Generation Technologies (NGN) will be driving growth. Most of the voice may come through the IP (Internet Protocol) telephony. Your SIM card may become your wallet, passport, and identity card all bundled up into one. You will be able to download the data, make calls and enter your office using your sim card. It will be your password or entry ticket for all other activities.