Transition year for Indian telecom’s growth story

By Aparajita Gupta

New Delhi – With over 900 million telephone connections, India remained the world’s second largest telecommunications market in 2013, recovering from the bumpy ride the year before, but made little progress to jump to the next generation of services.

The year under review had already equipped the government with a roadmap, following the release of the National Telecom Policy of 2012. But legacy issues, like the ongoing legal battle over allotment of airwaves, or spectrum, in 2008, kept decision-making in check.

Nevertheless, the government did announce some significant initiatives – like the much-awaited policy on mergers a! nd acquisitions and permitted 100 percent foreign investment in the sector – which will drive Indian telecom in the years to come, analysts feel.

The onset of 2013 was accompanied with the introduction of NTP 2012 that brought forth promise of policy stability for the sector, Rajan S Mathews, director general, Cellular Operators’ Association of India (COAI), told IANS.

“The implementation of the National Telecom Policy of 2012 is a positive step. But its immediate impact will be limited,” said Mahesh Uppal, director of a telecom consultancy firm, Com First.

“The current controversies of 2G (second generation) and 3G (third generation) telecom services have less to do with policy and more with the process. Those disputes cannot be resolved by changes in policy,” Uppal told IANS.

Industry stakeholders were nevertheless upbeat on the new merger and acquisition policy and felt it was an improvement over the previous one. Uppal, for one, felt it will ! help mid-sized firms, while bigger players will have more flexibility.
“The mergers and acquisition policy will have a major impact,” said Rishi Tejpal, principal research analyst with Gartner. “Once the market stabilises, it will play its role. With clarity, we can expect some more foreign players to come in,” Tejpal told IANS.

Analysts did not see much of an impact by allowing 100 percent foreign equity. “Very few players are keen except Vodafone, which wants to raise its stake beyond 64.38 percent. Investment is a priority for the sector but not foreign equity, per se,” said Uppal.

Experts said telecom players were looking for market capitalization and consolidation.

“The operators have started to focus on subscriber quality and have done away with the lucrative dealer commissions and promotional minutes. After 2008, for the first time, India has witnessed a surge in voice tariff,” said Jaideep Ghosh, partner witn KPMG.

He also mentioned that to increase data user penetration, operators have dropped their ! 3G tariff (by as much as 75-80 percent). As a result it is comparable with that for 2G services.

On the subscriber front, India continued to make progress.

At the end of December 2012, India had 864.72 million mobile phone subscribers and 30.79 million fixed-line connections for a total of 895.51 million wired and wireline. By this October, this increased to 875.48 million mobile while fixed-line connections declined to 29.08 million.

Thus, the total number of connections stood at 904.56 million end-October, with the overall tele-density in the country increasing from 73.01 at the end of last year to 73.32 at the end of October.

More importantly, the share of urban subscribers declined from 62.20 percent in December to 60.26 percent in October-end, while rural telecom penetration rose from 39.64 percent to 39.74 percent in October.

According to analysts, one principal area where the government faltered in 2013 was in the area of auctionin! g precious airwaves, or radio frequency spectrum. This, they said, did ! not materialise in March 2013 due to artificially-high reserve price.

Now, all eyes are on Jan 23 next year when the next round of spectrum auctions is set to begin. The government, this time, feels it has kept the reserve price at a moderate level and hopes it will fetch the exchequer some $650 million.

Highlights of 2013:

-National Telecom Policy of 2012 introduced

-Foreign equity of 100 percent allowed in telecom

-Vodafone evinces interest in buying entire stake of Indian partner

-Mergers and acquisition policy approved

-Dominant player can hold up to 50 percent telecom market share

-Telecom tower business given infrastructure status

-Clearance for unified telecom licences in respect of technology

-Total telecom connections at 904.56 million end-October.