Where the Telecom industry is heading in coming years...? 

          The historic Indian economic reforms of 1991 which gave birth to LPG policy (Liberalization, Privatization and Globalization) completely changed the industrial and business scenario in India. It boosted many sectors in India; telecom sector being one of them. India being a developing country and also the second most populous, Indian telecom industry has witnessed several key moments in the last couple of decades. While many of the events like NTP of 1999 and broadband policy of 2004 led the foundation to help the telecom sector flourish, some of the recent issues like 2G scam have caused uncertainty and slowed down the growth. But recently due to some advancements in FDI and government policies, the debt ridden mobile operators have got some ray of hope. The future of Indian Telecom industry as well as Global Telecom will depend a lot on few factors which are the major driving force for them.

Government Policies

            One of the biggest reasons why telecom industry is sceptical about Indian telecom environment is ambiguity in government policies. Even after government approved 100% FDI in telecom, operators are not sure about M&A policy and hence we won’t see any major advancement in telecom investments in India. With decision on telecom M&A policy around the corner, we can hope for some good news for mobile operators and also users. If the policy is positive for operators, big foreign guns like Vodafone will try to get maximum stake in Indian market.

            The government has also announced key policy measures intended towards providing a transparent business environment to bring the telecom sector back on track. The government has made it clear that future licenses will be de-linked from the spectrum, and companies will need to buy bandwidth at market rates, going forward. While many of the recommendations are yet to be implemented, government has already issued final guidelines on Unified License. According to the new rules, telecom operators can offer telephony, Internet, IPTV and linked communications services under a single license replacing the earlier United Access Service License (UASL) model, where operators had to take separate licenses for offering each of those services. So, in coming years, we can see operators providing these services on a large scale and in a cost effective manner.

            The government is also thinking about refarming of spectrum in 900 MHz band. The operators have taken varying stands on the crucial matter of re-farming that primarily deals with re-auctioning of spectrum once the licence of an existing operator expires and spectrum is vacated. Three private operators (Bharti Airtel, Vodafone and Idea), besides state-run BSNL and MTNL, hold nearly 85% of the spectrum in the 900 MHz band, which is considered valuable by mobile operators in view of the cheaper capital expenditure required for rollout of services. Licences of operators in this band will be expiring progressively from the year 2014 to 2024, prompting the newer operators to seek a chance for buying spectrum. So this will create a level playing field for all operators but at the same time will create a blood bath during spectrum auction. It’s a wait and watch game as to how things will work out.          

Increased Competition among operators

            As aforementioned, privatization attracted many domestic and foreign telecom players in India. Today, considering the vast geography and potential subscriber growth, nearly 13 mobile operators are providing mobile and data services in India. In 2003, Reliance, led by Mr. Mukesh Ambani, disrupted the Indian telecom market with its Mobile Monsoon Hungama offer, wherein they introduced subsidized phone with super cheap call rates. It compelled other telcos to introduce various budget mobile schemes and put the market on fire.

            But the dynamics have changed today as users are concerned with the data schemes provided by their operators. Current trends show that data ARPU forms nearly 30% of ARPU for almost all the operators. In the coming years, with technology slowly shifting from 2G to 3G to 4G LTE, data ARPU is going to be the major revenue source for mobile operators. So the operators like Reliance Jio and AirTel which have 4G licenses can be winners in this case.

New Technologies – 4G LTE

            The major reason for the surge in growth of Telecom Industry has been timely innovations and new technologies. The world is talking about 4G LTE but most of the rural India still lives in 2G world. 3G did not catch the required user attention in India but success of 4G depends on how mobile operators communicate with the users.

            The immature Indian LTE ecosystem, especially so in the TDD variant of LTE, has been a major roadblock for Indian telcos. The device manufacturers have been focusing on the FDD version of LTE mainly because this was witnessing accelerated adoption. This is also the key reason why telcos like Aircel, Tikona and Reliance Jio are yet to launch 4G services in the country. But now that the LTE TDD technology has been launched in Japan and China, device manufacturers have started developing devices for this technology. Despite the positives, the mobile device ecosystem for 4G could still take two or more years to really develop even to the level of 3G in India given that 3G itself has not reached up to a satisfactory level in India.  The challenge faced by the Indian operators is the ecosystem and once that falls in place it will trigger very fast.

Deals with OTT players

            Recently, Over the Top (OTT) players like Whatsapp, Nimbuzz, Facebook, Viber, Skype, Twitter, etc. have become a threat to mobile operators as they are eating into their SMS revenue. These OTT players are here to stay as they offer social networking benefits to the users.

            Mobile subscribers’ adoption of OTT services has had a momentous impact on mobile operators as data revenue seems to be the way ahead for telcos. Telecom operators are increasingly exploring the possibility of partnering with Over the Top (OTT) players for mutual benefits. Vodafone partnering with Twitter and AirTel partnering with Google are few examples. With more and more consumers gravitating to Smartphone’s and subscribing to an ever expanding array of OTT services, the operators are left with little picks. Undoubtedly, the Indian telcos are actively pursuing opportunities to establish meaningful businesses with OTT players to effectively monetize the benefits they bring. Almost every major operator is stepping out of its comfort zone to engage services offered by OTT players to add value to their offerings and in the process gain some competitive advantage. In a bid to drive internet usage, offering free access to OTT players will naturally add more internet users, which will, in due course act as a catalyst for generating higher revenues. Monetary realization of these partnerships will certainly take at least three-five years; hence to evaluate the success rate of such partnerships we have to wait and watch. But, this is how mobile operators will make use of OTT players in coming years.

Kiran Raikar

Class of 2015