Telecommunication Industry in the year gone by (2011)
1. MNP – This facility enabled the mobile users to retain their numbers while changing from one mobile network operator to another. For now only intra circle MNP is allowed at porting fees of Rs.19. It was initially implemented in Haryana circle on 25 Nov, 2010 and was than rolled out for Pan India on 20 Jan, 2011. Total MNP requests stood at 231.66 lakh subscriber till the end of October, 2011. Idea leads the porting in requests whereas Reliance CDMA faced the largest number of porting out requests till 31 Oct, 2011.
2. NTP – In a move toward consolidating the telecom industry in India, TRAI recommended a draft of the National telecom policy, 2011 to the Dot. It was revealed in Oct, 2011 and Government plans to implement it by Jun, 2012. Draft covers current area of concerns faced by telecommunication industry related to Roaming charges, Spectrum usage, Convergence, Broadband, exit policy, mergers & acquisitions etc. Draft also showed that Indian telecom industry has matured enough to move into a next level.
3. Rise and fall of 3G network - First six months of 2011 saw the launch of 3G services in India by private operators. State owned MTNL and BSNL had already launched 3G in selected cities by 2009. But it was in starting of 2011 which saw a rise in use of 3G services. But as per speculation, sale of the 3G services didn’t grew much due to many concerns like high prices, poor network, roaming issues etc among the customer. Till date operators are still fighting against roaming policies set by DoT for 3G. DoT has debarred them from forming a coalition among them for providing roaming services in India. The collective $14.6 billion investment in licence by the operators just managed to get a subscriber base of around 17 million by Oct, 2011.
4. Growth of Smartphones – Smartphone market saw a tremendous growth in Indian. As against 2.5 million units in 2010, sale of Smartphones is set to touch 8.5 million units till the end of 2011. Samsung finally overtook the Finnish giant Nokia in Indian Smartphones market in end of December. The proportion of Smartphones as a percentage of total mobile handset shipment also increased up to 6%.
5. Death of the iLeader – 5 Oct, 2011 witnessed death of legendary techno leader Steve Jobs, the master mind behind Apple’s iphone, iPad, iPod, iMac, iTunes, He died at the age of 56. He had co-founded Apple computers in 1976 along with his friend Steve Wozniak. Steve Jobs had earlier announced on 24 Aug, 2011 to step down as Apple’s CEO. Apple is currently the largest company in terms of market capitalization.
6. BWA auctioning in India – In 2011 finally India’s auctioning for broadband wireless access (BWA) took place. On 11 Jun, 2011 this auctioning saw government cloaking a total of Rs 38,000 Crore. Only Reliance Infotel won the bid for Pan India licence, giving away Rs 12,850 Crore to the government. They are set to launch Long Term Evolution (LTE) based high speed 4G wireless broadband services in India in second half of 2012. Whereas other companies like Aircel won bid for 8 circles, Bharti Airtel and Qualcomm won for 4 circles, Tikona for 5 circles and Augere for 1 circle.
7. Near Field Communication technology (NFC) – It has become one the most talked about application in current scenario. It is a set of standards for mobiles and similar devices to establish a radio communication with each other by touching them together or bringing them to proximity. Though 2011 saw a start in trend of NFC based Smartphones in India, it is forecasted that NFC technology would have risen to 96.9 million units worldwide in 2011. NFC technology will also help in rolling up the mobile banking sector in India.
8. National Optical Fibre Network (NOFN) project – Department of telecommunication approved the NOFN project. Telecom commission cleared the 20,000 Crore project on 22 Jul, 2011 with a vision to connect all the panchayats of the country by optical network in the next 3 years. It will help in increasing the broadband penetration in India which was at a very low figure of 12.98 million by the end of October 2011. This project will be funded by the USO fund. This fund currently has a balance of around Rs.16,000 Crore, with Rs.6000 Crore getting added every year from the operators in India.
9. The cable Television networks (regulation) amendment bill,2011 – This bill was passed by both Rajya Sabha and Lok Sabha in December, 2011.The bill has mandated that all cable companies should convert their analog system to digital in four metros by 31 Mar 2012. Big cities with a population greater than one million should be digitalized by 31 Mar 2013 and the whole country by 31 Dec 2014. In addition to 500 million cable TV viewers who will experience better audio and video quality, this bill is also going to benefit other stakeholders like MSOs, Broadcasters and Govt. Customers will also be able to pick and pay for the channels they choose to watch. Services like Video on demand and rise in number of channels will improve the cable network.
10. 2G scam – The 2G scam was the most talked about topic in the telecommunication industry in 2011. The scandal which is still under scanner involved many big politicians, Bureaucrats, Corporate Executives, Corporations and media people. High profile people like A. Raja- former cabinet telecom minister, M.K. Kanimozi – former Rajya Sabha member, Siddharth Behura – former telecom secretary, Sanjay Chandra –MD Unitech, Shahid Balwa - promoter Swann telecom were accused of wrongdoing. They were charged for illegally undercharging mobile telephone companies for frequency allocation licenses. A CAG report calculates the loss due to this scam to be around Rs.1,70,000 crore.
Telecommunication Industry in the year ahead (2012)
The year gone by (2011) has been an eventful year for the Indian economy. India has witnessed high inflation and slowing growth leading to a situation called as ‘stagflation’.
Well the same can be said about the telecom sector. The industry has been grappling with slow growth in terms less number of subscribers being added every month and high interest rates on the money borrowed for the 3G auctions. This has forced the operators to hike the fares. This in a way has signaled that the honeymoon for the Indian public at large is coming to an end and also represents the transition the telecom sector is going through.
Considering what has happened in 2011, we would like to give a snapshot of what is in store in 2012 and where telecom in India is heading.
1. Launch of 4G services - In 2011, 3G, although an anticlimax (as per the figures), made an impact on the people of our country and the policy makers. The forthcoming year may have something very stimulating i.e. faster broad band technology. Players like Reliance Industries (RIL), Airtel, and Tikona are pushing to launch 4G services in India. Tikona is gearing up to launch 4G with TD-LTE.
The point to be noted is that 4G will be launched at the same time as the rest of the world. Now since huge investments have been made in other technologies like 3G, Edge etc it would be interesting to see whether 4G will go along with other technologies or not.
2. Ecosystem - The smart phones are dominating world handset market today. So the launch of 4G services would require handsets to support the services. Getting the handsets in time will be a humongous task. The users will also have to adjust to the new services. After having seen a poor response for 3G, uptake of 4G services is bound to poor/limited to urban areas.Those operators with 3G spectrum can always go back to the earlier technologies like 2G, 2.5G. Those with BWA spectrum don’t enjoy such luxury. So rolling out 4G services would indeed be a challenge which the operators will have to face.
3. Mergers & Acquisitions - The players have been clamoring for a liberal M&A guidelines for the consolidation of the industry, which would definitely bring some sanity for the top players. With the Telecom Commission accepting the norms by TRAI, we should expect reasonable amount of M&A activities to kick start. SAR Group, makers of Wynncom brand of mobile phones, took controlling stake in the Indian arm of U.K.-based Fly Mobiles. The story is same as that of the operators. With intense competition (1.5 crores units per month) and many serious small time players, that makes it perfect for consolidation in the handset market too.
4. Mbps vs. MoU - ARPU has nosedived to less than Rs.100. For long the operators earned their lion’s share from voice and miniscule share from data. With voice revenue falling, data has to be the next cash cow for the operators. Since the launch of 3G services didn’t make the intended impact, it will be interesting to see how the operators will use 4G to make an impact on the data services front. Mbps will be battling out with MoU (minutes of usage) side by side.
5. Ambanis rendezvous - With RIL evincing interest in utilizing the infrastructure of RCom for the 4G services offered, the Ambani brothers can look to dominate the telecom market with RCom in 2G and 3G and RIL into 4G.
6. Roaming - The draft NTP2011 proposes to remove roaming charges. This was greeted with displeasure as roaming charges constitute 8% to 10% of the total revenue. TRAI has been engaged in talks with its foreign counterparts to lower the international roaming charges. Given that India now attracts more tourists, lower roaming charges will benefit the foreigners and TRAI would expect a quid pro quo for the Indian operators. It will be interesting to see how money counter will be affected as a result of the above policy.
7. Information Technology in Telecom - The Telecom sector, despite all its travails, is expected to lead the way in terms of potential growth. IT spending in India is projected to total $79.8 billion in 2012, a 9% increase over 2011. The telecom market is the largest IT segment in India with IT spending forecast expected touch around $55 billion in 2012. Even though IT analysts see a flat growth in 2012 for IT sector, Telecom market offers an opportunity to make hay in 2012. IT is the primary driver of business growth and the telecom ecosystem would want to use IT more now than ever before to enhance its business performance.
8. Cloud Connect - Like 3G, cloud was also a household term in 2011. Any discussion about telecom would not be complete without reference to cloud services. It is expected that the 4G services deployment will utilize the cloud for offering various services. It is also expected to bring in agility for Indian enterprises especially the SMEs. “India get your business online” an initiative by Google, aims to achieve agility and cost reduction for the enterprises.
9. Digital Cable - The Cable Television Networks (Regulation) Amendment Bill 2011 was passed on December 13th, 2011. Albeit such a move was expected long time ago still it brought out the smiles. The bill has some provisions though which has evoked mixed reactions from the industry. Digital translates to more channels, more advertisements leading to incremental revenue for the stakeholders involved. As a whole this bill is bound to bring in high quality video content (VOD) directly to the homes of the people thereby enriching their viewing experience. Cable can now look at cloud to offer new services and to cater to newer devices. However issues related to cost and revenue model will take centre stage in the upcoming year.
10. Migration to IPv6 - The business view toward IPv6 is very simple: Connectivity for future IP customers. With the government deciding March 2012 as the deadline for all government offices to be IPv6 compatible, it is going to a tough task to accomplish the same. Operators can use the IPv6 platform for differentiation in this hyper competitive market. The major concern, even though deadlines have been set, is the timing of release and its effect on the industry as whole. Location based services may take a hit as all LBS services are based on IPv4 databases.
Telecom sector, once the sunrise sector of our country, is going through tough times. Expectations in 2012 aren’t too great but opportunities do exist. The operators will have to reinvent the operating model in order to make the data services click. Consolidation in the industry is for sure to change the dynamics of the telecom industry in near future. Let’s, with bated breath, wait and watch.
L.KISHAN CHAND
&
VISHAL
(Class of 2013)
