2005: A Terrific Year For The Telecom Sector !

[Arun 795]

Terrific year for the telecom sector

- Rediff.com

December 29, 2005 16:41 IST

The country's telecom sector went into an overdrive witnessing among other things a uniform call rate, huge foreign investments as intense competition in the arena led to a drop in tariffs to benefit the consumer.

The new National Telecom Policy would unfold next year while the much hyped uniform call rates across India could become a reality in January 2006 where even a Delhi-Mumbai call will be treated as a local call. Or for that matter a call could be made anywhere in the country which would be like a local call.

The government is considering implementing uniform call rates across the country in order to bring down per minute STD call rates.

Meanwhile the new National Telecom Policy is likely to address issues relating to access, spectrum allocation, technology, telecom equipment manufacturing and others.

In the last couple of months global IT and telecom giants have announced their investment plans of more than $8 billion in the country over the next 3-5 years. These investments cover the entire gamut of IT services and telecom equipment manufacturing.

By 2006, the FDI in the sector is expected to double to $22 billion. About $9 billion in planned investment has been announced this year, including $3 billion by SemIndia and chipmaker AMD, $1.7 billion by Microsoft Corporation, more than $1 billion each by Intel Corp and Cisco Systems Inc.

The last three or four investments have come from the United States mainly from companies like Cisco, AMD, Intel and Microsoft.

Meanwhile, almost all global telecom equipment majors such as Ericsson Nortel Networks Corp, and Nokia have already marked their presence in the country.

Meanwhile, continuing cheer prevailed in the country's fast growing mobile segment with tariffs sliding by 37 per cent to touch Rs 1.20 per minute by the end of September 2005.

In the same period rates for fixed line local calls witnessed a 15 per cent drop to touch 85 paise in September 2005.

Meawnhile the gross subscriber base of the fixed and mobile services together reached 113.07 million for the quarter ended September, 2005 as against 104.22 million on June, 2005, registering an increase of around 8.49 per cent.

Mobile users also rose over 30 per cent at the end of September 2005, compared with September last year

The last quarter also saw the country's teledensity move into double figures to touch 10.36 for the quarter ending September 2005, compared with 9.61 in the previous quarter while the overall teledensity growth for the year was 28.03 per cent.

The user base is expected to soar as Bharti Tele-Ventures Ltd. apart from state owned BSNL are expanding their networks into untapped rural areas where more than two-thirds of the country's billion-plus population lives.

Also, falling prices of handsets, partly due to local manufacturing by players such as LG Electronics and even Motorola have also fuelled demand from potential mobile users.

Motorola launched its 'Made in India' handset, 'C 115' billed as a common man's mobile at a price tag of Rs 1,700, last month.

Communications and IT Minister Dayanidhi Maran had stated that the growth will have to shift to rural areas. China has a teledensity of 29 per cent way ahead of India.

Another event that has been chasing the telecom sector has been the merging of the two telecom PSUs MTNL and BSNL. But the government has still to make a final move in that front and decisions on the merger front is still awaited.

With an average of over 2.5-million mobile phone subscribers added every month, India is currently one of the fastest-growing telecom markets in the world.

On another tangent, the department of telecom faced the ire of Parliamentary Standing Committee on Information Technology, which has asked it to move fast on resolving the spectrum tangle.

Let GSM and CDMA co-exist, give both factions spectrum based on international norms and let CDMA have a go at the 1,900 MHz band, the Parliamentary Committee in its latest report said.

The committee asked DOT to create conditions for GSM and CDMA operators to roll out 3G at one time.

According to the report, DoT has been sitting on the telecom regulator Trai's spectrum recommendations for too long, and it has discussed the release of spectrum with the defence ministry since February, but without results.

''Even after 10 months, the department has not arrived at any final view on the requirement of Defence and the vacation of spectrum including IMT-2000 band,'' the report says. Decisions on spectrum need to be handled carefully, but ''such issues cannot be kept pending forever,'' the report said.

TRAI had earlier said that the 1,900 MHz band will not be easy to free from defence control, but the parliamentary report wants DoT to start work on a 'defence interest (spectrum) zone' soon.

This will free 1,900 Mhz, which CDMA operators can use with the existing 800 MHz. The GSM faction can also keep its 900 MHz and 1800 MHz bands the report said.

[Arun 795]

And whats in for the year 2006 ? ...

Zipping on the telecom highway

- Rediff.com

Joji Philip Thomas | December 30, 2005

If 2005 saw over Rs 15,000 crore (Rs 150 billion) in fresh investments on the ground (not financial investments of the Vodafone type), an addition of about 32 million customers to the nation's telecom subscriber base, and foreign direct investment of over Rs 12,000 crore (Rs 120 billion), the coming year may better it by a long margin.

According to industry and government projections, 2006 will see a 50 per cent increase in investments and over a 100 per cent rise in FDI inflows, with a near doubling of the subscriber base. In just the last six weeks, Tata Telecom has gone into overdrive and netted a million subscribers.

Rivals Airtel, Hutch and Reliance have immediately come up with similar lifetime free-incoming offers, reducing effective tariffs even further.

Not surprisingly, valuations have risen phenomenally. The value paid per subscriber rose from $570 in Essar's acquisition of BPL Mobile, to $1,000 when Vodafone bought a 10 per cent stake in Bharti. Over the year, the Bharti share, the only one publicly quoted, has risen from Rs 218.90 to Rs 356.45.

"2006 should be another landmark year. The most affordable tariffs will help establish India amongst the top five telecom markets with over 170 million subscribers," says Mukund Govind Rajan, president, Association of Unified Service Providers of India and Director, Tata Teleservices.

While the industry is now focused on how on the new 3G spectrum policy will play out, since this will spawn a new range of broadband mobile applications like gaming and IP TV, there's a lot more in the works.

For those using long distance telephony, Telecom Minister Dayanidhi Maran's new plan comes into operation in a few days, and will see new players coming in since the licence fee has been slashed -- from Rs 100 crore to Rs 2.5 crore (Rs 1 billion to Rs 25 million) for a National Long Distance licence, and onerous investment obligations have been waived), Skype-type Internet telephony has been permitted and will further crash tariffs, and the long-awaited Carrier Access Code will also be in place -- this will allow subscribers from a Hutch phone, for instance, to dial a code for Reliance Infocomm and use its service to call from Delhi to Mumbai, and will increase subscriber choice.

Hutch, Spice and Idea Cellular have already announced their plans on the NLD front, and BSNL and MTNL have joined hands to enter the international long distance sector.

The dampener, however, is the cost of the access licence (a fixed line and a mobile phone licence still costs Rs 1,508 crore (Rs 15.08 billion) ) and since Internet telephony can only be offered by those with such a licence, Skype-type players are unlikely to come till this is fixed.

Rural telephony is also likely to see action, with the government finalising its plan to change the current USO-system of subsidising each rural line and instead funding infrastructure like mobile phone towers.

The coming year will also see manufacturing take centre-stage. Global leaders such as Ericsson, Alcatel, Elcoteq and LG have already set up their manufacturing base in India, while Nokia, Samsung, Flextronics, Siemens, Motorola, Foxcon and Aspcomomp are setting up their production facilities -- all told, $855 million will be invested in this part of the sector. Others such as Alcatel and Cisco have announced plans for R&D investment.

The only cloud on the horizon is the emasculation of the regulator.