The telecom market in India is the second largest in the world, next to
China. Growth has been rapid, and as of May 2008, India had 277.39 mn
subscribers-an average penetration level of about 28% for mobile telephony.
Ninety three per cent of this subscriber base belonged to the top six operators-Bharti,
Reliance, Vodafone, BSNL, Idea and Tata Teleservices.
But there could be more in the future. The number of players is increasing,
for one. GSM spectrum licenses have been issued to at least four new players-Videocon
promoted Datacom, Swan Telecom, Loop Telecom and Unitech. Beginning with the
Tamil Nadu circle, spectrum licenses for other states are also expected to be
issued soon, including the three other Southern states, Orissa, Bihar, MP and
the Kolkata circle. Moreover, a lock-in period has been stipulated for M&As, so
that the new players cannot be acquired by the existing biggies.
The raging debate on 3G spectrum licensing is also over-we hope. The
government has opened the licensing to global players as well, thereby
increasing competition for the existing players in India. The TRAI has laid down
recommendations pertaining to the entry of MVNOs (Mobile Virtual Network
Operators) and it is likely that some participants would come through this
route. For those tuning in late, MVNOs are players who don't own the spectrum or
telephony infrastructure in any circle, but can still offer services (their
brand or distribution network are some of their strengths) to customers, through
agreements for buying airtime from licensed access providers.
MVNOs are expected to do well in circles like Mumbai, where mobile
penetration rates are as high as 65%. In such circles, MVNOs can provide highly
specialized value added services and content. Though it would increase
competition, MVNOs could also help existing operators increase the subscriber
base, without too many incremental costs. The smaller players, especially, can
benefit from agreements with MVNOs.
Mobile Number Portability (MNP) is back on the table, and metros could expect
to get the service by mid 2009. That would make life even more competitive for
operators, as customers dissatisfied with one operator could easily move to
another, without changing their mobile number.
The Indian marketplace has seen intense competition in the last few years.
Especially in the telecom sector. It is also true that this has resulted in low
tariffs-and a booming market as a consequence of that. And the mobile handset
penetration in India is still not very high, and therefore offers scope for
growth.
But is there something like too much competition? Is the growth coming at the
expense of quality of service? And will it lead to unhealthy companies and great
loss to shareholders? Will the airline story of takeovers happen in telecom? And
if yes, would the low price year come to a halt? In an era of falling ARPUs
keeping the revenues flowing will be a challenge. For existing players, 3G, MNP
and the possible entry of MVNOs would make earning revenues and increasing the
subscriber base more challenging. Clear service differentiation is a possible
strategy. But so far it is the basic phone call that rules the roost. Data can
be a growth area but the internet growth remains sluggish on a relative basis.
There are no clear indications so far. But that does not mean that there are
no concerns. In good times the urge to dismiss warnings is strong. The US
investment banks collapse is a current example. There were warning signals but
in the era of greed everyone chose to overlook them.
Intensified competition is a result of Government policy. And we all know
that the telecom policies have had a bumpy ride. And dictated to some extent by
lobbying and pressure. We assume that the health of the industry is factored in
when competition is intensified.
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