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India is one of the few telecom markets in the world with such a high number of service providers. And the already crowded telecom space is all set to become even more crowded with the entry of new operators.

The market is heading towards a war zone with six new operators set to enter the market. Bloodbath is anticipated with the operators getting ready to fight for each and every subscriber.

The market landscape is likely to go in for a dramatic change. However, the moot question is with ARPUs hitting rock bottom, ever increasing user-base and near saturation subscriber levels in top cities, what will be the innovative business strategies of the new operators to survive, and thrive.

Consolidation will be the order of the day. New players are likely to be acquired or merged after the three-year lock-in period. This is also considering the fact that M&As might become one of the ways to get access to spectrum.

The new telecom players having received license in January 2008 are likely to roll out services in the next three-to-four months. With the backing of foreign telcos, service providers like Loop Telecom, Swan Telecom, Unitech Wireless and Sistema Shyam Teleservices have placed orders for equipment and commissioning of networks is at an advanced stage. Datacom, which is yet to rope in a strategic partner and Bycell Telecommunications, which is having difficulties coming out of the legal loop, will be the last to kick off services. Promoted by Batelco STel would be one of the last ones to start operations since according to industry sources, they haven't even started scouting for vendors.

This frenzy to launch services at a time when the country is going through a bad phase is also linked to DoT's tough stance against new licencees who have failed to roll out new services. DoT is said to have given new operators time till July to launch their services or face penalty. Operators given ultimatum are Datacom, Swan, Unitech and Loop Telecom. At the same time, considering that roll out of telecom networks requires anywhere between 6-10 months from the time of placing orders, it is highly unlikely that the operators will be able to offer services in all the circles by July. The estimated fine payable by operators is Rs 450 crore.

As of now, Bharti Airtel in GSM and Reliance Communications in CDMA dominate the space and new operators will add to the competition. Unitech alongwith Shyam Telelink has got licenses to operate in twenty-two circles, while Swan Telecom has got licenses in fourteen circles. Loop on the other hand has got licenses in twenty-one. Apart from that, Datacom has licenses to offer services in all circles except Punjab.

At a recent summit on greenfield operators, new service providers shared their challenges and opportunities in India Standing (L-R): Asit Kadayan, director (M-II), Telecom Engineering Center; Kiran Pande, president, ECI Telecom; Apu C Saha, director, service delivery & business development, Bycell Telecommunications; Shafiq Anjum, senior general manager, IT, Datacom Solutions; Ibrahim Ahmad, group editor, Voice&Data; Atul Agarwal, head, IT, Datacom Solutions; Ram Prabhu, head, roll out, Unitech Wireless; Rajat Singh, head, business strategy, Datacom Solutions Sitting (L-R): Rajneesh Arora, CFO, ByCEll Telecommunications; Bhoopesh Raghav, head NLD, Loop Telecom; BM Baweja, senior director, Department of Telecommunications; Yoav Valadarsky, AVP solutions marketing, ECI Telecom; Sergey Savchenko, CFO, Sistema Shyam Teleservices; Alexandre Louzine, CEO, ByCEll Telecommunications; Vinay Kala, general manager, projects, Unitech Wireless

Most of the operators have got foreign investment. Norwegian telecom major Telenor has acquired 67.25% stake in Unitech's wireless business. The company recently named its top management. Sistema, on the other hand, entered the Indian market by taking a 74% stake in Shyam Telelink. ByCell Holding AG has 74% stake in Bycell Telecommunications. The Indian partner in the deal is Hyderabad-based Jayalakshmi Group. Datacom, on the other hand, is promoted by white goods major, Videocon. Bahrain Telecommunications Co BTEL.BH (Batelco) has announced that it would buy 49% of Indian mobile telephone operator S Tel Ltd for $225 mn.

However, while the space is getting crowded, the subscriber pie itself is growing. As of now, there is a subscriber base of 300 mn (around 28% wireless penetration). This is likely to double by 2012, so there is enough space for all the players to survive. This data also means that the rural market is going to be the focus of all service providers since teledensity in urban areas and metros is quiet high, and it is the bottom of the pyramid which is going to witness the maximum action.

This is not to deny that new operators are likely to face rough weather. They are not likely to turn free-cash flow positive before seven years. The new entrants face challenges of brand building, distribution, spectrum availability, organization building, negative free-cash flow and scale.

While most of the incumbents have spectrum in 900 Mhz, the new operators have got spectrum in 1800 Mhz, which would result in new operators having double the number of towers to cover a service area. “In this scenario, infrastructure sharing, both active and passive, becomes a must for new operators,” says Alexandre Louzine, CEO, Bycell Telecommunications.

“Differentiation of services is going to be the key focus. It is not going to be just voice. Mobile is going to be the socio-economic driver and it is going to go beyond communication and the presence of so many service providers is going to change the rule of the game. For new customers, bundling is going to be the key. Total cost of ownership is going to be the big differentiating factor,” says Madhusudan Gupta, senior research analyst, Gartner.