With the current year nearing an end, the technology industry, much like the human beings, tends to reassess the past and get itself ready to embrace the new year with new innovations that promise to make life easier. And not just new developments in the technology space, it also analyzes the mistakes or shortcomings of the technologies of the previous year and makes some resolutions to rectify the issues and move forward. As the year 2011 is closing in, hopes afloat on various technology and corresponding business aspects of the Indian telecommunications industry, VOICE&DATA analyzes the market by feeling the nerves of the technology space to come up with the top 10 forecasts. These predictions spanning across stakeholders in the telecom industry also explains why the forecasts, even if not spot on, have the merit to be taken seriously by the industry.
New Telecom Policy 2011
The new year 2012 could not have brought a better gift for the Indian telecom industry than a new set of policy guidelines, afresh with new ideas and equipped with measures, which promises to iron out many wrinkles that have been bothering the industry for so long. The NTP 2011 Draft Policy, expected to be on the roll in January 2012, stresses on 6 hot areas: Broadband, manufacturing, spectrum, licensing, grievance redressal, and cloud computing. If drafted properly, the New Telecom Policy 2011 (NTP 2011) will shape the future of telecom in the present decade. Also, it will help once again in making telecom the shining star of the Indian growth story, contributing a sizable share to the Indian economy. With respect to broadband, the policy talks about providing an affordable and reliable broadband on demand by 2015. The new policy has set a target of 175 mn broadband connections by 2017 and 600 mn connections by 2020.
It has also revised broadband download speed from 256 Kbps to 512 Kbps and subsequently to 2 Mbps by 2015, and 100 Mbps thereafter. So the first step towards that direction is expected to be taken in 2012. However to ensure that the mobile broadband takes off, the government should also specify timelines for 100 Mbps bandwidth. High bandwidth will result in applications like tele-education, tele-health, e-agriculture, and e-government services to flourish as these applications will require high bandwidth.
The draft policy on manufacturing aims to meet 80% of the Indian telecom sector's demands through domestic manufacturing with a value addition of 65% by the year 2020. One has to see how this will translate into a reality, as it would be a gigantic task for the Government of India and needs to be tackled at all levels to have value addition of 65% by the year 2020. Plans are also to create a corpus fund for promoting indigenous R&D, intellectual property right (IPR), and entrepreneurship. And, this is a welcome step, but the policy does not specify the quantum of fund to promote local manufacturing and entrepreneurship, which is an important ingredient and will act as a catalyst to promote indigenous manufacturing.
The draft policy also talks about making available adequate globally harmonized spectrum in the bands of 450 MHz, 1,800 MHz, 1,910 MHz, 2.1 GHz, 2.3 GHz, 2.5 GHz, 3.5 GHz, and bands identified by ITU for commercial mobile services. In all the above spectra, the government has not specified the timeframe for allocation of spectrum. Besides, among other proposals, the policy envisages the abolition of roaming charges in the country, meaning that the mobile phone users can treat the whole country as their local network and make calls as per their existing tariff plans.
Once the policy is in place, provided it has all the answers for the issues that the industry is facing, the juggernaut of the telecom success story would again start rolling on.
M&A Guidelines
The NTP 2011 is expected to bring clarity on merger and acquisition guidelines for the telecom industry. The telecom operators may adopt a circle-wise acquisition strategy, as the licenses have been awarded by circle. Industry experts believe that there would be 6-7 telecom operators in each circle by the end 2012, while the rest would be acquired.
The current set of players are running out of options to grow profitably and have already sought to build synergies through sharing of networks and backhaul infrastructure. This was evident in tie-ups that resulted in the formation of tower firms such as Infratel. Bharti airtel in its feedback to the government on new policy says that in order to facilitate consolidation the M&A guidelines should be liberal, forward-looking, equitable, and non-discriminatory.
The leading 6-7 players would stay on to battle it out for the telecom subscribers and services revenues. However the merger and acquisition (M&A) guidelines are expected to stipulate that the merged entity in any circle should not have market share in excess of 60% in terms of subscriber base and gross revenues. In such cases, both the Department of Telecommunications (DoT) and Telecom Regulatory Authority of India (Trai) would have to approve the proposed merger. In case the combined market shares of any 2 entities is less than 35%, then the DoT alone may grant approval to the merger, provided the resultant entity does not hold more than 25% of the total spectrum for the service area.
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