I agree with Paranjoy that the impact of agriculture is substantial. Though it contributes only 25-30 percent, almost three-fourths of our people are directly or indirectly engaged in agriculture-related activities in our villages.

What I am trying to say is that without the success of rural economy, it is difficult to achieve success for the overall Indian economy. It is here that telecommunications can play a very important role.

The teledensity of three, I do not think, is a true measure of our telecom penetration. That is just an average. And all of us know how deceptive averages can be. Delhi has a teledensity of fourteen. In rural areas, it may be 0.1 or 0.2.

Improving the Indian telecom infrastructure is a huge task still. Is that an opportunity? Yes. And it is huge.

But where is that opportunity? If you look at the Indian market, it is all voice. And the reality is that many of the networks that will be deployed in the near future will be voice-oriented networks. The reason is simple. People don’t quite know how they would make money out of data networks. That is a unique situation. Anyone who comes up with that answer, will have a differentiated service with new revenue streams.

Yes, another good thing. India’s regulation is almost state-of-the-art. Yes, there are implementation issues. People rush to courts every now and then. But if you look at it dispassionately, the regulators have done a fairly good job. Implementation issues will get sorted out.

There is genuine demand. Whether you look at cellular or teledensity or internet penetration, there is genuine demand. Yes, operators have to find out what will be the differentiated service.

I feel data will be the differentiator. Because, as new players come in to challenge BSNL by offering lower prices, it will not sit down and watch. It can also cut the price. In fact, in voice, the only arbitrage is price. So, the only way you can generate profits is if you can create a mix of services and data.

What I see for India is growth. And only growth. I will have their opinion on this.

CS Rao

India is a highly middle-class oriented society. As Manoj said, there is hope always. We, as a country, are not so heavily dependent on electronic component trade as Taiwan is, or the Philippines, or Malaysia. So, I think a slowdown in the telecom services and then equipment market in the West will not affect us, significantly. We will remain fairly insulated. A significant portion of the GDPs of the East Asian countries come from the components’ exports. They will be badly hit. I do not think we will have the same kind of impact.

Also, I agree with Manoj that the Indian government has done its best. All the right policies are at place. The challenge before the Indian network operators is to come out with optimal network rollout plans with a mix of both voice and data.

The Indian operators, like all of us in general, try to place the blame on the government. I do not think the government can do anything better than what has been done.

The onus of coming out with right business models is on the operators.

India, I do not think, will feel too greatly, the impact of the global slowdown.

Paranjoy Guha Thakurta

I am pleasantly surprised by the nice things that our panellists have to say about the regulation and policy. I think a lot of the issues that we have today is the legacy of wrong policies of Mr Sukh Ram.

Mr Dutta…

Kaushik Dutta

The situation in Asia is also not that good. Let us look at China and India. China has 60 million subscribers. India has only 3.5-4 million. It is still fairly small. It has taken a long time due to policy and other reasons.

However, what has happened is that the cost of equipment has come down since then. Wit network equipment cost coming down, anyone putting up a new network will have a stupendous cost advantage. Add to that, the fact that the market is still small and the existing operators have spent a lot already. And for whatever reasons, the loyalty of the subscriber is not very high in India. Going back to Manoj’s example, when there is only voice and not much differentiated service, price becomes the only parameter. That is a huge challenge.

So what is likely to happen—and we are already seeing it—is consolidation through mergers and acquisitions. When you have a lot of M&A, it brings large amount of debt. And debt needs servicing. With low volumes, you generate low amounts of cash and servicing the debt takes a longer time. The cost of debt too, goes up.

However, when there is slowdown in the West, they will do a lot of cost arbitrage. New services like IT-enabled services will actually come to India. That will drive not only the business here, but also the infrastructure deployment and revenue flow of Indian network operators.

Also, I foresee another major change when voice over Internet becomes legal in India. It will definitely affect the business plan of the fixed, cellular service providers and long-distance carriers.

But, whatever happens, if you see a lot of players are looking at the new cellular and basic licenses that are being issued today. They are looking at it fairly long run. And that is a good sign.