Indian Telecom: Under seige!
Bad governance and regulation in India is an equal opportunity offender. UPA’s errors of omissions & alleged commissions beginning 2004, has all but ruined one of the best stories of the Indian economy—telecom.
While new entrants struggle for their very right to exist in India, older incumbents are currently staring at the prospect of being “retroactively” charged an estimated Rs. 37,000 crore each for 10 years-worth of “excess spectrum” held by them. State-owned Telcos are being progressively run to the ground, earnest private operators have been waiting for start-up spectrum in key markets for any number of years. When a foolhardy new entrant pops up, and when it bid $1 billion for 4G licenses in four lucrative markets, its application was rejected for thoroughly frivolous reasons.
A mish-mash of secretive and uninformed regulators—the ministry of Telecom, TRAI, Department of Telecom, TDSAT—work at cross-purposes with each other. Operators and other stakeholders come to know of regulations via frequent “leaks” to the media, in most cases traced back to unauthorised photocopies of official documents that are palmed off and sold by junior staffers. The phrase “regulation through photocopy” would not be out of place, most stakeholders agree in private.
With nearly 900 million subscribers across seven to 15 operators (depending on whether you include the ones whose licenses were cancelled), regulators ought to understand Indian Telecom is no longer in its infancy. The whole idea of prescribing how an eighth, ninth or tenth operator should roll out their networks doesn’t make sense today. Consumers need service competition, not multiplicity of infrastructure. There is a strong belief that this logic of introducing many more operators in each regional market may not be consistent with how wireless telecom has evolved across the world. According to the credit rating agency CARE’s research, on an average there were 15 players (both GSM and CDMA) in a telecom circle in India as compared to three in Singapore, three in China, four in Mexico and five in the US.
Out of the total 122 cancelled licences, 39 licence areas (about 32 percent) are under-utilised as these many operators did not even have 1,000 subscribers in many circles as of December 2011, implying the services were not fully rolled out. And here’s a telling comment on the state of the industry: After the cancellation of licences, average number of operators will come down to around nine to 10.
This indicates that further entry of operators beyond four or five does not significantly increase the competitiveness of the market. And what do the fringe guys have to show for their efforts? A $2 billion pan India network without any subscribers!