Coping with Change: Operators’ plans and perspective

Data has emerged as the centrepiece of every operator’s strategy and they are keen on exploring the potential of new technologies such as virtualisation, artificial intelligence, internet of things (IoT) and 5G. However, several challenges exist, the key among these being hyper-competition, slow revenue growth, burgeoning debt, infrastructural constraints and cannibalisation from over-the-top (OTT) players. To overcome these and leverage the opportunities presented by the sector, operators are seeking government support and a favourable regulatory framework for business sustainability and profitability. The top telecom operators recently came together at the India Mobile Congress 2017 to discuss the challenges facing the sector, the changing business dynamics and new growth drivers. Excerpts…

Himanshu Kapania

India’s role in the emerging global order cannot be emphasised enough. Tremen­­dous economic energy has been unleashed by India over the past few years, which has placed us amongst the fastest growing economies in the world. The telecom in­dus­try has been a key driver of this growth. The Indian mobile telecom industry has emerged as a force multiplier for connecting the unconnected by expanding wireless voice connectivity from an abysmally low level. Seven years back India had only 200 million subscribers; today around 1 billion have been added to that number. Here, while it is important to talk about India’s Vision 2020 in terms of telecom growth, it is also important to talk about the big elephants in the room.

Recent market developments have dras­­tically altered industry dynamics, resulting in severe financial stress for the sector. The introduction and subsequent proliferation of bundled unlimited usage plans, and the lack of effective regulatory intervention have had a deep impact on the realisation rates for the industry. Both mobile voice and data ARPUs, which were already one of the lowest in the world, have now plummeted to below-cost levels. The revised interconnect usage charge will further deplete the industry’s funds besides creating inter-operator imbalances on account of high traffic asymmetries. The fault lines are already evident as the industry registered, for the first time in its history, a degrowth of approximately 2 per cent in 2016-17. Industry forecasts for this year reflect a decline of anywhere between 10 per cent and 12 per cent. Undoubtedly, this will also impact the long-term competitive structure of the industry.

In such a challenging scenario, urgent intervention and support are required from the telecom ministry, in the form of a package that can help in alleviating the financial stress in the sector. The mobility industry remains one of the most taxed sectors, with multiple levies such as licensing fees, spectrum usage charges and goods and services tax (GST) adding up to nearly 28-30 per cent. Spectrum, the key raw material for mobile telecom services, remains the highest cost element for the industry. The rationalisation of taxes, reduction of GST to 5 per cent, lowering of spectrum usage charges and discontinuation of operators’ contribution to the Uni­versal Service Obligation Fund will provide a much-needed respite.

Despite the financial stress, the infrastructure building process of operators continues undisturbed. The private sector is working at breakneck speed to provide the world’s largest mobile broadband infrastructure for 4G. We expect that in the next two to three years, at least 500,000 4G base transceiver stations (BTSs) will be installed.

Access to high speed mobile broadband will spur the digital services ecosystem. Digitisation in India will have far-reaching implications for major sectors such as education and public health. Digital wallets will convert the cash economy into a digital economy. Fixed broadband is going to get a big push with the ongoing investment in fibre, especially for enterprises and home customers.

Also, over the next five years, the world is going to increasingly move towards the introduction and deployment of 5G. India, however, still has some distance to travel. The availability of adequate and affordable spectrum is going to be one of the major bridges to cross. Further, most industrial consumers have just commenced their digital journey and relevant use cases need to be identified and developed for 5G adoption. Therefore, while we welcome the arrival of new technologies and services, the regulations have to ensure and create a level playing field for competing services. India has commenced its transition to a digital economy, but how swift and successful this transition is going to be will depend on a single factor – the health of the industry.

“While it is important to talk about India’s Vision 2020 in terms of telecom growth, it is also important to talk about the big elephants in the room.” Himanshu Kapania

Mathew Oommen

Looking at some of the trends of 2017, the next big wave is enhanced intelligence. It is not just about the programmability of the network; is a combination of cloud, artificial intelligence and machine learning. Some call it automation, but it can be considered as a level of orchestration from an end-to-end perspective. Augmented reality, virtual reality, visual graphics, natural language processing and natural language understanding are changing the way we do business. Some of the transformative technologies and opportunities that will bring a big shift in India are enhanced virtual learning and e-learning, e-health including affordable diagnostic tools, and smart cities. This transformative ecosystem is not just about connectivity; rather, it is about an integration of people, processes, data and things.

The past 12 months have been dramatic for the Indian telecom sector and a wave of mobile broadband has been unleashed. Today, the competition is not among telecom service providers; rather, the operator fraternity is facing competition from emer­ging OTT players, who are very agile from various standpoints – be it the dev-ops model, product innovation, programmability, security or automation. They price their services at zero as their business mo­del is not purely subscription-driven; instead they focus on value creation throu­gh advertisements. The operator fraternity can also look at such enhancements to their business models. There is an urgent need for operator collaboration as well as for improvisation at the technological, operational and business levels.

Our vision for India 2.0 is to deliver the best experience using the best technology at the highest value to every Indian, and 5G and FTTx are the building blocks for this. 5G and fibre have tremendous opportunity to coexist, collaborate, complement and supplement. 5G is not just another generation of networks. It is a framework of capabilities that will bring about a paradigm shift. Thus, it is very important to make the right spectrum allocations the very first time.

As for long term evolution technology, it will drive the digital empowerment and the digital enablement of India. The quantum of data being generated and consu­med is a big opportunity for us. The question is how to protect it and harness it to deliver the best and the highest value to every individual.

“5G is not just another generation of networks. It is a framework of capabilities that will bring about a paradigm shift. Thus, it is very important to make the right spectrum allocations the very first time.” Mathew Oommen

Sunil Sood

India is a land of contrasts. On one side, there is a rush for 4G adoption with data consumption doubling/tripling every few months; on the other, we don’t have necessary infrastructural support such as ducts in roads to lay fibre. Every cell site must be connected through fibre to ensure high speed internet access and the industry is in urgent need of enabling laws to support fibre roll-out. All operators are struggling to get permissions from municipalities and local governments. They have only managed to get fibre to a few sites, which is clearly not enough given the huge data consumption and demand. A very basic solution is that every road should have a duct, which is a widely adopted global practice.

Today, we talk about smart cities, but there is no fibre and no connectivity, and without it nothing will work. First, it is important to get this component right by having enabling laws and infrastructural support in place. Second, for an operator, it is important to leverage the opportunities arising from convergence.

At Voda­fone, we are looking at the IoT space in a big way. We are already the largest IoT player in Europe and have 60 million IoT-enabled SIMs. One out of two cars in Europe runs on a Vodafone SIM card. In India, we have brought the global data service platform, which is identical to the European platform, and are currently running trials with a few start-ups. We are providing the initial hand-holding by offering our cloud services and marketing capabilities free of cost for a certain period.

We are also offering our application programming interface (API), which is a key part of the converged world. It is important to open up our APIs to developers. As telecom companies, we capture a huge amount of information about our customers. By opening our APIs, we expect to get a lot more ideas from the start-up world. Going forward, IoT will be a key focus area, which means we will go beyond just offering connectivity and occupy some of the other unconventional spaces in this new converged world.

“Today, we talk about smart cities, but there is no fibre and no connectivity, and without it, nothing will work.” Sunil Sood

Anupam Shrivastava

The Indian telecom space is undergoing a transformation and thus, bridging the digital divide has become important. As per an industry report, almost 60 per cent of urban India is using the internet, in contrast to only 17 per cent of rural India. As per another estimate, there are around 750 million users in rural India who are yet to become internet or broadband users. In such a scenario, the government’s flagship programme, Digital India, launched in July 2015, promises to be a game changer. It aims to increase information and communications technology penetration in the remotest corners of India. It is estimated that by end-2020, India will have almost 730 million internet users.

In recent times, the growth rate and penetration of internet services has been fuelled by operators like Bharat Sanchar Nigam Limited (BSNL). Today, India’s internet growth rate is one of the highest in the world.

BSNL has two roles to play in the In­dian telecom space. On the one hand, we are involved in providing retail telecom services to our customers across the country, and on the other, we are shouldering the responsibility of implementing vital government projects such as BharatNet as well as those for connectivity in the Northeast and left wing extre­­mism (LWE)-affected areas. In 10 LWE-affected states, we have installed 200 BTSs in areas where no other operator has ever forayed. Under Bharat­Net, the government has planned to connect 250,000 gram panchayats through optic fibre networks. In Phase I of the programme, 100,000 gram panchayats have already been connected, with BSNL accounting for 85 per cent of the work.

Meanwhile, there has been a multifold increase in the uptake of broadband services by our retail customers through mobile and landline. Wi-Fi offload and Wi-Fi broadband are some of the unique initiatives taken by BSNL. We have introduced mobile wallet services such as MobiCash and Speed Pay, which enable customers, even those with feature pho­nes, to use banking services on the move. We have already partnered with original equipment manufacturers such as Nokia, ZTE and other technology partners for 5G.

Last year was a year of transition for the Indian telecom industry. Several developments took place that launched India into a new digital age. It began with Reli­an­­­­ce Jio Infocomm Limited (RJIL) entering the market, followed by demonetisation, and the introduction of GST. It is true that companies are grappling with these challenges but, as they say, when there are challenges there are opportunities as well. BSNL is geared up to not only embrace these challenges and changes, but also take advantage of them. With a series of measures taken by the government and operators, the day is not far when the person at the lowest rung of the social ladder and living in the remotest part of the country will be able to understand and reap the benefits of the internet age.

“Digital India promises to be a game changer. It is estimated that by end-2020, India will have almost 730 million internet users.” Anupam Srivastava

Gopal Vittal

India stands at the cusp of a massive revolution. The country currently has about 300 million smartphones, which will grow to 1 billion over the next three to four years. This growth will be driven by three factors: consumption (India is a young country with over 400 million young Indians who are exploring  new technologies); economics (a year ago, the cost of a 4G device was around Rs 5,000, which has today come down to almost Rs 3,000 and offers better computing power and more device storage); and industry structure (the number of operators is likely to reduce from eight to 3+1 in the next 12-18 months, which is a seismic shift in terms of the industry landscape).

However, there are several key issues. We rank 136th in terms of broadband infrastructure in the world, the industry debt stands at almost Rs 4.5 trillion and the return on capital is just about 1 per cent. There is an urgent need to acknowledge all these problems. From an industry standpoint, massive investments are re­quired over the next few years to improve mobile broadband coverage. Our network has more than doubled in the past two years and will double again in a couple of years.

Further, there is a need for outstanding customer experience. The network not just needs to be rolled out, but needs to be managed on a day-to-day basis. Mean­while, a new ecosystem will evolve, which will have the telecom industry at its centre, but will also involve a lot of innovation around sectors such as education, healthcare and financial services.

From the industry perspective, there are two areas where the government can help. The first is ease of doing business as operators still face several challenges such as right of way. Second, taxation in the industry is very high at 29-32 per cent. Moreover, the cost of spectrum is amongst the highest in the world while tariffs are amongst the lowest. All of this needs to change if we truly aim to take the vision of Digital India forward.

“There are two areas where the government can help. The first is ease of doing business and the second is taxation in the industry, which is very high at 29-32 per cent.” Gopal Vittal