Despite witnessing tremendous growth, the telecom sector faces a number of unresolved issues, such as high spectrum prices, heavy duties and multiple levies and wafer-thin profit margins. In an interview with tele.net.in, Rajan S Mathews, Director General, COAI, discusses the industry body?s agenda for the next year, its regulatory wishlist and the technology trends likely to be seen in the sector. Excerpts?
What is on your regulatory wish list in the next year?
The regulatory wish list of last year and the years to come is to deregulate this sector and let the market dynamics pave the way for the future of the telecom sector in India.
Financial Viability and stability of the sector: There is an immense need for an open outlook from the regulator towards all the stakeholders of the industry with emphasis on the sustainability of the telecom industry and its much required development and expansion. More liberal merger and acquisition norms would provide the much required impetus to the sector.
Light Touch Regulatory Approach: It would be imperative to ensure that the sustained growth of the industry, which has translated into affordable consumer tariffs, innovative offerings, enhanced technology, increased rural penetration, attraction of domestic and foreign investments; continues its previous growth story. A ?light touch regulation? approach would be beneficial for the industry as opposed to focusing on micro-management of the sector which often leads to reproachful results.
Availability of Spectrum: Greater availability of spectrum and sharing of the same should be facilitated so as to help the sector to optimise its performance. Our submission on the high spectrum reserve prices which will hamper the affordability roll should be considered favourably. Unnecessary actions like redistribution of existing spectrum from 900 MHz to 1800 MHz should be avoided as it affects the efficiency as well as the financial health of the industry.
Reduction in heavy duties and multiple levies on the sector: The industry has been making various representations to the centre and state for the multiple levies, and duties which are levied on this sector. Additionally, India has a significantly high regulatory levy varying between 19 per cent and 28 per cent of the operator revenues. This is affecting industries ability of increased penetration levels and especially for rural penetration, an incentivised approach is necessary.
It is also essential to allow the industry freedom to innovate so as to explore newer levels of technological advancements which would enable India to enhance its presence in the global telecom arena.
On a broader scale, we are looking forward to a consistent, predictable, balanced perspective on the issues of the industry and towards the protection of the interests of the consumers, the stakeholders as well as the government.
What are the unresolved issues and concerns facing the sector?
Ever since its inception in the mid-90s, this industry has faced a host of challenges in spite of it being the poster boy of economic reforms and one of the major contributors towards the socio-economic as well as GDP growth of the country. The challenges are manifold. Apart from the intense competition, the profitability and sustainability of the telecom industry is at stake due to high regulatory costs such as very high spectrum prices, cost of implementing security measures, MNP, huge penalties arising under modification of contract terms and unreasonable expectations of the government from the operators. Not to forget the high prices that the operators had to pay for 3G spectrum in the country; intense and grueling price wars and the fact that the returns on the investments have not been adequate till date. Further, the operators are finding it difficult to receive funds from the FII?s and Banks that are shying away from the industry due to policy instability and uncertainty.
In terms of policy framework, the industry is in dire need for a proper policy roadmap in place and needs immediate attention from the government to address these critical issues which are constraining the essential growth of the sector.
What is COAI’s agenda for the next year?
COAI?s agenda primarily originates from the regulatory wish list. From the price of spectrum, to curbing the regulatory overreach being faced by the industry today, there are a number of issues that COAI will be concentrating on and pursuing in the year ahead. Some of the major issues are:
Ensure Financial Viability of the Sector: A major focus area for COAI would be to work towards the financial viability of the sector. Last year COAI conducted study along with PwC on the declining financial health of the sector which reinstated that there has been a significant increase in network operating expenses besides governmental fees, levies, charges and penalties adding to margin pressures for the operator. Rising interest rates have resulted in increase in debt servicing costs for operators. Consequently operators are under immense margin pressures (several reporting negative PATs). Similarly, most operators report a negative or low return on capital employed. Therefore the mandate would be to work towards reducing the:
High and irrational regulatory costs
Multiple levies and duties on the sector
Seek a positive and light touch regulatory approach from the government
A positive regulatory regime which will ensure increased FDI and investment flow for the sector
Allocation of spectrum through fair market based mechanism: Creation of artificial scarcity and high reserve price will prove as a death knell for the industry. To help sustain the advantages and affordable services offered by the sector, it is imperative that spectrum be allocated to operators through fair market based mechanism to determine its price instead of resorting to erroneous assumptions and flawed calculations to derive reserve prices of astronomical values.
Review and implementation of NTP 2012: The other major agenda would of course be the review and implementation of the much awaited NTP 2012. While the vision of the NTP is true, the policy requires some balanced review in terms of rationale and applicability of provisions included in it. COAI has shared its concerns with the centre and will be working closely with the government towards finalisation of the policy with a balanced approach and its successful implementation in the country.
National Broadband Plan (NOFN): The National Broadband Plan, an important part of the NTP 2012, would also be a decisive factor in structuring the socio-economic fibre of the country.
The other important areas where COAI will continue its efforts are – Green Telecom, working closely with the Government on consumer awareness and engagement programmes on EMF related issues and subscriber verification issues. COAI also has plans for close consumer connect and awareness programmes in association with the Government for educating the consumers on various relevant issues and strengthening the ties between the consumers and the industry.
Standards Development: COAI is spearheading the formation of a standards body to represent India and the industry in the various international standards bodies such as ITU, IEEE, 3GPP, etc. The objective is to embed Indian IP and local requirements in international standards.
Skills Training and Development: COAI is spearheading the formation of the Telecom Skills Training and Certification entity. The objective is to provide training, set standards and curriculum and certification for the approx. 400 million youth of India so they can avail of employment opportunities in the industry.
What technology trends do you foresee in the sector?
India being the second largest wireless market in the world, still holds immense scope for further growth of the sector and some of the key trends which are expected in the coming years are financial inclusion, deeper penetration of service in rural areas, new and customised value added services applications such as vernacular SMS and proliferation of 3G services.
M- Commerce: The rapid growth in number of users and wider coverage of mobile phone networks have made the mobile phone an important platform for extending banking services to Indian customers. Nearly 40 per cent of India?s population of 1.2 billion is ?un-banked? and almost 80 per cent of it resides in the rural areas. Mobile phones can be used to make payments and conduct banking transactions and are well placed to emerge as a strong tool for financial inclusion of the masses. Operators in India will increasingly leverage mobile technology to open up channels beyond the branch network of the banks and create a banking footprint to reach banking services to the un-banked masses. However, the government policies and the policy initiatives by the Reserve Bank of India (RBI), which till date have been treading cautiously, shall be the key determinant of the pace at which mobile banking service spreads in India.
Rural penetration: Urban teledensity in India has reached 169.55 per cent, whereas rural tele-density is still at about 39.22 per cent. Therefore shift of focus from urban to rural subscribers is imperative and connecting the unconnected will be the prime focus in the coming years as we look towards a great rural push by all service providers. Operators are already exploring various opportunities to tap the rural markets. Attractive tariff schemes such as lifetime prepaid, micro prepaid cards and low cost handsets have also been introduced by the service providers to enhance penetration in rural areas
Vernacular SMS: Operators have been working on new VAS applications that deliver right content at the right time in the right medium (audio, video or text). An example of this is vernacular language SMS which is especially relevant for a country like India which has 22 official languages. Moreover, the rural population is non-English speaking and to increase the usage of SMS by these people it is essential to have vernacular language SMS options. This initiative will gather momentum in the times to come and will not only bring additional benefits to subscribers but will also result in growth of SMS usage in India.
3G services: 3G has changed the telecom landscape making MVAS an important parameter in attracting new customers, retaining existing customers and increasing ARPU. Introduction of new VAS applications is also expected to give a boost to initiatives such as m-education, m-governance and telemedicine. With minimal/negligible fixed line broadband penetration in the country, 3G will be the quickest way for Indian consumers to experience mobile broadband. The plethora of services offered through 3G/Mobile Broadband will thus help improve productivity in rural areas, help overcome the constraints of an inadequate infrastructure and enable an overall improvement in the quality of life of the rural masses.
Use of Non-Conventional Energy Sources: Some mobile operators are already in the process of carrying out trials on the use of non-conventional energy sources. 2011 will see a greater emphasis on use of alternate energy in telecom sector.
Advanced future technologies like 4G/LTE are already making their presence felt in the country and it won?t be long before these services start operating in full capacity in the Indian market. With an increased focus on R&D, innovation, constant monitoring of evolving technologies and consumer-oriented products/services development, the sector is looking forward to scaling newer heights in terms of technology and a competitive space in the same in the global arena. A supportive and encouraging policy and regulatory environment can ensure that the industry is able to perform to its fullest so as to achieve this vision of growth.
Some of the other initiatives being undertaken by the operators are infrastructure sharing (both passive and active), collaborative research centers to boost R&D efforts, reduce costs and build capacities through knowledge initiatives.
