The proposed introduction of a fully unified licence regime has sent positive signals across the industry. There is a lot of expectation and hope as the new licensing regime is likely to open up opportunities for integrated players and give an impetus to consolidation. It will also give the smaller players an option to exit. Telecom experts comment on the implications of unified licencing for the sector, for the players, and for the consumers...

With the telecom sector poised to migrate to a fully unified licence regime, integrating broadcasting, internet and other media, what trends do you expect over the year?

Arshit Pathak
With the unification, we are moving towards a “total solution”. We have crossed the first step where a telecom service provider is also providing internet service or a cable operator is also providing internet service. The loop will be closed or completed when a telecom company or cable operator or, for that matter, internet connection provider, offers total solution for telecom, broadcasting and internet.

Mohit Saraf
A significant impact of the unified licence regime would be streamlining end-of-line service delivery to consumers. Unification of licences would finally result in genuine unification of services as far as the consumer is concerned. The days of worrying over numerous bills from various service providers may finally be over. One-stop shops of service providers offering attractive discount deals to hard-nosed bargain hunters might be the order of the day.

For business – small and big – communication management promises to be simpler than ever before. Service providers also stand to gain tremendously. They will be able to better match overall consumer requirements with carefully customised deals under the new regime. A quantum leap in revenues – through the unification – enabled additional service offerings – awaits competent and competitive service providers. An obvious corollary is that the smaller players might have to struggle to survive.

Prashant Singhal
With introduction of the unified licence regime, revised IUC regulations and resolution of pending disputes with the service providers, the government has cleared the decks of all litigation. Once the spectrum policy is finalised, the government will have created an enabling environment for the service providers to step up the pace of telecom growth in the country. In this new regime, we see wireless continuing to act as the driver of subscriber and industry growth. Operators are expected to consolidate the services offered in various segments under a single mother brand for more efficient and effective marketing. The broadband internet segment will witness some activity with operators offering wireless and DSL broadband. However, broadband is likely to woo away the cream of the existing dial-up internet subscriber base rather than significantly increase internet penetration in the country. As for integration across telecom and other media segments such as broadcasting and cable, it is early days yet. Even though some telecom operators like BSNL have announced their intention to enter the cable TV business, no firm plans have emerged. Although TRAI has been appointed as the regulator of the media industry as well, true integration of the telecom and media sectors will take some years to materialise.

Mahesh Uppal
There are still many glitches in the so called “fully unified regime”. For instance, the broadcasting licence is still not a part of the proposed licence. We will continue to see growth, but little new entry in any services can be expected right away since most of the services, except mobile, have always been open for all and the fees too have not been exorbitant (though, admittedly, these will become lower if the recommendations of TRAI are accepted by the government).

What, according to you, have been the significant developments in the sector over the last year?

Arshit Pathak
Unified licensing is the most significant development over the last year.

Mohit Saraf
The move towards unified licensing, introduction of the interconnect usage regime, allocation of additional spectrum and setting up of a framework for intra-circle and intercircle mergers are some of the noteworthy developments that have taken place in the sector during the last one year. These developments have made investing in the telecom sector in India an exciting prospect for both domestic and international players.

Prashant Singhal
Last year has clearly been a landmark year for the industry, with significant developments such as introduction of the unified licence regime, which paved the way for aggressive rollout of CDMA-based wireless services, notification of the new IUC regulations and the calling party pays regime, as well as the permission granted to wireless operators to acquire competitors in the same circle, subject to conditions. The last one has allowed the stronger/bigger operators to consolidate their position and given the weaker/smaller operators the chance to exit.

Mahesh Uppal
Clearly, the most significant has been the unification of fixed and mobile licences, which has put an end to much of the litigation. But this is now replaced by BSNL’s frequent challenge of TRAI’s decision in the TDSAT. The other is that the incentives for providing rural services have become even less, post unification of fixed and mobile licences.

By how much do you expect the total telephone connections to increase this year? What will be the share of wireless and wireline services in the new connections?

Arshit Pathak
The industry expects to add 24 million new subscribers during the calendar year 2004. The estimated share of wireless to wireline will be 90:10.

Mohit Saraf
Telephone connections are increasing at a furious pace. This isn’t exactly great news for all service providers though. Consider the facts. The wireless sector has witnessed a spectacular annual growth rate of 160 per cent while the growth in the wireline subscriber base has been an almost negligible 3 per cent.

Given that the relative percentage of mobile subscribers to fixed line subscribers is already 80 per cent, it is very likely that by the end of the year, the number of mobile subscribers would exceed the number of fixed line subscribers.

Prashant Singhal
During the previous financial year (financial year 2003-04), the growth in wireline telephony, including limited mobility, was insignificant compared to the growth in wireless. According to estimates, the wireless subscriber base grew from around 12.7 million at the beginning of financial year 2003-04 to around 33.3 million at the year end, that is, by 1.7 million subscribers per month on an average. In contrast, the wireline subscriber base inched upward from around 42 million to an estimated 43.4 million. In the future too, we expect wireless subscriber growth to be several times that of wireline, as wireless will continue to be the preferred mode of communication for users. However, the pace of growth of wireless may be lower this year as compared to last year, as subscriber growth during the first three months of this year has slowed down to 1.3-1.4 million levels. This could also perk up in the months to come on account of aggressive marketing and launch of new value-added services by operators, falling handset prices, etc. Nevertheless, the number are likely to be well below the targeted subscriber additions of 2.5 to 3 million per month, which is required to achieve the 100 million level by financial year 2006.

Mahesh Uppal
Wireless/Mobile will certainly overtake fixed line soon. One could expect mobile lines to grow to about 60 million. However, with mobile growth tapering off, the ratio of mobile to fixed may be about 1.5 times.
How do you perceive the Indian telecom market currently in terms of business opportunities compared to other Asian countries?

Arshit Pathak
In terms of sheer size and growth, the Indian telecom market offers the best business opportunity in Asia.

Mohit Saraf
The Indian telecom market appears to offer much better business opportunities compared with other Asian markets due to its significant latent demand base. India’s massive population coupled with low teledensity clearly indicates the huge potential the country offers in terms of growth for telecom operators. However, cellular operators cannot afford to be complacent and have to work hard to achieve this growth. Measures like greater investment in network infrastructure, rural market penetration and introduction of innovative value-added services would help in achieving the growth potential of the telecom sector.

Prashant Singhal
Today, the Indian telecom market is being talked about in the same breath as China’s, the world’s largest telecom market. With a population of over 1 billion, a teledensity of a mere 7.4 per cent and a rapidly growing telecom market, India is clearly seen as a country with immense potential for telecom investment as compared to other Asian countries. During the past year and a half, the regulator and the government have taken initiatives to clear the regulatory haze and provide an environment conducive to strong growth and consolidation. Once the proposed increase in the foreign investment limit to 74 per cent is ratified, the sector will be further opened up to foreign investors. Thus, the Indian telecom sector is at an inflection point from where it can grow rapidly into the second largest telecom market in the world, driven by the wireless revolution.

Mahesh Uppal
India’s market is bigger and the environment arguably clearer than that of most Asian countries. The opportunities are immense, especially in non-voice services.
Which telecom segments are expected to perform better?

Arshit Pathak
The wireless segment will definitely perform better. Within wireless, in percentage growth terms, CDMA will perform better, but in absolute numbers, it will be GSM. In the wireline segment, private operators are expected to do better.

Mohit Saraf
The mobile segment continues to remain attractively poised for growth in 2004. In terms of traffic, data services are widely expected to take off and make up for any erosion in revenue due to competitive pressures in voice traffic. Broadband growth also seems imminent in the coming year.

Prashant Singhal
Clearly, wireless will drive the growth of the telecom market in 2004. Wireless growth will, in turn, be drive by its lower capital cost and faster deployment capability as compared to wireline as well as market factors such as low tariffs, low handset prices coupled with attractive financing schemes and bundling of handsets with connections. Aggressive marketing of affordable prepaid offerings by operators will also contribute to wireless growth. Value-added services, such as SMS, are expected to rise in prominence and account for a higher shares of revenue. Eventually, with further rollout of 3G technologies and provision of compelling content services, wireless data services will account for a key portion of the total telecom pie.

Mahesh Uppal
It appears that the market will continue to be dominated by mobile services. Value-added services too will expand a lot but the revenues associated with them are yet to become comparable to those from voice services.