Chiming telecom sector

The telecom sector has been news in 2009 for more than one reason but the prime cause has been the government’s announcements on 3G spectrum. As per reports, six blocks of spectrum might be auctioned along with three for broadband access. 3G or third generation services are high-end services for mobile phones that permits features like video conferencing and allows high-speed internet. The auction details were to be known once DoT released the information memorandum for the potential bidders. The actual bidding would have started in December this year but now the process will be complete only next year by March 31,2010 as per the latest development. The delay is because of foreign telecom companies who say the auction dates clash with Christmas break.

The auctions were deferred before also due to differences between the ministries over the floor price and the number of bidders to be allowed for the auction. According to DoT officials, global telecom operators who do not operate in India would also be allowed to participate on conditions that they will acquire a unified access service licence (UASL). There is a major crunch of 2G spectrum in the country with more than 300 applicants waiting for two years to acquire new spectrum/licences.

As of now only BSNL and MTNL have been allotted spectrum blocks and they have launched mobile services in India that are 3G enabled. MTNL did it first with the launch in Delhi and Mumbai followed by the services in 12 cities.

Earlier in August, a reserve price of Rs 3,500 crore was fixed for 3G spectrum and a base price of Rs 1,750 crore was fixed on pan-India WiMax spectrum.

Telecom as a sector has seen a robust growth despite recessionary market trends. According to naukri.com, the overall job index fell by 1.9 per cent from 677 in April 2009 to 664 in May 2009. There was a decline of 12 per cent in the hiring activity in the telecom sector.

This is amid positive developments projected by the industry.

FDI and growth
As per a report carried out by the industry body Assocham in July, the economy registered 11 per cent rise in FDI in 2008-09 with sectors like telecommunication recording a growth of 103 per cent. Assocham cited the raise in FDI from 49 to 74 per cent as the reason for the robust growth of the sector.

As per the industry body, the sector attracted US$ 2,558 million FDI in FY ‘09 as compared to the US$ 1,261 million in FY ’08, acquiring 9.37 per cent share in total FDI inflow.

The sector has not only reported healthy growth, there is more in the pipeline that aims to bring in a riot of growth and development opportunities. The government plans to raise the Internet subscriber base to 100 million and aims to provide Internet connectivity to all villages by 2014. The ambitious plan is under the government’s programme to extend broadband connectivity in the country as a “revolution in data connectivity 2009-14”.

As per minister of state for communications and IT Gurudas Kamat, common service centres with broadband connectivity are planned in one lakh panchayats in three years of which 70,000 are already set up. Broadband connectivity currently stands at only two per cent of the population and PC penetration just a meager three per cent. The data revolution, as termed, would also seek to narrow the connectivity bridge between the rural and urban parts of the country. Reportedly, 74 per cent of the mobile phone connections are happening in tier II and III towns and cities in rural India.

The government is also likely to go for a dedicated broadband network in a bid to reach out to the entire nation. The telecommunications department opines that spectrum allotment policy should be such that the economic efficiency of the service provider should be ensured.

Industry experts say every 10 million rise in mobile connections adds one billion dollars to the GDP growth.

Among new initiatives, India’s leading telecom services provider Airtel announced a number of network augmentation and customer service initiatives that would lead to rolling out of over 100,000 BTS sites all over the country, establishing of customer service management center and establishment of 100,000 airtel service centers in rural India by 2010.

Airtel already has 14,000 service centers. Also around 60 per cent of the customers are the additions from rural India.

Mobile number portability
Another major development has been the finalisation of the implementation date of mobile number portability (MNP). Finally, mobile phone users in India will be able to change their service providers but retain their numbers. As per telecom regulator TRAI, regulations have been issued for MNP. MNP will be launched in metros and ‘A’ category circles on December 31. It will be available to the rest of the country by March 20, 2010.

The implementation deadline for MNP has been extended twice before this because of opposition from operators.

MNP will raise the bar of the competition for service providers as the subscribers will have a choice to switch over to another service provider in a licensed service area.

But the success of MNP will depend on the rates as there would be stiff competition among the providers. India has 90 per cent prepaid users and MNP would suit more to post paid users.

Budget 09-10 and the sector
The budget 2009-10 was an average budget as far as telecom sector is concerned. While the budget gave full exemption of four per cent from CVD to accessories, components and parts that are imported for the manufacture of mobile phones for another year from June 30, 2009, the industry reacted saying that not much was there for them in the budget. Though the exemption from CVD means increased accessibility of mobile phones, the budget did not have anything to offer in terms of rationalisation of multiple taxes being imposed at the state and center level. Industry wanted this to drive growth in the sector.

CII broadband study India 2009-14
Confederation of Indian Industry (CII) in June came up with a five-point agenda on telecom and broadband and the same was submitted to the communications and information technology minister. The recommendations spoke of a roadmap to increase the growth of broadband in India by 2014 so that it reaches to 695 million users with 309 million users in rural India. The industry body said that Universal Services Obligation (USO) should be given the responsibility of laying down to high-speed infrastructure all over the country.

CII also suggested growth of wireless broadband through 3G and BWA spectrum. There was a stress on tower construction approvals, tower sharing and standardisation, availability of electricity at affordable prices etc. It also recommended rationalization of taxation and levies. Another thrust area has been on the potential to develop telecom manufacturing and building up of technology.

Legislation in telecom
Keeping in mind the security of the nation, there could be stringent action on cards against Chinese devices and equipment as per industry reports. Also there are talks on setting up of high value commercial courts that would fasten up the process of resolving of disputes that hinder the smooth inflow of FDI in various sectors including telecom.

As far as the government’s dual spectrum allocation policy is concerned which was upheld by the sectoral tribunal Telecom Disputes Settlement and Appellate Tribunal (TDSAT), Delhi High Court refused to get into the issue saying that High Court is not the right platform to sort out the matter as it might get challenged in the Supreme Court. However, the bench said that the government would need to tell why new entrants from various sectors were allotted spectrum, which they sold further to different companies at steep rates. Reportedly, some real estate companies that had no former understanding of the telecom sector were allotted spectrum, which they sold in a month’s time to some other companies at an exorbitant price of Rs 10,000 crore.

The Court questioned the discrimination between new entrants and existing operators that wanted to expand. Earlier, TDSAT upheld the dual spectrum allocation policy. It allowed Anil Ambani group company Rcom and Tatas to avail GSM spectrum for operating mobile services.