Rajan S Mathews, Director General, Cellular Operators Association of India
The year 2017 was an eventful year for the industry. The year started with the entry of a new service provider with ultra-low data prices, and compelling offers for the consumers. Thus, began a phase of hyper-competition which the Indian telecom sector has never seen before. All the operators significantly expanded the 4G services across the country, and began heavily diversifying their services beyond voice and data for providing high-quality services on high-speed broadband – creating a win-win situation for the consumer.
Driven by the low data tariffs, the Indian telecom market almost exploded. Over the course of the year, the number of wireless broadband users has gone up from 217.95 million at the end of December 2016 to 306.85 million wireless broadband users at the end of September 2017. In just 10 months, there was a jump of more than 90 million subscribers by about 40 percent, in line with Prime Minister Modi’s Digital India vision of a fully connected and empowered nation. Every 10 percent increase in broadband’s household penetration delivers a boost to a country’s GDP that ranges from 0.1 to 1.4 percent, according to a McKinsey and Co report.
The Indian telecom success story is unprecedent. With one of the lowest tariffs across the world the industry crossed the billion connections mark. At the same time the industry is still struggling with a massive cumulative debt of around Rs. 4.6 lakh crore, while revenues have fallen to under Rs. 1.8 lakh crore. They have yet to recover from the past upheavals of the 2009 voice tariff war or the expensive spectrum auctions in the years that followed. The poor financial health of the sector has resulted in consolidation. The next year is expected to be all about more consolidation and new technologies getting deployed.
The year also witnessed the government introducing one of the biggest reforms since the liberalization of the 90s – the Goods and Service Tax (GST). A very welcome move in-principle, it, however, meant an increase from 15 percent in tax to 18 percent now, over and above the around 15 percent outgo in levies such as spectrum usage charges and license fees. There are short-term operational implementation challenges, but the sector is optimistic that the rate will be revised downwards in time given the poor financial health of the sector.
During the year, the telecom regulator reduced the interconnection usage rates from 14 paise to 6 paise. This reduction also impacts the earnings of the telcos, with bigger networks that see more incoming traffic from other networks. At the same time, last year’s demonetization move forced a massive increase of mobile payments and m-wallets, in 2017, there was a huge shift to mobile banking. And this worked like a shot in the arm for the uptake of digital services.
The country is now seeing the Prime Minister’s Digital India plan taking shape with more and more districts getting connected to the BharatNet optical fiber network. The Rs. 42,000 crore network, that aims to connect all Rs. 2.5 lakh gram panchayats by March 2019, saw the launch of the second phase in November 2017. Recent data indicated that broadband services have started in some 48,000 gram panchayats and another 75,000 gram panchayats are ready to start providing high-speed broadband services. A number of private operators have also started using the network to provide broadband services in the far corners of the country.
In light of deep financial distress which the industry was experiencing the government constituted an inter-ministerial group to come up with recommendations to ease the financial stress in the industry. The entire telecom and the banking sector made submission before the IMG, calling for substantive, immediate, and cogent relief. In terms of numbers, the industry saw a growth of just 5 percent or 55.67 million mobile users up to September, as per TRAI data. India ended 2016 with 1127.37 million mobile users and 24.40 million fixed line users. At the end of September 2017, there were 1183.04 million mobile users and 23.67 million total landline users.
The poor financial health and increasing demand for better connectivity and quality content has forced the industry to consolidate as well as constantly evolve technologically.
While 2017 saw a number of new entities emerging including the Bharti Airtel–Tata Teleservices–Telenor combine; Idea Cellular–Vodafone combine, and the Reliance Communications–Aircel combine, 2018 is expected to see them come to fruition and take actual shape.
As far as consolidation goes, no market in the world has more than five telecom operators but in India, there were more than 10. Post consolidation, it looks like the Idea–Vodafone combined entity could hold as much as a 40 percent market share, closely followed by Airtel with around 38 percent. With consolidation, the telecom service providers will get the benefit of synergy amongst the operations and the overall cost of operations are likely to come down, leading to increased margins. Eventually pricing power could also return enabling longer term sustainability overall.
Apart from consolidation, the buzzword for 2018 is expected to be 5G. The year 2018 will see greater movement toward the next generation of mobile telephony though many experts still believe that, the fifth iteration of mobile telephony technology is still around 2–3 years away, the preparations are expected to go full swing in 2018.
The government has also been committed toward the ease of doing business. It is heartening to see India jump 30 places this year to join the top 100. The government is likely to come out with the latest National Telecom Policy 2018 by early next year. This will act like a framework document, that will take India into the next decade of technology – introducing services like IoT and M2M. Services like driverless cars and refrigerators ordering produce directly from the farmer will also be possible in the near future at the click of a button on your phone.
The biggest expectation that the sector has of 2018 is Prime Minister Narendra Modi’s Digital India program becoming a reality and expanding its ambit to bring the next billion online. At the recently concluded GCCS 2017 he launched the UMANG app, which would have over a 140 government services available.
With the Government’s Digital India program, the telecom sector has emerged ever more critical as the nerve center for services including banking, education, health etc. would be provided by the telcos. The telcos on their part will focus on capitalizing the increased data usage and consequent services, to generate more revenue. The focus would mainly be on especially shifting 2G users to 3G and then 4G, and prepared for 5G.
The data market is always driven by the use-case scenario where subscriber requirements in different geographies would define what the telcos need to create in order to provide a compelling value proposition and thereby drive the data usage.
The regulator has issued its recommendations at the end of this month which are aligned with industry submissions and will certainly help the industry.
This year COAI hosted the country’s largest and first ever iconic Mobile, Internet, and Technology event in India – India Mobile Congress 2017. This platform was a much awaited event in the country which has over a billion subscribers and has seen tremendous growth in given number of Internet users and a large number of IT and Telecom companies operating and investing in India. The event was supported by DoT, MeitY, and Ministry of Skill Development and Entrepreneurship. The event took place under the unstinting support, guidance, and leadership of Manoj Sinha, Minister of Communication for translating this vision into a reality.
Entertainment and infotainment has driven the 4G journey for the operators so far, but in 2018, telcos would need to collaborate with the local content generators in order to push the wireless broadband services to the rural masses. This makes new technologies in the IoT/M2M space even more important. While the urban population is ready for the next level of evolution in the telecom services, the IoT segment requires a perfect blend of IT and telecom for development of solutions where the telcos intelligent network driven by smart applications can actually define the lifestyle of the consumers. This would require light touch regulation conducive for innovation and growth and forward-looking policies.
In a population of Rs. 1.32 billion, where the GSMA says the unique users are estimated to reach one billion unique users by 2020, there is no shortage of opportunity. In the New Year, the telcos will continue to revolutionize their service offerings by converging digital services and entertainment-based content along with their core services of voice and data. Services like digital payments, Live TV, VoD (video on demand), tele-medicine, tele-education, as well as other information on demand will become the norm.
The year 2018 will see increasing m-wallets and mobile banking become ubiquitous, as well.
The industry hopes to work closely with the government, ministry, and the regulatory leadership to address an ever changing and extremely dynamic ecosystem for continuous improvement in consumer interest, advocating a stable, long term, sustainable, policy environment, which will promote innovation and orderly growth for a fully connected and digitally empowered India.