TV Ramachandran, Hon. Fellow, IET (London) & President, Broadband India Forum
How Telecom Industry fared in 2017?
2017 would truly go down in the annals of Indian telecom as the great year of contrarian happenings – of turbulence and disruption but also of a shower of unimaginable customer benefits, of financial stress and much-needed consolidation but also a remarkable technological leap to 4G, of decline in voice but phenomenal rise in data and, last but not least, India making giant strides - to pass milestones like a billion connections with lowest mobile voice and data tariffs, nearly 300 million smartphone users, over a hundred handset assembly units – and become indubitably the world’s second largest telecom powerhouse.
The transformation in data uptake following the entry of Reliance Jio has been nothing short of remarkable. As per Kleiner Perkins, wireless data usage shot up over six-fold from about 200 million GB a month in June 2016 to 1.3 billion GB a month by March 2017. The year has seen not just a sharp increase in data usage but, importantly, a very big growth in data-based services (rich interactive apps), bandwidth intensive music and video streaming applications. India is now one of the biggest data consuming markets in the world.
For over a decade, experts and industry players have been bemoaning the fragmentation of the market due to too many players (about nine or more) whereas even the HHI Index calculated by regulator and DoT shows competition is optimum with four, or a maximum five, players. Expectedly, due to the excess competition, the viability of most of the operators was unsatisfactory and steadily worsening and there was a continuously-rising level of financial stress in the industry.
The entry of Jio saw a very sharp deterioration in the already unsatisfactory situation of the industry. The market leaders have seen a reduction of as much as 35 percent in operating profit and around a 10-percentage-points contraction in operating margins as they looked to match the cost of Jio’s services, initially free and, later, in the form of ultra-cheap pricing. Incumbent operators rushed to cut tariffs as Jio offered free services for the first six months, and then offered cut-rate data services. It also offered voice calls for free. The price wars left operators struggling to repay debt even as Reserve Bank of India urged banks to set aside higher provisions to deal with bad loans in the telecom sector. The entry of Reliance Jio triggered the direly-needed consolidation in the industry.
Among the most notable M&A deal since Reliance Jio started commercial services in September 2016 is the merger between the country’s second largest provider Vodafone India Ltd and third ranked Idea Cellular Ltd, a combination that is set to create India’s largest operator once the merger is completed. The merged entity would probably be one of the largest in the world, - second only to China Mobile. Reliance Communications Ltd‘s future course is uncertain after the merger of its wireless business with Aircel Ltd has failed to go through. In February, Telenor sold its Indian operations to Bharti Airtel and in October, Tata Tele sold its business to Bharti where Bharti virtually paid nothing. Indian telecoms are thus, at long last, attaining the desired HHI level of four – paving the way for improved financial health and sustainability.
The year also witnessed the commencement by DoT of the great task of revising the National Telecom Policy to be released in 2018. DoT has begun a very comprehensive exercise for collecting, collating, analyzing input on various areas that will have a bearing on Telecom Policy and formed 12 sub-groups. BIF provided its detailed and actionable recommendations. These recommendations on spectrum, licensing, broadband infrastructure, Satcom, content and applications, privacy and security, rural digital initiatives have all been given under the over-arching principle of achieving Digital India. In my view, NTP 2018 assumes far higher importance than even the great epoch-making NTP’99 which was the main reason for catapulting Indian mobile telecommunications from about one million connections to today’s awesome level of about 1200 million connections today, second highest in the world. Like in 1999, India is today poised at a very critical juncture and the nation’s socio-economic progress will depend on some crucial decisions regarding the way forward in telecom which need to be made through a new telecom policy – NTP 2018. Only a new policy can bring the changes that can propel our country to a leadership position in the new digital economy. Government appears well set to prepare its first draft Policy Paper by January 2018, when it is expected to be put up on the Net for a global consultation and to get inputs from all stakeholders. A truly trendsetting exercise.
On the regulatory side, too, there was a plethora of comprehensive consultations, recommendations and regulations like in no single year ever before, - as many as twenty of them. There was a Mobile Termination Charge Regulation that crashed charges by over 50 percent to 6 paise per minute, causing much tumult in the industry. Other noteworthy recommendations include, interalia, on liberalization of public wi-fi which is a pre-requisite for broadband proliferation and Digital India, Ease of Doing Telecom Business, Internet Telephony, M2M Communications, and, importantly, on Net Neutrality. The last-mentioned Recommendation was the conclusion of a massive 2-year exercise and has, most unambiguously, upheld the Open Internet principle and reaffirmed the commitment to Net Neutrality.
2017 was also the launchpad of another great ambition for the future, - namely, 5G. In a most admirable initiative, the government has set up a 24-member high level forum for 5G India 2020. As widely recognized world over, 5G is the next technological frontier which takes us to a brave new world involving IoT everywhere, fixed mobile convergence, artificial intelligence, virtual reality and augmented reality etc, that is several orbits above the incremental steps of 2G to 3G to 4G. For India, 5G will fundamentally impact the various national mission mode projects. It would provide a new dimension to the Digital India, Smart Cities, and Smart Village missions. It could potentially make huge contributions to Make in India and Start-Up India missions also. The objective in setting up this High Level 5G Forum is to position India as a globally synchronized participant in the design, development and manufacturing of 5G based technology, products and applications. The terms of reference of this multi-stakeholder Forum are: To develop the vision, mission, and Goals for 5G India 2020 and to evaluate, approve roadmaps and action plans for 5G India 2020. The first meeting of this body is on December 13, 2017. Thus, Indian telecom will close the year with a firm eye on the future.
Where is Industry headed to in 2018?
We believe that 2018 will mark the beginning of much brighter prospects for Indian telecom on several fronts.
With the significant consolidation getting completed in 2018, the bloodletting tariff battles will gradually cease and the telecom industry will start experiencing the much-needed financial relief.
The New Telecom Policy 2018, expected around April 2018, will hopefully usher in a completely new perspective to telecom by transcending it from the voice era to that of data and data-based services.
Two clear phenomena have emerged. One the data segment is going to grow stronger and the broadband sector will witness tremendous growth in terms of wireless connectivity, wi-fi hotspots as well as fiber layout. Two, the quality of customer experience and quality of networks will determine the success of players in the market.
The other important issue will be how companies use their platforms to create fresh revenue streams.
Last, but not the least, India would have charted its way forward to the 5G world and given a huge impetus to innovation, manufacturing, and entrepreneurial initiatives. We expect that India would further consolidate and improve its position in the global digital rankings.