Value for the user, more co-operation, intense competition, market realignment,
M&A–possibilities are many. The second phase of our telecom reforms need to be
executed faster.
A new era has dawned upon the telecom sector with the
announcement of the new telecom policy. After months of killing uncertainty, depleting
reserves, shrinking bottomlines, and intense lobbying, the telecom sector will now wake up
to a promising future. It is a true expression of our present system that a critical
infrastructure sector like telecom got entangled in the intricate political and
bureaucratic wrangles. The second innings has begun in the right earnest and the companies
are pulling up all the slackened strings to respond to the new regime of revenue sharing.
With the increased competition, visibility, and reach, the telecom services are expected to move to the more exciting world of fast moving consumer services. |
The real objectives of the liberalized telecom
environment will now take roots. The focus of the companies will shift from doing rounds
of the corridors of power to developing world-class telecom infrastructure and providing
the best value to the customer. The present government has taken bold decisions that will
go a long way in building up the confidence amongst the industry and the investors. The
decision to allow the existing private telecom operators to migrate to revenue sharing
will change the face of the industry.
With the switch over to the revenue- sharing regime and
multiple operator environment, in tune with the world-wide trends, telecom in India will
emerge as one of the hottest industry segments. It will also rekindle the interest of
large Indian corporates and telecom multinationals that had lost out in the previous
rounds of bidding. The validity of licences for 20 years will make the projects highly
attractive for the investors and sizeable foreign investments are likely to flow in. The
national financial institutions that had earlier shied away from funding the telecom
companies will also come forward to finance these mega projects.
With the entry of more players, the market for different
telecom services will open up in a big way since large amounts would be spent on market
development. The increased competition will result in aggressive tariff plans leading to
value maximization for the customers. The service providers will focus on building
high-value customer bases and retaining them since there will be an increased threat of
customers switching loyalties because of multiple options available. The existing players
who have been extremely cautious of the network expansion due to uncertainty will now go
all out to implement their roll-out plans to establish a formidable lead over the emerging
competitors. Larger chunks of population will get covered and even the existing customers
shall benefit from the extended coverage.
With the increased competition, visibility, and reach, the
telecom services are expected to move to the more exciting world of fast moving consumer
services. Besides this, as envisaged, the telecom sector will also emerge as one of the
largest reservoirs for a wide spectrum of employment opportunities.
The trend is likely to revolve around the creation of regional telecom superpowers since it will lead to developing synergy in business. |
regional telecom superpowers since it will lead to developing synergy in business. The new
telecom policy has allowed direct interconnecti-vity between different types of service
providers including sharing of infrastructure. This will encourage the companies planning
major investments in telecom to go in for multiple services and build integrated networks
to reduce the infrastructure costs. To cite an example, the basic telecom operators will
also look at opportunities in the Internet and cable television services to maximize the
returns on investments made for building the backbone networks. Instead of deploying only
a telephony network, they would prefer to build up broadband networks capable of carrying
voice, data, video, and multimedia services. The advanced backbone networks, thus, created
would also be capable of being used for carrying paging and cellular traffic. The fixed
telecom service providers will, therefore, also eye the cellular services or will forge
strategic alliances for sharing the network with other cellular operators.
Likewise, the existing cellular operators will be in a
position to quickly roll out the paging services riding piggyback on their extensive
microwave networks and market these complementary services as a package. To optimize their
infrastructure costs, the operators would also evaluate the usage of the existing backbone
networks of power transmission companies, Railways, GAIL, etc., for carrying long distance
data and voice traffic. Building up regional networks will also enable the operators to
create their own corridors for carrying long-distance traffic when it is opened up for
competition from 1 January 2000.
Not only this, operating multiple services in a specified
area of operation will also lead to sharing of manpower, offices, and operational
overheads. The marketing costs can also be optimized since the companies can create a
single powerful brand for all the services. The players operating single service will have
to seek strategic alliances with each other for sharing infrastructure and marketing of
services to meet the challenges posed by the regional telecom superpowers.
With duopoly making way for multiple operators environment,
coming months are expected to witness major restructuring and realignment in the telecom
industry. It is very clear that India will, ultimately, fall in line with the
international trends. In recent times, the most advanced telecom markets have seen some of
the biggest corporate mergers and acquisitions in the history of telecom. And the coming
times are likely to witness many more. Some of the mega mergers and acquisitions announced
include a $70 billion acquisition of Ameritech Corp., by SBC Communications Inc., the $65
billion Bell Atlantic merger with GTE Corp. and $40 billion acquisition of MCI Comm by
WorldCom Inc., not to talk of the hostile Olivetti take-over of Telecom Italia.
With the changing scenario, some of the fiercest marketing wars are likely to be fought in India too, for controlling the larger telecom pie. |
With the changing scenario, some of the fiercest
marketing wars are likely to be fought in India too, for controlling the larger telecom
pie. With the kind of investments required for basic and cellular projects, only companies
with deep pockets will be able to survive in the long term. The existing service providers
who have not been able to achieve financial closure and are keen on selling out will now
find a number of takers for their projects. The operators who have been able to establish
favourable brand equities and healthy subscriber ramp-up will be the favourites of the
companies looking at acquisitions and the existing players will now be in a position to
command the premium for their stakes.
creating synergy of business, enhanced market capitalisation and valuation, take over of
established brands, faster access to new markets, take over of companies with
complementary assets and optimisation and sharing of infrastructure, manpower and brand
building costs. Despite the five-year lock-in period effective from the date of signing of
licence agreement, the companies have initiated the preparation of blueprints for the
future. A spate of mergers and acquisitions in the cellular services seems to be imminent
since most of the licence agreements for metro and non-metro circles were signed in 1994
and 1995 respectively. The basic service sector will either have to wait for the next
three years since most of the agreements were signed in 1997 or will have to come out with
innovative financial arrangements to achieve their objectives.
Major opportunities are also likely to be created for the
network equipment and terminal equipment suppliers who will experience a phenomenal growth
in the coming months after having seen a major slow-down in their business recently. The
anticipated growth in the telecom sector is also likely to open up ample opportunities for
the companies specializing in turnkey projects involving installation and commissioning of
telecom networks. In addition to this, multi-million dollar contracts for the maintenance
of these networks will also be awarded.
There is no doubt about the fact that the bold initiatives
taken by the Government have created tremendous euphoria amongst the telecom companies but
certain grey areas need to be addressed immediately so that the implementation of the new
telecom policy does not remain a distant dream. The Government, in close conjunction with
the TRAI, must take immediate decisions on the percentage of the revenue share, entry fee
structure for the new players, the number of players to be allowed in each service and a
concrete plan for the bidding process. This will open up new horizons and take India in
league with the telecom superpowers.
height="131" alt="Ashish Nagrath" align="right" border="2" hspace="4" vspace="4">
The road ahead would then be clear and there would be no
looking back.