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Spectrum crunch, high cost to limit Digital India deployment: Alasdair Grant, GSMA - Head of Asia

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Krishna Mukherjee
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Alasdair Grant Head of Asia GSMA

By Krishna Mukherjee

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In the backdrop of the latest release of ‘The Mobile Economy Report’ by GSMA, Voice&Data caught up with Alasdair Grant, Head of Asia, GSMA, to understand its perspective on the mobile industry in India.

Grant voiced his concerns over the design of spectrum auctions in India, the need for immediate roadmap for 700 mhz band and why high spectrum cost and capacity crunch may have serious fallout on Digital India initiative.

Voice&Data: Please take us through the key highlights of the recent GSMA report...

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Alasdair Grant: This is primarily the growth outlook of the Indian telecom sector for the next five years and it also mentions about the contribution of the mobile industry to the ‘Digital India’ strategies.

The key findings of the report, prepared by the GSMA intelligence, are the current subscriber penetration rate in India which stands at 36% and we see it growing quite dramatically to reach 54% within the next five years and this would be quite dramatic growth, as we will see India adding around 250 million subscribers by 2020 to reach 734 million, which will account for almost half of all the subscriber growth expected in the Asia Pacific region.

So, we can see that India is heading for a massive growth and this is very exciting. At the same time, the current percentage of people connected to 3G and 4G networks will increase from 11% to 42% by 2020.

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So, at the moment, it’s obviously 2G network that would become significant.

In terms of contribution of the mobile sector to the economy, we estimate that in 2014 the mobile industry was responsible for about 6.1% of India’s GDP which amounts to Rs 7.7 lakh crore.

And as the industry disproportionately grows to primarily 3G additional subscribers, the contribution of the mobile industry will grow from 6.1% to 8.2% by 2020, which brings about Rs 14 lakh crore. Besides, indirectly and directly, the industry is supporting about four million jobs and we see the number increasing by 20% in the next five years to five million people.

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The last data point is how much tax we pay and at the moment, it is about Rs 1.1 lakh crore in 2014 and it includes general taxation, mobile specifics taxation and spectrum taxations. In a nutshell, mobile is the future and mobile is the connectivity solution in India and so the mobile industry is not only connecting people but is also making internet accessible, which will help the digital economy to transact with any business or with government online and thus, helping in digital inclusion.

 Voice&Data: So, how does the roadmap of ‘Broadband for all’ actually look like in India?

Alasdair Grant: Well, the key part of the question is -- connectivity. We have to build mobile networks in the areas, which are not connected or underserved. At the moment, the industry’s ability to improve connectivity is very much dependent first and foremost on the availability of spectrum. So, there is a capacity crunch and India urgently needs more spectrum, the immediate priority is in 2.1 band where the government is about to release (about 15 mhz slot) more spectrum, so we need that. We are also looking for a longer-term roadmap for 700 mhz spectrum band and we need it immediately for rolling out connectivity in the rural areas.

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Besides 700 mhz, sub-700 is also relevant spectrum band for rural areas. As more people come on board onto the network, we actually need more capacity, 100 mhz all together across the bands -- 2.1, 2.7, 2.8 bands, and also the existing 2.6, the C-bands. So, it’s all about availability.

The cost of spectrum is also important factor if spectrum is too expensive, presently; the operators don’t have the robust balance sheets to invest in them, which is not only about acquiring more spectrum but also about extending the networks and investment in the current networks.

Talking about the spectrum auctions, it is very useful to design the auctions system in such a way that enables the market value of spectrum to be not fixed at additional supernormal cost. There’s an artificial scarcity created by keeping less spectrum for auctions, as there are too many operators in India.

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Voice&Data: But do you think that the latest spectrum trading and sharing guidelines will help in the improvement of the current scenario?

Alasdair Grant: Yes, they do play a very crucial role. However, we don’t see the need of the government to continue to impose a tax on the AGR (annual gross revenue) because it is a very important initiative.

Recently, we have seen Idea Cellular taking advantage of that. Besides, spectrum sharing and trading, the other very helpful policy is the tower sharing. Back to the auctions, besides the way it is designed, there is also the need to harmonize spectrum as well, because if operators have small blocks, they can’t scale up for LTE and so, more harmonized approach is required globally.

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Voice&Data: What are the key challenges for the Indian Telecom today?

 Alasdair Grant: The major issue today is spectrum only. India is growing so fast and so, if we have a spectrum crunch and if the cost of the spectrum is too high, then the ability to deploy Digital India initiative of the government, in terms of connectivity will be threatened.

If we have affordably priced and predictable supply of capacity, then we can transition into 3G, and there will be much bigger take-off for 4G.

As we mentioned in the report that even by 2020, about 45% of the population will not be connected and so it is important to pursue the Digital India initiative very aggressively.

Voice&Data: What’s your take on consolidation of the Indian telecom industry?

Alasdair Grant: Yes, it is necessary. In India, we have 12 operators and in each circle it is between 6-10. While in other markets, we have 3-5 operators. However, GSMA never comments on the ideal number of operators a country should have but India is a very competitive market.

In India, policies such as spectrum trading would definitely help the process and we can say that consolidation is something inevitable.

 Voice&Data: Call drop is a major concern today. How do you see this problem in India?

Alasdair Grant: There is tremendous growth in customers, there’s tremendous growth in data traffic and there’s not enough spectrum at affordable prices, so the operators are struggling to add capacity on a pure layer 1, layer 2 basis. There’s also constraint around setting up of enough base stations on account of regulations and also because of EMF concerns. So, there are practical issues around quickly augmenting capacity.

Looking at other markets, we can say that it happens in all the markets, particularly where there is rapid growth, particularly in urban areas and these problems could be solved with the intervention of the regulators. Operators and regulators in India should go for discussions and underline the cause for such issues.

digital-india gsma alasdair-grant-head-of-asia-gsma the-mobile-economy-report
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