What will turn telecom bullish?

VoicenData Bureau
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Attention to the following 5 areas in Union Budget 2015 will matter – Telecom Infrastructure; Rural Telephony; Spectrum Allocation; Digital and Smart Cities; Make in India


By Manu Sharma

Telecom companies face a host of challenges, such as insufficient telecom infrastructure, unfavorable taxation policies, high import duty costs and unavailability of local component suppliers. However, with the new government at the centre, these companies are hoping to ride growth with the expectation that the following areas with be adequately addressed in Union Budget 2015.

Not Enough Spectrum


3G spectrum availability is one of the major concerns for the industry. Lack of adequate spectrum, which is the integral part of the mobile telephony sector could hamper its growth severely.

The telecom industry has lined-up for a upcoming round of spectrum auctions in March even as some of them have approached various courts with some clarifications and queries regarding the sale. The spectrum allotment has been one of the controversial issues in the Indian telecom sector.

The industry is asking for relaxed norms for spectrum trading and sharing and merger & acquisitions. “Since there is a spectrum crunch in the country, the budget should remove limitations with regards to spectrum trading and sharing for efficient utilization of frequency airwaves. Relaxed norms will aid further consolidation in the telecom sector,” says Karthik Ananth, Director, Zinnov.


Kamlesh Bhatia, Research Director (Telecom), Gartner says the smooth process of scheduled 3G and BWA spectrum allocation is likely to be one of the key factors affecting the industry dynamics, going forward. “Given the highly-competitive nature of the Indian telecom industry on one hand, and limited licenses in the 3G network on the other, the risk of excessive biding by the service providers has increased. Irrational bidding, especially in some circles, might render 3G services financially-unviable.” Further, there exists a risk of delay in allotment of proposed spectrum to the service providers who have successfully bid for the 3G spectrum. This would be followed by the 4G auction, he adds.

Ananth opines that the change in the government and the 100% FDI in telecom earlier has sent the right signals and the new players are waiting for the allocation of the higher spectrum i.e., 3G and 4G.” Even though Airtel, Vodafone, Aircel are already pumping in money, some other new players like Reliance Jio are waiting and will later invest in telecom infrastructure.”

Inadequate Telecom Infrastructure


Lack of telecom infrastructure in semi-rural and rural areas could be one of the major hindrances in tapping the huge rural potential market, going forward. The service providers have to incur a huge initial fixed cost to enter rural service areas. Further, as many rural areas in India lack basic infrastructure such as road and power, developing telecom infrastructure in these areas involve greater logistical risks and also extend the time taken to roll out telecom services.

Besides the industry voices that lack of trained personnel in the rural area to operate and maintain the cellular infrastructure, especially passive infrastructure such as towers, is also seen as a hurdle for extending telecom services to the under penetrated rural areas.

Pankaj Kitchlu, Service Provider Systems Engineering Leader, India & SAARC at Juniper Networks says, “Connectivity in India is still a case of work-in-progress, a decade behind developed countries. India is made up of 23 circles, each circle is like a country in itself with millions of subscribers to offer. Huge investments are required to accommodate the tsunami of data volumes that will erupt when 80 million of mobile data becomes 800-plus million in the years ahead.”


Prashant Bindal, CEO of Spice Mobility agrees there has been significant rise in internet connectivity (especially in the rural/sub-urban areas) through smartphones rather than broadband; the prime factor being the affordability of smartphones and affordable data packs. Thus mobiles offer economical and convenient alternative to connect the Indian population to the internet and its services.”

“With the new government in charge, the establishment has major plans to lay FTTH and connect more than 250,000 villages across the country, auctioning of spectrum, making smartphone accessible to all Indians by 2019. We can see some of the plans are almost on the execution stage and if it continues as scheduled the telecom sector will see positive changes after a sluggish growth period, Says Ranjan Sharma, Director T&C, ZTE India.

Rural Areas Continue to Remain Under Penetrated


A rural teledensity of merely 15% point towards the fact that majority of Indian population do not have access to telecom services. The rural India seems to have remained untouched by the telecom revolution witnessed in the last few years. A huge ‘digital divide’, which is reflected by the enormous difference of 74% between the urban and rural teledensity, reiterates this fact.

Ranjan Sharma, Director T&C, ZTE India says the power of mobile phone has been phenomenal in the last couple of years but at the same time broadband expansion in India has not grown in the pattern seen in mobile telephony. Some of the ways the government can increase broadband connectivity is by having Public-Private Partnerships (PPPs) to help curb the gap between urban and rural areas, and boosting availability of adequate spectrum at reasonable cost and affordable devices.

According to Ananth, with the urban markets reaching a saturation point, the telecom service providers are penetrating rural areas for driving future growth. Thus, the service providers entering new rural markets might witness substantial increase in subscriber base. The expansion in the rural areas, however, has increased the risk of further decline in the ARPUs. Nonetheless the revenue growth from these regions is unlikely to match the surge in the subscriber base. Telecom operators are looking for government intervention in arresting this problem.


Digital India & Smart Cities

Ever since Narendra Modi's vision of Digital India was announced. Major ICT companies such as Cisco earmarked multi-crores of rupees for investment this fiscal year in India. Other players such as Google, Microsoft, HP, IBM TCS and Wirpo are also gearing up with their offerings, according to news reports.

Bhatia is very optimistic of the campaign and says it will provide opportunities for telecom operators. “Digital highway will see high level data content flow on their network seamlessly. Not just carriers of data but also service providers of – end-to-end services for consumers, government and also enterprises will see growth,” he says.

The project promises to transform India into connected knowledge economy offering world-class services at the click of a mouse. It will be implemented in a phased manner by 2019, including ongoing enabling projects run by telecom and electronics and IT departments. At the end of the day, it promises to change the life in rural India, adds Bhatia.

To drive the e-Governance projects high speed broadband at affordable prices is essential. As the new government is pushing for 100 smart cities it requires immense planning and execution for efficient public transport, public safety, smart traffic, data connectivity, e-health, water systems, communication facilities, utilities etc. Creation of smart cities will help the entire ecosystem.

“Technology will be the precursor and will be the crux of the functioning of the entire system. Smart cities will create huge potential for technology and telecom sector generating myriad possibilities to advance further with the existing solutions and innovation,” remarks Sharma of ZTE India.

Make in India Campaign

India is already the fastest growing mobile market in the world and the industry will benefit significantly from a local manufacturing policy. The Make in India campaign launched by the government has been a significant move in this regard and it will empower the sector by attracting investment bids. “By creating a mobile manufacturing hub in the country, the government can make the sector attractive enough for new and existing players to enhance investments. It will foster the growth of a complete supply chain for mobile products including components like chipsets, screens, cameras and other electronic items,” says Bindal.

“I feel India is not ready to handle total manufacturing when it comes to manufacturing of high-end telecom equipments. India still lacks the eco-system and so the government in the forthcoming budget policy must focus on telecom applications, services like VAS, e-governance, citizen services, mobile health, education, vocational training, skill training program where it already has the knowledge and the skills,” adds Ananth.

“Consensus on PM’s Make in India campaign is gathering major momentum lately. India needs to build a solid manufacturing base for high-end telecom equipments. Even though I don’t foresee a 100 percent make in India manufacturing yet however, a significant part of the manufacturing can be executed out of India,” Bhatia adds. In respect to the sick PSUs – BSNL, MTML and ITI, the government must in this budget must be clear on privatization or else close down as they are incurring huge losses and are a burden to the public shareholders, suggests Ananth.

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