Exciting times ahead for Indian telecom industry

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Staff Reporter | 10 Jul, 2008
With 300 million telephone subscribers today, India now boasts of having the second largest telecom network in the world after China. The country is adding some 8.5 million to 10 million new mobile subscribers to the network every month to also emerge as one of the fastest growing telecom markets in the world.

The telecom industry also saw an estimated $8.5 bn in investment flow in during 2006-07 alone, of which $550 million was in the form of foreign direct investment. All major telecom handsets manufacturers - including Nokia, Samsung, Motorola and LG - have their presence in India, so do leading global service companies and infrastructure majors, such as Vodafone, Singapore Telecom, AT&T, Ericsson, Alcatel and Siemens.

The next phase of growth, experts believe, will be in the country's vast rural areas - a development that, they say, would be more important than the Green Revolution in India's farm sector in the 1970s, when the country emerged as a self-sufficient economy in food production, driven by the introduction of hybrid seed varieties and new irrigation techniques. Also, with a tele-density of just eight percent in rural India, as opposed to 50 percent in urban centres, the hinterland offers good scope for expansion.

Little wonder, Nripendra Misra, Chairman of the Telecom Regulatory Authority of India (TRAI), the sector's watchdog, says in that the next few years would prove to be even more exciting for the telecom industry in the country, not just for domestic layers, but the global companies as well.

Excerpts of the interview...

What has been the main driver of India's robust telecom growth and where does the potential lie for the future?
Nripendra Misra: The telecom sector in India has registered remarkable growth during last few years propelled largely by the unprecedented growth of the mobile telephony. As we all know the growth in infrastructure sector like telecom is not just the growth of a sector but it has multiplier effect on the entire economy.

The key to the growth of telecom in India has been liberalization, reforms and competition. The positive regulatory framework has played a major role. Three years back, a target of 250 million telephone subscribers by 2007 was considered too ambitious. We could achieve this target few months ahead of the schedule.

The telecom policy of 1999 envisaged a tele-density of 15 percent by the year 2010. The overall tele-density of the country is already over 26 percent now. Today we have over 300 million telephone subscribers of which around 40 million are wire-line subscribers. Ours is the second largest network after China. The developments in telecom sector have resulted in massive investments and explosion in supply, which are signs of a vigorous, competitive and fast-growing sector.

While the tele-density in the urban areas is over 50 percent, in rural areas it is around eight percent only. Clearly, the future lies in the rural areas. Telecommunication access to rural India is going to be the most important development since the Green Revolution. Research analysts feel that mobile voice is overwhelmingly the engine of growth followed by Next Generation Network (NGN), broadband and data.

What is the future potential for domestic and global players? Do you think the projection of 500 million telecom subscribers by 2010 is feasible?
Nripendra Misra: The target of 500 million telephone connections by the year 2010 is very much achievable. Even with 300 million telephone connections, the tele-density of the country is only about 26 percent. Mobile telephony is growing at an annual rate of over 90 percent. On an average over eight million subscribers are being added every month. Besides the basic telephone service, there is a huge potential for different value added services. In fact, the real potential for telecom service growth is still lying untapped.

The telecom sector is attracting significant domestic and global investment. The capital investment made by the telecom service industry during 2006-07 was around $8.5 billion, out of which $550 million was foreign direct investment. The margins and profits of almost all the telecom companies have been increasing. In fact there are cases where a significant portion of profit of international telecom companies have been from their operations in India.

How well is India prepared for the introduction of next-generation mobile phone services? Do you think the Indian telecom market, in terms of technology, is growing on par with the global scenario?
Nripendra Misra: India is well prepared for the introduction of NGN. Being a late starter in the telecom scenario, India has the advantage of using the latest technology and so it is in a better position when compared to many other countries as far as introduction of NGN is concerned. Besides, the TRAI has identified introduction of NGN as a priority area. I can say with confidence that technologically, the Indian telecom network is second to none.

How important has competition in the sector helped nurse growth in India and what has been the telecom watchdog's stand in this regard?
Nripendra Misra: The ideal strategy is to allow free competition and the market forces would ensure healthy competition. The Indian telecom sector is the living example of healthy competition among telecom service providers. Since 2003, competition has been introduced in the access services. This has resulted drastic reduction in the tariff and exponential growth of the sector.

How has the lowering of tariff in Indian mobile phone services from Rs. 16.80 (42 cents) per call in 1991 to around 40 paise (around one cent) or whereabouts now, helped in the expansion of India's telecom network?
Nripendra Misra: The tariffs for telecom services in India are one of the lowest in the world. The telephone, which was treated as a luxury few years ago, has become a part of day-to-day life of the common man. The reduction in cost of the mobile handsets along with the low tariff has made this possible. There is a direct relationship between tariff reduction and increase in the number of telephone connections. In India the revenue model of the telecom companies are based on volumes. For this, the service has to be affordable to the common man.

What are the main challenges facing the sector as we go forward?
Nripendra Misra: The challenge of the day is to search for new cost-effective ways to roll out telecom services in rural areas. It means one has to choose proper and effective technology for deployment and leverage on the use of available infrastructure to reduce cost and time of role out of services. Those service providers who create the right business would emerge winners and the rest would remain spectators.

Connectivity of networks and cost of bandwidth are also important to facilitate broadband usage. Availability of local application and content is another area of concern. Most of the content available on website as of today is in English. The content in local and regional language will increase interest of the local population in broadband utilization.

The convergence of technologies and emergence of new applications is another thrilling area. Lot of revolution is round the corner in broadcasting and entertainment industries. The emergence of Internet protocol TV, mobile TV will all change the scenario in the coming years.

Wireless technology is the future growth driver for which spectrum is the most important input. The task of spectrum management in a multi user and multi usage scenario is more daunting and crucial than ever before. In summary, if the last few years in telecom were exciting, it will be even more exciting in the coming years.