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Operator Views: Industry expects greater regulatory and policy clarity

February 01, 2012
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The operator focus in 2011 was on rolling out 3G services. While service uptake was slow to begin with, operators are looking to increase subscriber numbers by improving service quality and enhance their data services portfolio. The top executives of the leading telecom operators spoke to tele.net about their company’s performance over the past year, their growth plans and expectations of the new telecom policy. Excerpts…

Interview with Sanjay Kapoor, Chief Executive Officer (CEO), India and South Asia, Bharti Airtel


What were the key thrust areas for Bharti Airtel in 2011?

The telecom industry maintained its fast and eventful pace throughout 2011. With a teledensity of 73.27 and over 881 million subscribers, the industry was buoyant. Airtel successfully rolled out 3G services in its 13 circles and received an encouraging response from over 7 million early adopters in a short period. In 2011, Airtel started providing life-enriching services – mCommerce and mHealth – and also launched the world’s first USSD-powered Facebook access, international video calls and iPhone 4S. On the Airtel digital television (TV) front, we introduced remote recording (mobile and internet) and launched the iFasal application. As a brand, we were able to strike the right chord with customers through the “Har Friend Zaroori Hai” campaign. We are also proud of our Formula 1 sponsorship, which placed India on the global motor racing map.

What transformation have 3G services brought in the Indian telecom sector?

The long-awaited pan-Indian launch of 3G services in 2011 marked the beginning of the sector’s transformational journey from voice to data.

Is Bharti Airtel satisfied with the 3G service uptake? When do you plan to launch broadband wireless access (BWA) services?

Airtel has successfully rolled out 3G services in its 13 licensed circles and offered the service in 500 additional cities through roaming arrangements with other operators. In a short period of time, the initial uptake of 3G in India has been encouraging with 2 million regular 3G data users among 7 million overall users.

As the 3G market gradually strengthens its game across factors like 3G-enabled handset penetration and depth, availability of content and network expansion, the outlook for further adoption of such services looks positive indeed. Going forward, we will remain committed to expanding India’s data services segment by leveraging various technologies like EDGE, 3G, long term evolution (LTE) and DSL.

What are your views on the draft National Telecom Policy [NTP], 2011? Do you have a regulatory wish list for the industry?

The draft NTP 2011 indicated the government’s strong focus on broadband and convergence. We expect that the NTP will ensure long-term sustainability and viability of the sector. We are looking forward to 4G technology, which will be launched in India at the same time as the rest of the world. Developments in the handsets and devices segment will bring in more choice and affordability, and give a thrust to the data services sector.

Interview with R.K. Upadhyay, Chairman and Managing Director, Bharat Sanchar Nigam Limited


How did BSNL perform in 2011?

Progress in the first three quarters of 2011-12 was satisfactory and as per our expectations. From the customers’ point of view, there has been an appreciable improvement on the mobile and broadband fronts. Bharat Sanchar Nigam Limited (BSNL) added about 5.5 million wireless and 1 million broadband customers in this period of the year.

We were also able to reduce the rate of churn in the fixed line segment.

The company’s revenues have started improving, especially in the mobile, broadband and enterprise segments. We expect the negative trends of the last three years to be reversed in the next few months.

We have also revised our mobile, broadband and fixed line tariffs. Another key step was the introduction of TV services on 3G data cards.

What are the expectations from 2012?

BSNL is looking at 2012-13 as a landmark year. We plan to implement major changes on all fronts. We would redefine the minimum broadband speed from the existing 256 kbps to 512 kbps in the near future and have already introduced plans with 512 kbps speeds in rural areas.

Apart from this, we are expecting significant growth in the mobile, broadband and enterprise segments.

We are making efforts to not only add more customers but also to open new avenues for revenue generation. We want to enter the fibre-to-the-home space by offering high speed broadband services that are bundled with value-added services like IPTV, video surveillance and videoconferencing. We also plan to partner with the union government for executing the ambitious National Optical Fibre Network project, which aims to provide high speed broadband to about 0.25 million village panchayats.

What are the challenges for BSNL and how do you plan to address them?

BSNL was formed in 2000 as a PSU. The operator has to follow government procedures for procurement, which entail several checks and balances and, therefore, involve long processes.

Since the system is open, delays in procurement are aggravated due to litigation by unsuccessful bidders. We are trying to streamline the procurement process to reduce these delays. BSNL has already introduced the e-bidding process, which brings transparency in procurement.

Unlike its peers, BSNL is responsible for maintaining a telecom network even in unprofitable segments such as the landline business in rural areas. We are currently serving the country’s rural population through more than 28,700 digital telephone exchanges. The company has sought the union government’s assistance to support loss-making businesses and ensure the provision of uninterrupted fixed line, mobile and broadband services.

What were the key developments in the telecom industry during 2011?

3G and Wi-Max services were introduced in the Indian telecom space in 2011. BSNL is at the forefront in this regard, with a 3G coverage of 850 cities. Consumers have also benefited from the introduction of mobile number portability, which is ensuring that mobile operators improve efficiencies.

The year 2011 witnessed hypercompetition in the sector. The overall revenues of the telecom industry did not grow as per expectations. Most of the telecom operators were reported to have registered minimal profits or losses in the past year.

Customers’ faith in the telecom industry has been eroding due to various issues, pending litigations, etc. Therefore, the sector’s performance in 2011 was mixed, which provided lessons for all stakeholders.

What are your views on the draft NTP?

The new NTP is an improvement over the previous policy (NTP 1999). Its key focus areas include broadband growth, efficient spectrum allocation and pricing, and facilitating mergers and acquisitions (M&As). BSNL is satisfied with the recommendations made by the policy, especially those on broadband. This will help in bridging the digital divide between the rural and the urban, the rich and the poor, and the young and the old. BSNL is committed to implement the NTP in its true spirit.

What major sector trends are likely in the coming years?

A major trend would be the transition from voice to data. Data may begin taking over voice slowly, starting from urban centres like Bangalore, Hyderabad, Chennai and Pune. The industry is preparing to introduce Wi-Max/LTE to meet customer expectations. Consolidation will help the sector as it will mean a limited number of operators per circle. In the coming years, operators would increase their focus on optimising operational efficiency, retaining customers and improving their bottom lines. BSNL is committed to meeting customer expectations through innovation, introduction of new services and maintaining transparency in the billing process.

Interview with Marten Pieters, Managing Director and CEO, Vodafone India


How has Vodafone India performed over the past one year?

The company’s performance has been healthy after the industry setback in 2009, with six new operators entering the market and tariff reductions of over 20 per cent. In the last year, industry growth picked up again, year-on-year revenue grew by 12.2 per cent and Vodafone witnessed mobile revenue growth of 18.4 per cent in the first half of 2011-12.

Even in such a competitive market, we have managed to grow our revenue market share by over 1 per cent to 20.2 per cent in the second quarter of 2011-12.

Our subscriber base has grown by over 30 million over the last 12 months to 147 million subscribers (as of November 2011). We have made headway in the seven circles we entered three or four years ago. These markets have witnessed a year-on-year growth of over 50 per cent, to the extent that we have now gained a double-digit revenue market share in four circles.

Data is an exciting opportunity for growth. It currently represents 9 per cent of total mobile revenues, having grown over 66 per cent in the first half of 2011-12, with over 31 million data users and 1 million 3G users as of November 2011.

How has the renaming of Vodafone Essar as Vodafone India (post its acquisition of its Indian partner) impacted the company’s  operations?

The change in the shareholding pattern has had no major impact on the business operations, apart from the requisite changes in terms of the name change from Vodafone Essar to Vodafone India.

What are the challenges and concerns facing the company?

The biggest challenge continues to be the uncertain regulatory environment, a hypercompetitive market and limited spectrum availability. India has 12-15 players in the market as compared to three to five players across similar Asian markets. Such intense competition has had an effect on revenues per month (RPM) and hence, margins get adversely impacted. However, marginal RPM rationalisation across the market in the second quarter is a positive sign and bodes well for the industry.

Competition, limited spectrum availability (an average of 6.5 MHz versus a global average of 22 MHz), scientific valuation of spectrum and lack of clarity on spectrum refarming are other roadblocks to growth.

Another factor is the potential impact of various regulatory measures. These include further cuts in mobile termination rates (from Re 0.20 to Re 0.10), retrospective attempts to charge a one-time fee for spectrum beyond 6.2 MHz, attempts to increase the licence fee (from 6 per cent to 8 per cent), lack of clarity on M&As, and the impact of licence renewal charges.

What are your views on the draft NTP 2011?

The opportunity to reset India’s policy and regulatory environment is clearly welcome, and we look forward to detailed consultations on the key issues which remain undefined, especially rational spectrum allocation and pricing. Overall, it is a high-level and aspirational policy. Very few details have been made clear so far. We expect detailed consultations to take place. There are a few forward-looking proposals that are welcome, such as delinking of licences and spectrum; permitting of spectrum pooling, sharing and trading; and recognition of telecom as an infrastructure sector.

However, several concerns remain. They are as follows:

•   The proposal to impose a one-off fee is unjustified since operators have paid for it through higher licence fees. It also contradicts the Department of Telecommunications’ (DoT) position as evidenced by its response to Parliament. The policy has not addressed the issue of irrational pricing, earlier proposed for licence renewal (1800 MHz of 2G spectrum at multiples of artificially high 3G auction prices in certain circles). It illogically questions certain issues like 3G intercircle roaming, which was specifically allowed by DoT.

•   There is lack of clarity on the “one nation, one licence” policy, the pan-India number portability proposal, the exit policy for licensees, the cap on spectrum at 25 per cent (which again favours dual -spectrum operators) in case of a merged entity, and the reiteration on a one-time fee. These issues make the decision-making process complex. We are waiting for the final version of the policy, which is now expected later this year.

What are the company’s growth plans, going forward?

We have invested nearly Rs 64 billion per year (in 2009-10 and 2010-11) and over Rs 343 billion in capex since 2007, which reflects our long-term commitment. However, I think that the peak for investment and network expansion is over.

Going forward, our strategy is based on strong execution and growth in the following three areas:

•   Traditional voice business: With an actual penetration of around 50 per cent, we still have some way to go.

•   Data: We have seen very healthy growth in data usage. Most Indians will experience internet access, narrowband and broadband, for the first time via the mobile. There is huge potential in the internet space as well. Penetration of internet and broadband is currently around 8 per cent and 1.1 per cent respectively.

•   Enterprise and carriers business: We are uniquely positioned to serve international companies via the Vodafone Global Enterprise business unit.

What are Vodafone’s regulatory expectations?

The company’s key policy and regulatory expectations from DoT and the Telecom Regulatory Authority of India (TRAI) in 2012 are as follows:

•   Early allocation of more 1800 MHz spectrum through well-designed, transparent auctions

•   Clarity on licence extension terms

•  A suitable exit policy and liberalised M&A guidelines

•   Auction of 700 MHz spectrum

•   Sharing and trading of spectrum

•   Uniform licence fee

•   Cost-based mobile termination charges.

Interview with Syed Safawi, President and CEO, Wireless Business, Reliance Communications


What were the major milestones achieved by Reliance Communications (RCOM) during 2011?

RCOM had several major achievements during 2011. Overall, our focus on quality of operations led to three quarters of sustained consumption-led revenue growth. On the data side, we were the first in the industry to launch 3G services in the key metros of Delhi, Mumbai and Kolkata, within 100 days of receiving the licence, and were the first operator in India to launch an affordable 3G tablet. In line with our vision of creating a “wire-free India”, we increased wireless broadband coverage to over 1,300 towns from 65 towns a year ago.

How has the 3G landscape evolved in India over the past one year? How has RCOM’s performance been in this regard?

3G services have taken off and have gained momentum over the past two quarters with increasing awareness, and improved availability of smartphones and tablets. RCOM was the first operator to launch 3G services in the country. We have the strongest 3G network in India, with superior IP backhaul offering speeds of up to 28 Mbps. As of September 30, 2011, we had a 3G customer base of 2.1 million, amongst the highest in the industry. RCOM launched the first-of-its kind 3G tablet, offering a seamless network experience. We have exclusive tie-ups with leading handset manufacturers like Nokia, Samsung, LG and Sony Ericsson.

What are some of the challenges facing the company and how do you plan to address them going forward?

Two key challenges faced by the sector as well as RCOM today are driving sustainable profitable growth, and building and accelerating wireless data growth. RCOM strongly believes that profitable revenue growth will come through a focus on quality of operations, which has helped us drive consumption-led growth over the past few quarters and will continue to do so.

As for wireless data growth, RCOM is well positioned to lead in this area, and our vision of a “wire-free India” is keeping us on track. The challenge would be to drive the device ecosystem and data consumption in a larger number of towns.

What are your views on the draft NTP 2011?

RCOM broadly welcomes the major initiatives enumerated in the NTP 2011.

A few suggestions have been put forth to the central government for the creation of a favourable and fair regulatory environment, and for the growth of the telecom sector.

What are the key areas of concern that need immediate regulatory attention?

The following areas need attention:

•   Creation of a level playing field for new GSM players in terms of interconnection usage charges

•   Clarity on 3G roaming norms

•   Definition of adjusted gross revenue for unified licences

•   Uncertainty on additional charges beyond the contracted spectrum.

What are RCOM’s growth plans for the coming year?

We will continue to deliver mark-to-market growth through a focus on quality of operations. Our non-voice contribution to total revenues is currently at 20 per cent, which we plan to take to 30 per cent in financial year 2013.

Also, in line with our vision of a wire-free India, this year, we are looking at expanding our high speed broadband coverage, HSD and 3G to over 2,000 towns across the country. This would be the  widest and deepest coverage by any operator in India.

Interview with Deepak Gulati, Executive President, Mobility Business, Tata Teleservices Limited


What milestones has Tata Teleservices Limited (TTSL) achieved during the past one year?

Last year, our biggest achievement was to offer a suite of integrated telecom solutions to our customers under a single, unified brand, TATA DOCOMO. This entailed bringing all our technology platforms – GSM, CDMA and 3G – under one umbrella brand. We adopted a future-ready strategic approach to bring in the next wave of growth for the company, while unveiling an integrated technology-agnostic structure to leverage emerging market opportunities.

TTSL led the 3G wave in India by becoming the first private operator to launch these services. What was the company’s experience on the 3G front in 2011?

We launched our 3G services simultaneously in all the nine circles in which we won licences. We are happy with the quick rollout, having covered 250 towns already. Once the rollout in these nine contiguous circles is complete, TATA DOCOMO’s 3G network will cover 51 per cent of the country’s towns with a population of over a million and almost 60 per cent of towns that have over half a million people.

Besides, our footprint will cover 55 per cent of households with an annual income of over Rs 300,000 million and 49 per cent of households in the Category A and B circles. These parameters reflect our market reach and growth potential. Going forward, TATA DOCOMO plans to offer path-breaking products and services that will simplify the lives of our customers.

What are your views on the draft NTP?

We are very buoyant as far as the draft of the new telecom policy is concerned. I believe that it will accelerate the adoption of next-generation technologies in an aggressive manner amongst service providers. I am also confident that the upcoming policy will attempt to correct the shortcomings of the earlier policy by removing existing bottlenecks and regulatory challenges.

What is the company’s growth strategy for 2012?

This year, our strategy will be to build on the promise of the TATA DOCOMO brand, which offers simplified products and services to its customers on the GSM, CDMA and 3G platforms. We will also focus on taking several initiatives on the 3G front as we believe we have the potential to emerge as one of the top two or three players on that front.

Another area of focus would be our CDMA products, which offer a very rich data experience. We plan to invest further in our superior network so that our consumers find continued and enhanced value in our services.

How has TTSL’s decision to integrate all its services under the TATA DOCOMO brand impacted business?

The response to our integrated services has been tremendous. This places a huge responsibility on us to live up to our customers’ expectations and provide them with world-class products and services. Our new strategic approach of integrating all our services under one brand has helped us in bringing the full strength of TTSL’s telecom experience to customers through an elevation in its promise, from only telecom services to seamless access, relevant content and differentiated solutions.

The company’s new portfolio of products, applications and solutions has allowed consumers to access cutting-edge voice and data services, avail of content of their choice, and access a host of solutions ranging from mere conveniences to life- and lifestyle-assistance services.

Interview with Srinivasa Addepalli, Senior Vice-President, Corporate Strategy and Communications, Tata Communications


How has Tata Communications performed over the past one year in terms of market share and what has been the company’s strategy so far?

Tata Communications is a leading global provider of a wide range of communications solutions. Our strategy is to leverage our advanced solutions capabilities and domain expertise across our global and pan-Indian networks, to deliver best-in-class connectivity and managed solutions to large enterprises and service providers in both the developed and emerging markets.

Our reach in emerging markets includes leadership in the Indian enterprise data services segment and the global international voice market. We have also made strategic investments in Neotel, South Africa’s first converged telecommunications network operator.

We are also one of the top companies in the wholesale international voice provider business, with a market share of 26 per cent in the international long distance inbound segment. Besides, we have over 19 per cent market share in the country’s enterprise data services segment.

What is the single biggest challenge before Tata Communications today?

Tata Communications competes in the global network services and managed services markets. Over the past few years, Tata Communications has emerged as a credible challenger to the established global leaders. Improving our awareness and credibility in the multinational enterprise market is the biggest challenge we face. We have made good headway in this area, with our emerging market capabilities, and Ethernet and telepresence offerings; however, we still have a long way to go. Around 70 mobile network operators have signed up for the new framework, which is designed to leverage the latest technological innovations in the mobile broadband space through better interprovider mobile service delivery and management.

What level of investments are you looking at over the next few years? Which segments are likely to receive greater investments and why?

Over the past five years, we have invested over $2 billion in building our capabilities and expanding our global footprint. These investments have helped us acquire and build one of the most advanced and largest submarine cable networks, a Tier-1 IP network, with 400 points of presence, and nearly 1 million square feet of data centre and co-location space worldwide.

We will continue to invest in building strategic infrastructure (submarine cables and data centres), expanding our network and building new service capabilities in the managed services and cloud computing space.

What growth trends do you foresee and which segments are likely to do better?

Given the changes brought about by the advancements in consumer and enterprise technologies, the three trends that are most likely to impact our business are:

•    Cloud computing

•    Mobile broadband

•   Proliferation of video collaboration.

Building the right capabilities by leveraging these trends would help us grow both our customer segments – large enterprises and service providers.

Where does Tata Communications stand vis-à-vis its competitors?

Tata Communications is a leader in the Indian enterprise data services market. We are also the market leader in global wholesale international voice services. The company’s submarine cable network circumnavigates the globe and is the largest such network. We operate a global Tier-I IP backbone and are considered one of the leading providers of integrated services to operators.

What are the company’s expansion plans in the international market?

Tata Communications is already a global player with substantial capabilities and revenues abroad. We continue to strengthen our position in all the markets we serve. In particular, our focus areas would include newer investments in Southeast Asia, Africa and the Middle East.

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