India is the third largest market for telecommunication industry in the world after China and US, adding close to seven million subscribers every month. With a tele density below 20%, telecommunications has huge potential market in India. This makes Vodafone bet heavily on the Indian market. Mr. Sarin, CEO Vodafone who took over Hutch India to mark the biggest ever takeover of an Indian company by an Overseas company is all set to take Indian telecom Industry for a roller coaster ride. Be it low cost handset, better network, low end customer, he is there all over.

I reiterate (as already said in my earlier article) that in this war of telecom companies to bring down the prices and increase numbers, the ultimate winner is consumer. I hope the queries of my friends now resolved who were worried on takeover of an Indian company by Overseas Company. New plans are on anvil which will bring down the cost of handset and bring mobile phones within the reach of common man.

We are aware that the tariffs are lowest in India when compared to the rest of the world. The question now is what makes the operator to further pull down the tariffs? The huge unaddressed common mass for which the mobile phones are still a luxury is driving the telecom players into aggression. Every one wants to have a pie out of the unaddressed market, ‘the bigger the better’. Telecom market is all about numbers (subscribers), the more you add, the more you earn in spite of the fact that ARPU (Average Revenue per User) and Tariff Rates are going down. To have a win-win situation on both sides is not possible, if numbers are increasing and the target customer is low end user, the ARPU is supposed to go down. Once the customer comes into network, the operator can capitalize in future by providing consistent connectivity and better after sales services which makes the customer loyal. This is completely in line with the normal business case – bring down the margin, revenues will automatically shoot up and make up for fall in margins.

In spite of going into the nitty -gritties of telecom business, let’s look at what telecom honchos have to say on future plans and policies.

Hutch is all set to rope in new customers with better marketing, sales promotion and new schemes to go far ahead of all the competition. Mr. Sarin is uttering the punch line from day one of his venture in India (all for consumer – ‘wherever you go, our network follows you’). Let’s hear it in the voice of Mr. Sarin –

“We are coming into India with network, low-cost handsets, services — information services and entertainment services. We will mix that all up and in six months’ time, you will get a feel that Vodafone has come to India. You will see some interesting low-cost handsets. Our basic thesis is that we want to make mobile telephony more affordable to more Indian consumers at this stage, all I can say is that (mobile handset) prices have room to go lower and we will take it there. We are here because we think we can do something for the Indian population.”

If Mr Sunil Bharti Mittal is listening this, it may send shivers down his spine. No, he is least worried. Infact, Air Tel and Hutch are going to share all passive infrastructures and bring in the economies of competitive advantage. This gives a fantastic message to the Corporate World. Business is all about making more money than the competitors but both these tycoons are citing a great example by sharing passive infrastructure and bringing the best synergies out of their potential (Once again Mr Sarin is humming the Hutch song – You (Air Tel) and I (Hutch)…. In this beautiful world…)

Mr Sunil Bharti Mittal is all happy at the entry of Vodafone in India and as the caption of Air Tel says (Express yourself), this is what Air Tel camp has to express in the warm welcome given to Vodafone –

“The company would up the ante knowing that Vodafone would come hard to grab more market share. Vodafone’s partial exit from Bharti would allow Airtel to look at expanding outside India as it would not run the risk of having to compete with one of its own equity holder — Vodafone. The agreement would lead to huge savings for both companies.”

Gone are the days when PSU’ were considered to be slow moving. BSNL has added more fuel to the telecom market and accelerated the mad rush for numbers by announcing the target of 36 million subscribers per year. As of now the entire Industry is adding close to 7 millions every month, BSNL’s plan to capture about half (3 millions) the total acquisition speaks the aggression. And as the punch line (‘Connecting India’) goes, BSNL will connect rural India to the world and has accordingly bagged about 80 per cent of the Department of Telecom’s Rs 2,500 crore rural mobile telephony projects for which bids were invited by the Universal Service Obligation Fund to build about 8,000 mobile towers.

From the desk of Mr. A K Sinha, chairman and managing director, BSNL –

“Bharat Sanchar Nigam (BSNL) will invest Rs 60,000 crore over the next three years with the objective of more than doubling turnover to Rs 90,000 crore by 2010-11. The firm has earmarked a yearly capex of Rs 20,000 crore over the next three financial years, he added. For the next three years, our target is to add three million new mobile subscribers each month”.

Tata Indicom, the first CDMA player in the country has also announced its plans of investing 3000 crore in the current fiscal year for spreading its network. To boost up the sales, the company went for a complete revamping of its brand. As the new punch line goes ‘switch to Tata Indicom and experience the difference’, the CDMA player provides one of the best connectivity, coverage and clarity of voice. Apart from this, if media reports and sources are to be believed, Tata Indicom will soon enter into an exclusive franchise agreement with the Virgin group. Furthermore, the company is also in talks with financial institutions for hiving off its tower business in order to concentrate on acquiring numbers rather than spreading network which will then become the core responsibility of new tower company.

This is further substantiated by Mr. Darryl Green, CEO Tata Teleservices Limited – “The Company is in talks with five or six tower operators, both domestic and international.”

The telecom industry is boosted by the Government too and recently access deficit charges were brought down drastically. On this positive move made by Government, the telecom players reacted by saying that the savings will be passed on to consumer. This clearly gives an indication of the aggression in the industry to bring down the tariff rates further and share the buck with consumer. Government is also considering the sharing of active infrastructure (passive infrastructure sharing is allowed but not active infrastructure sharing) between the telecom operators which at present is not allowed. In case the active infrastructure sharing is allowed, it will save the company from making huge capital expenditure which can then be shared with the competitors. Last of all, as already mentioned in my budget article, a single levy is expected to come into play in spite of multiple levies like access licence fee, spectrum charges, access deficit charges, sales tax, custom duty, stamp duty, Octroi, Service Tax, VAT, thus bringing down the net outflow of Telecom players.

Indian telecom sector has already crossed $100 billion (Rs 4.5 Lakhs crore) in valuation. For an industry which is just 13 years old, this is something commendable. Seeing the potential market in India market in India we can safely boast of unprecedented growth and many more success stories to come in future.

(The author is a Chartered Accountant working with TATA Teleservices Limited)

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