Recent market development has drastically altered the dynamics of the industry, said Himanshu Kapania, managing director, Idea Cellular Limited
TRAI has pushed us to a level where only one technology survives and all older technologies close down, said Himanshu Kapania, managing director, Idea Cellular Limited.
Excerpts from Kapania’s address at India Mobile Congress:
While we are talking about the 2020 vision, lets also talk about the elephant in the room.
There is no doubt that India's role in economy can be emphasised enough. The tremendous economic energy unleashed in India over last few years has placed us among the fastest growing economies.
Over last two decades wireless industry especially the private sector have built the finest and widest service infra for mobile voice high way and today it connects 5 lakh towns and villages in India. Indian telecom industry has emerged as a force multiplier by connecting the unconnected.
It was 7 years back that India had only 200 million users and we have added a billion people in such a short span of time.
Three percent of economy is directly related to telecom.
Recent market development has drastically altered the dynamics of the industry, resulting in the sector passing through severe financial and mental stress. The introduction of and subsequent proliferation of bundled voice and data usage plans, outcome of lack of effective regulatory intervention had a deep impact on realisation rates on the industry.
The voice tariffs have fallen to half in one year. But the data tariff have fallen by one tenth and one fifteenth. Voice and data tariffs were already acknowledged lowest in the world and have now plummeted below cost.
Now the interconnect charges further depletes the industry of funds, besides creating inter-operator imbalances on account of high traffic traffic asymmetry.
The fault lines are already evident. For the first time in history, the industry is seeing de-growth of 2 percent in FY 2016-17. Industry forecast has declined from 10 - 12 pc including the impact of 58 pc reduction in IUC.
Undoubtedly, it will also impact in the long term competition structure of the industry, as mentioned by (Airtel CEO) Gopal.
But it is very evident that government's revenue collection will be hit adversely.
While this is happening on financial side, the infrastructure building is continuing undisturbed.
The Indian mobile telecom is gearing for big transition in services.
By 2021, 500 mn - 600 mn Indians will be using internet, mostly all of them on 4G. And hopefully 4G will yield revenue per customer at somewhere between Rs 175 Rs to Rs 200 from the current level of below Rs 100.
However, there is going to be 900 million Indians who use 2G network for their connectivity.
These 2G and 3G networks are lifelines and mass market for rural India by enabling connectivity as low as Rs 10 per month. The rapid revenue growth of the industry coupled with alarming threat of higher NPAs will curtail industry's ability to invest.
So the challenge for vision 2020 today is that the government of India has to decide if it wants only to have 4G or it will allow co0existence of 4G with 2G. And this is an important element because the TRAI has pushed us to a level that only one technology survives and all older technologies close down.
In such a challenging scenario, there is an urgent intervention / support required form the telecom ministry in form of reasonable package that can help in alleviating current financial stress in the sector. Mobility industry remains one of the most taxed sector.
Spectrum, the key raw material, remains the most costly element for the industry.
The deferment of spectrum pay out and reduction of applicable interest rates are immediate steps that need to be taken.
The industry also looks forward to the new telecom policy 2018 which will propel India to digitally connected 2020.
But unless you resolve the legacy of high cost spectrum …we will always be hostage to the past.