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Year 2012: When Indian Telecom Lived Dangerously

With the possible exception of drama-seeking journalists, almost everybody will be hoping that 2013 is less turbulent than 2012 for India’s telecom sector. Operators, customers and the government – all lived dangerously this year: Some emerged unscathed, while others got well and truly burnt.

By the time the year is out, less than a dozen of India’s 15-odd mobile operators will have survived the regulatory and judicial assault that the industry has borne over the past 12 months. The Supreme Court judgement of February rang the death knell for several operators by cancelling their long-term rights to provide service in many or all of India’s 22 licensed service areas.

The judges may not have realised it; but this verdict was seminal because it precipitated the demise of hyper-competition in Indian telecom, heralding the arrival of a new chapter of stable, measured industry rivalry. During the next two years, we will see the emergence of an industry with 4-5 national operators and a number of niche players concentrating on particular geographies or customer groups.

For those that survive, only relentless transition to non-price based innovation, truly engaging customer service, and new levels of inter-circle operating efficiency will result in a continued march forward.

The days of winning in the market by building out towers and connecting customers in droves are over. But it is not evident whether operators have fully grasped the extent of transformation required and only some have the resources, skills and execution capability to make this happen.

It has been a year of living dangerously for India’s 900-plus million mobile telephony users, too. From the time of the SC judgements, it was clear that tariffs would have to rise because operators were simply not in a position to finance spectrum acquisition and refarming at the prices which were being talked about.

Some industry observers forecast 90 percent basic voice tariff increases. That would have resulted in an affordability reduction for low-end users in metros and rural areas, lower usage and possibly even a drop in penetration. But courtesy the dampened interest in the auctions last month, prices are set to remain stable, at least for now.

While the government called the shots throughout the year, ultimately the Finance Ministry has been 2012’s major casualty. The telecom authorities did alright – regulatory uncertainty reduced, industry growth prospects temporarily restored, and customers are still being empowered by the power of connectivity.

But the exchequer lost out: An auction billed to solve broader fiscal deficit issues raised only 23 percent of the theoretically expected proceeds (up to Rs 10,000 Crore).  Over-egging industrial policy to solve macro-economic objectives has never been successful, and hopefully this simple economic lesson has now been learnt for the benefit of future auctions.

2013 will only be better than 2012 if operators focus on rapid evolution and policymakers implement the confidence-building measures needed to restore growth.

What are your predictions for 2013? Before the year is out I’ll post my ‘Top 5 Trends’ to look out for. After a decade of hyper-growth in this industry, we can safely say that the party’s over, but the fun has just started!

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I agree to your point of survival of the most innovative. The days of dependence on call rates are over. During such scenario what is your take on operators like Tata, who mostly survive on call charges ?
 
 
Mohammad Chowdhury
Mohammad Chowdhury is a Telecom, Media and Technology Industry Partner at PwC India and a member of the global executive team. He moved to India in 2011 following senior roles in Vodafone, IBM and previously PwC where he started his career on the graduate scheme for economists. From London, Mohammad ran Vodafone Group strategy across emerging markets, and from Cairo served on Vodafone Egypt's executive team just before the Arab Spring. At IBM, he set up the corporation's first telecom solution centre in Bangalore, and at PwC directed the firm's account at the World Bank in Washington, D.C., and the firm's telecoms privatisation work in Eastern Europe, Middle East and Africa. Mohammad served as an adviser to telecom sector reform in Saudi Arabia, Zimbabwe, Ethiopia, Slovakia, Poland and Slovenia. He is quoted regularly by the Financial Times, Wall Street Journal, BBC, TV-18 and NDTV.

Mohammad has worked in 74 countries, lived in 7 and speaks 6 languages. He has a BA in Politics, Philosophy and Economics from Oxford University, an MPhil in Economics from Cambridge University, and strategy training from Harvard Business School. He was born in London, has family origins in Bangladesh, and is married with two sons. Mohammad will move from Mumbai to take up a new role in the PwC global network in 2015.
 
 
 
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February 06, 2013 14:36 pm by Avinash
I agree to your point of survival of the most innovative. The days of dependence on call rates are over. During such scenario what is your take on operators like Tata, who mostly survive on call charges ?