Can the Govt Restart the Telecom Sector?

The Indian government has an opportunity to restart the telecom sector. Will it come through?

Published: Feb 20, 2012
Can the Govt Restart the Telecom Sector?
Image: Corbis

Three years and $3.1 billion dollars after starting operations in India, MTS—easily India’s loneliest, though pluckiest mobile operator—has managed to add roughly 15 million subscribers.

That gives it a market share of 1.68 percent of India’s 893 million-strong wireless subscriber base. Worse, it must service these customers using a pitiful 2.5 MHz of spectrum—the least among all operators across the country.

“In many circles [states] our towers are so close that we can’t put in any more without creating more interference. It’s not even possible to buy more spectrums. We have zero visibility of the future, I don’t know what to do,” says Vsevolod Rozanov, the usually jovial president and CEO.

On February 2, 2012, even that painstaking and expensive little house came crashing down for MTS and for operators like Uninor, Etisalat and Sistema Shyam as the Supreme Court cancelled all 122 licences. The total investment that is likely to be affected: At least $5-6 billion.

Some businesses might have thought it wise to use the opportunity to walk away, instead of trying to justify the sunk cost of an apparent bad investment. But not MTS.

Rozanov says his company, while exploring all avenues to fight the Supreme Court judgment legally, would still be interested in bidding for spectrum if and when it is made available next. Telenor, which holds a majority stake in Uninor, is mighty upset. “If you ask me am I angry and am I upset, the answer is yes. It’s very clear that we are unfairly harmed. Despite that anger..., we are not going to roll down and die,” Sigve Brekke, head of Telenor Asia, told reporters a few days after the Supreme Court verdict.

Telecom, especially wireless, was supposed to be India’s ticket to economic development. How did things come to a stage where the industry is known more for the taint and not the technology?

Most operators contend that the government is trying to extract too much from them. A senior executive in one of the top firms contends that the top four firms must have paid close to $15 billion over the last four years itself as revenue share, licence fee, service tax and spectrum charges. “If they try and extract more, it will only be counter-productive,” says the senior executive of one of the top three mobile firms. Maybe it is time to think afresh.

Therefore, like the US President Franklin Roosevelt in 1933, the Indian Prime Minister too has both the crisis and the opportunity—thanks to the Supreme Court judgment—to unveil a “New Deal” for this beleaguered sector.

“This is a landmark judgment that can solve all our problems around mergers & acquisitions, exits and market consolidation, along with price discovery for spectrum,” says B.K. Syngal, a 40-year veteran of Indian telecom, now a Senior Principal with Delhi-based Dua Consulting.

And like Roosevelt’s, Indian Telecom’s New Deal too will need the “Three Rs”—Relief for serious operators and poorly served consumers, Recovery of the sector’s vast potential and Reform in order to bring lasting transparency and fairness.

Sanjeev Aga, former CEO of Idea Cellular, makes a very pertinent point: “If we don’t get it right this time, the next 10 years of Indian telecom will be like the last 10 years.”

This crisis really, never mind the cliché, is an opportunity.

(This story appears in the 02 March, 2012 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)

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