There's Nothing for Shareholders

T.V. Ramachandran has had a ringside view of the creation and growth of India's mobile industry. Stepping down from COAI, he talks about his experiences with Forbes India

Published: Oct 22, 2009

Name: T.V. Ramachandran
Title:
Former Director General, Cellular Operators Association of India (COAI)
Age: 64 years
Career:
Campus recruited by Dunlop in 1966. After 25 years joined Apollo Tyres in 1991. After three years, Shashi Ruia, chairman of ESSAR Group, invited him to work together and then he got involved with COAI and became its chief.
Education:
Masters in Physics (Wireless and Telecom), Madras University 1966.
Interests:
Reading English poetry, especially Thomas Gray and Shakespeare.

What’s the most significant time of your tenure?

The sequence of steps resulting in the National Telecom Policy (NTP) of 1999, which created the telecom industry of today. Every telecom company was in deep losses as everybody had bid high and consumers weren’t willing to pay Rs. 16 for a call. I told this to A.V. Gokak, secretary, DoT in 1997. He called ICICI to do a report and [later] got the Bureau of Industrial Cost and Pricing involved. After six months of analysis, the report showed the extent of trouble. Finally, in October 1998 Mr Vajpayee said at a FICCI conference that we need a new policy ­— announced in March 1999 ­— making government a stakeholder.

Some say the telecom industry pulled a fast one. You got the government to accept less money and then made money with nearly 40 percent profit margins

Let me first tell you what we gave away for NTP 1999 to happen. We accepted more competition for a move to revenue share. That allowed BSNL and MTNL into the playing field. And we withdrew all our court cases against the government.
Yes, the EBITDA margins are 35 percent or so but the free cash flow is not high. After interest and network expansion costs, there is very little money for the shareholder. Bharti declared a dividend only last year, 13 years after they started.

Tell us about the GSM versus CDMA battle in the early 2000s

One of the bloodiest that I have fought. Ambanis and Tatas were one side — country’s biggest corporate houses. We did not have big names. Sunil Mittal of those days wasn’t the Sunil Mittal of today. But we fought and we won. Reliance had to pay a penalty of Rs. 500 crore, the only time they have been penalised in this country. It cost us three years. We would have been closer to China today had that not happened.

What are the lessons from the first phase of telecom liberalisation?
In industries where government is a player, like telecom, you must first appoint an independent regulator. Then you must rebalance tariffs. So you balance and make it segment according to the costs and then you invite private players.
We went in reverse. First we invited private players. We never rebalanced the tariffs. Government allowed players in the local call segment without opening up STD and ISD. Then we appointed a regulator — judge and the jury without any appeal. This they changed later.

Do you think different telecom bodies should unite under one umbrella now?

I think so. Now that most issues have been sorted out. The COAI should become the CII of telecom sector and look at the sector holistically. They have to look afresh at its agenda. It has to enlarge its view. Wireless broadband, DTH and VoIP (using the internet technique to send voice) should all be of interest for the new COAI.

What do you think of the way government is carrying out the 3G licensing?
The way it’s happening is not right. The administered price has been set very high at Rs. 3,500 crore. This is time the auction design is much, much better: Multiple rounds of bids where every player knows how much everyone else has bid in the previous round. If you do this, let the price be market-determined. The current reserve price seems to be close to maybe the final price. Will there be enough bidders?

(This story appears in the 06 November, 2009 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)

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