There'll be bloodbath in the telecom industry, avers TVR

As a Director General of COAI, one of the most active industry bodies in the country (COAI represents GSM mobile service operators in India), T V Ramachandran, has had an eventful stint, during which not only did the mobile subscriber base in the country explode from a few million to nearly 450 million now, but also saw major changes in the dynamics of the industry.

Popularly known as TVR, Ramachandran, did MSc in Physics with specialisation in Wireless & Electronics from the Madras University and has over 40 years of experience in various fields of management. He is quitting COAI end of October 2009 to join a private mobile service operator as a senior member of the team.

Ramachandran spoke to Deccan Herald’s Dilip Maitra on a variety of issues currently adding to the anxiety of the industry.

Deccan Herald: Recently the Chairman of Telecom Regulatory Authority of India (Trai) said that mobile operators could be asked to make per-second billing mandatory. This is expected to lower mobile tariff further but may hurt the industry. What is your view?

TVR: Mobile subscribers in India are very happy as the tariff in the country is the lowest in the world. If the tariff has to come down further, let the operators decide it and let free market forces drive the choices. Trai need not worry about tariff as intense competition in the market will continue to push them lower. Trai should look more into policy matters and anti-competition regulations to make the industry and consumers benefit.

DH: The licensing process for 3G (third generation) mobile services began about four years ago and it is still not clear when the government will call for the bids. Do you think the government is serious about it?

TVR: You are right, 3G is hanging fire for the last four  to five years. But I think the government is serious to bring in the new regime and the process of licensing will be completed in the current financial year. The entire cabinet is behind it and the country needs money (3G bidding is likely to garner more than Rs 25,000 crore in licensing fee).

DH: There is a lot of hype around 3G service. People think it could be a major turning point in terms of falling revenue and profits. Do you agree?

TVR: 3G, which is nothing but broadband on mobile spectrum, will certainly revolutionise the service and consumer experience as it will open up many new facet of service. But it will be wrong to believe that 3G will bring a pot of gold for telecom companies. International experiences show that as a business case 3G is going to be very tough. In India where the consumers are extremely price sensitive, 3 G services will have to be affordable to a large number of subscribers.

If it remains an expensive service meant for the riches, 3 G will be a losing proposition. I think, only large players will be able to mix 3G with existing 2G service to offer affordable yet innovative services. Others will find it tough.

DH: In the last 18 months many new players entered the market and some more are soon to join the bandwagon. Can so many survive?

TVR: It is true that the market is already crowded and more players will make it worse. Most large cities are saturated with upwards of 80 per cent penetration and average revenue per user is awfully low. Many circles have 10 or more telecom operators who are simply poaching from each other as new users are difficult to come by. Market cannot sustain so many and I think there will be major bloodshed in the near future. In a couple of years we will see major consolidation, weaker players will be bought over by the stronger ones. Only people with deep pockets will survive and in the end only three or four national players will be left behind.

DH: The telecom industry in India had a dream run  and is fastest growing in the world.  What  are the current challenges the telecom sector facing?

TVR: There are quite a few issues troubling the industry. Telecom is one of the most heavily taxed sectors, leading to huge burden for operators in an environment of hyper competition and a price sensitive consumer base. This problem will further aggravate as the industry will reach out into the rural areas. It will become increasingly difficult for the sector to attract foreign investment.

The industry also needs to bridge the digital divide between the urban and rural areas to deliver the benefits of connectivity and broadband to rural citizens. There is also an urgent need to expedite the spectrum reforms process for the industry. The first step has been taken with the submission of the DoT Spectrum Committee Report, 2008. The Report is presently pending consideration of Trai.

It would be amongst COAI’s topmost priorities to try and ensure that India moves to a liberalised market based spectrum allocation policy. Going forward COAI should also work towards allocation of future spectrum bands as per internationally harmonised band plans.

DH: You are leaving COAI at a time when there is a clear divide among established, large operators and new players struggling to survive. Can COAI meaningfully balance interest between members?

TVR: I don’t see any divide, COAI always has and will always continue to act in the overall interests of the industry. For most part the issues and concerns are common for all operators whether old or new.

There are some specific areas where there could be some short term divergence in views or differences of opinion but these need to be resolved through dialogue and consensus.