The Hindu Business Line : Battle for spectrum dominates telecom sector

New Delhi, Dec. 31 If 2007 will be remembered as the year when the telecom sector was in the middle of one of the fiercest battle between various operators and the Government, 2008 is expected to be the year which will be remembered for ushering in a huge change in the way we communicate through next generation technologies such as 3G and Wi-Max.

The spectrum war, however, has had no significant impact on the growth of the sector with India crossing the 200-million subscriber mark. Thanks to a whopping growth in the cellular segment, with an increase in subscriber base from 105 million in December 2006 to over 170 million by 2007-end, India is set to be the second largest market worldwide after China. The growth story, however, did not reflect in other segments including broadband where the increase in subscriber base has been quite sluggish. Analyst predict that with newer wireless technologies such as Wi-Max, promising higher speeds and faster roll outs, set to hit the consumers – broadband will take off in a major way in 2008.

Net access

Already, in 2007, the number of people using their mobile phones to access the Internet has crossed the number of people who use dial up or fixed broadband connections. Fixed line telephone subscribers continue to give up their connection in favour of mobile services and, therefore, the user base in this segment dropped below the 40-million mark this year. Market watchers predict that with the introduction of triple play services (telephone, broadband and TV on the same line), fixed line telephones might see a revival over the next few years. The past year surprisingly did not offer any major cheer for existing telephone consumers as operators chose to consolidate their numbers and kept a tight leash on tariffs and freebies. In fact some of the operators chose to increase tariffs, which led to another legal tangle between consumer groups and the service providers. However, there was a lot to cheer about for consumers in the semi urban and rural areas as operators pumped in close to $20 billion in ramping up their network reaching out to newer areas.

For example, the rural mobile project under the Universal Services Obligation fund saw some aggressive bidding by the operators so much so that they were prepared to give money to the Government instead of taking subsidy from the fund.

Change of guard

2007 also saw a change of guard with Mr Dayanidhi Maran making way for Mr Andimuthu Raja as the Communications and IT Minister. While Mr Maran had his focus on bringing in hardware manufacturers to set up base in the country in the first half of the year, Mr Raja initiated the process to bring in new players in the sector. This process of getting in new operators is expected to be completed in 2008, which is good news for consumers as more competition will bring down tariffs further.

On the business side, despite falling average revenue per user almost all the operators raked in huge profits primarily riding on a growth of 7-8 million new subscribers every month. And with a target of 500 million subs by 2010, the business will continue to ring in moolah.

The mouth watering proposition made Vodafone buy out Hutchison telecom’s stake in Hutch this year for a whopping $11 billion. The world’s largest cellular brand Vodafone formally made its entry into the Indian market in September this year. There are now 46 new companies, including real estate firms and electronic good manufacturers, wanting to offer telecom services and have applied for licences.

The year saw the emergence of a new breed of companies – telecom infrastructure providers. Almost all the cellular companies hived off their towers into a separate company in order to unlock value.

The merger of Bharti Airtel, Vodafone and Idea Cellular’s tower infrastructure was a significant move in this segment even as global majors such as American Tower Corporation made its entry.

In 2008, consumers can also expect the introduction of mobile number portability, which will enable them to change their operators without having to give up the phone number. The New Year is expected to be a significant year for the Indian telecom sector. Whether it will be a year with new operators, new technologies and new applications or whether 2008 will be yet another year of legal battles, it all depends on how soon the current stalemate over spectrum is resolved.