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Krishnan Thiagarajan

The burgeoning mobile subscriber base is sending the country's telecom industry into a tizzy. What's in store for 2005? A look at the shape of things to come...

Nothing epitomises the dynamic fortunes of the telecom industry as clearly as the spiralling mobile subscriber base. In end-December, 2003, a month after the imbroglio over limited mobility and full-blown service was resolved, the mobile subscriber base stood at 28 million. And this segment is expected to have touched 48 million in 2004, averaging over 1.5 million subscribers every month. The mobile segment not only maintained the scorching pace of growth for the third successive year, it also dominated the telecom landscape. As the New Year has dawned on an optimistic note for both the software and telecom industry, e-World attempts to track the four trends that are likely to rule in 2005:

Mobile will rule the roost

The mobile subscriber base will continue to grow at a healthy clip, at over 1.5 million subscribers every month, adding up comfortably to 65-70 million in 2005. Some of the contributing factors are: * The dominant mobile operators — Bharat Sanchar Nigam, Bharti, Reliance Infocomm and Tata Teleservices — are rapidly expanding into B (Kerala, Punjab, West Bengal, etc.) and C (Himachal Pradesh, Bihar, Orissa and North East) circles. This is expected to pump up the subscriber base.

* As mobile tariffs continued to dip in 2004 and focus shifts to B and C circles, the average revenue per user (ARPU) may a steadily declining trend. Obviously, this will force mobile operators to reorient strategies towards a `volumes' game, which will raise the minutes of usage (MoU) of each subscriber.

* Slowly but surely, bundled services, which involve subsidising mobile handsets with attractive tariff offers, will become prominent in building subscriber base.. Operators will also offer high-value subscribers value-added services such as multimedia or e-mail to induce them to increase usage.

* Even as the GSM vs CDMA turf war intensifies, a parallel battle will resume between integrated operators (offering basic, mobile, and national and international long distance services) such as Bharti, Reliance and Tata Teleservices and standalone operators (pure mobile services) such as Hutchison Essar.

* Investor choice in telecom stocks will also increase as Hutchison Essar and Reliance Infocomm (provided it settles ownership battles between the Ambani brothers) are likely to come out with an IPO in 2005 and join the other listed players such as Bharti, MTNL, VSNL and Tata Teleservices (Maharashtra).

Regulatory battles

In 2004, the Telecom Regulatory Authority of India resolved several regulatory aspects such as lowering of revenue share and intra-circle mergers. But even if FDI (foreign direct investment) is hiked from 49 per cent to 74 per cent before the 2005 Budget, the regulator's skills will be put to the test on at least three critical issues:

* Spectrum usage: With rising mobile subscriber numbers, the focus will be on the scarcity of spectrum. In May 2004, TRAI had mooted the introduction of the 1,900 Mhz band spectrum for CDMA operators. This has set the stage for a no-holds-barred battle between GSM and CDMA operators. According to GSM operators, the 1,900 Mhz band had been earmarked for the migration of GSM operators to 3G (third generation mobile technology with high speed data services). But CDMA operators claim that 3G can co-exist with their existing services. As both sides are unwilling to compromise, there's a big battle in the offing...

* Access Deficit Charge (ADC): This levy, which was introduced by TRAI in October 2003, is payable by basic, cellular and long distance service providers on a per-minute basis primarily to BSNL. This is intended to mainly fund low-return subscriber bases in urban and rural areas. Since the levy is stepping up tariff rates, debates over a reduction or possible abolition of this charge might intensify during the year.

* Unified Licensing Policy: TRAI will be forced to walk a tightrope between mobile and national long distance operators. Since this policy aims to integrate basic, mobile and long distance services under one umbrella, mobile operators will insist on direct inter-circle connectivity. Mobile operators with a presence in several circles will be able to carry calls between adjacent circles (typically, between two States) using their own infrastructure, bringing down costs. But the long-distance companies are bound to resist as this threatens their existence.

The broadband thrust

This year may finally see broadband (described as high speed, reliable, on-demand Internet connectivity) take off in a big way. Perhaps not in terms of subscriber numbers, as the existing subscriber base of dial-up connections is fairly low, but in terms of a clear broadband strategy from BSNL/ MTNL (public sector), and Reliance, Bharti and Tata Teleservices in the private sector.

The overall success will hinge on the response to the broadband services launched by BSNL in January/ February. If it succeeds in offering reliable DSL (digital subscriber line) at an affordable price (Rs 600-800), it will probably accelerate broadband rollout from the private sector. And since BSNL is bound to maintain its stranglehold over the local loop (or the last mile),private operators will be forced to explore other alternatives. WiMax (30-50 feet), Wide Area Networks over Ethernet and hybrid fibre co-axial technology (for cable TV operators) are some of the alternative technologies that will take off to provide limited area coverage in different parts of the country.

Mobile handset base

When Nokia recently decided to invest in a mobile handset manufacturing facility in India, India suddenly emerged as an attractive destination for manufacturing. Though LG Electronics and Elcoteq had announced their plans earlier, it failed to create as much of a splash as Nokia did. Given the country's burgeoning mobile subscriber base, 2005 may well see other global handset giants eyeing India as a manufacturing base. Samsung, which has been mulling setting up a mobile handset base in India, may finalise its plans soon. Secondly, since global hardware giants are expanding their presence outside China and other Asian locations, it presents a great opportunity for India.

maverick@thehindu.co.in

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