NEW DELHI : It was a towering feat for the telecom industry in 2015 to cross 100-crore subscriber mark, but the call-drop menace spoiled the party and the operators are now pulling up their socks to face greater competition with the imminent entry of Reliance Jio in 2016.
It took a rap on the knuckles by the government for the mobile operators to beef up their network performance, which still remains far from the optimal levels with dropped calls still remaining a problem in many areas.
The government is however are hopeful that the problem of call drops will become a thing of past in the new year with the operators putting up more towers, while more spectrum could also be made available to them at the earliest.
“The government will try to auction spectrum as soon as possible depending upon Trai’s recommendations,” Telecom Minister Ravi Shankar Prasad said.
He, however, added that the scarcity of airwaves is not an issue as spectrum sharing and trading guidelines are already in place that can be used by operators to augment their services.
The New Year can also bring in many more new services for the customers at affordable rates.
With the government framing a new policy for additional features on mobile phones, customers will be able to communicate in their local languages and access services like e-payment through their phones.
“PM has said governance must be available on the mobile phone so we are going to have a good initiative to encourage mobile phone operators by a suitable policy framework to have further features like e-payment, governance issues etc on mobile phones,” Prasad said.
For the industry, 2016 can be a ‘make or break year’ where resolution of issues around call drops, net neutrality debate and availability of spectrum will be critical.
Still, consumers can expect to save on mobile bills with availability of public wifi and pressure on internet rates due to expected entry of pan-India 4G player Reliance Jio.
Also, most of the incumbent players including Bharti Airtel, Vodafone and Idea Cellular have already their launched the 4G services.
Though data usage of consumers is likely to see a significant increase, the spending may not be in proportion to the usage with availability of public wifi.
“The pricing would be under pressure and 2016 could see intense completion on the price front, both for data and voice. Intense completion may give rise to innovative tariff plans including bundling offers, etc,” Deloitte Haskins & Sells LLP Partner Hemant Joshi said.
The trend is expected to put pressure on financial health of telecom operators as the government has been talking tough on issues like quality of service and call drops and wants the companies to enhance their investment on infrastructure.
Bharti Airtel announced an investment to the tune of Rs 60,000 crore in networks over a period of next three years.
The first quarter of this year witnessed spectrum rights getting sold for Rs 1.1 lakh crore. Government has now started preparing for the next round of spectrum auction, which includes sale of most premium radiowaves, likely to be conducted in the next year.
Credit rating agency Moody’s expects Indian telecom sector to grow by 5-6 per cent in next 12-18 months.
“The higher growth in emerging markets such as India will be driven by increasing smartphone penetration and data consumption as well as higher expected GDP growth,” Moody’s Investors Service AVP- Analyst Nidhi Dhruv said.
As per Dhruv, Bharti Airtel will lead the growth with revenue rising by 8-10 per cent as it launched 4G services and the proliferation of affordable smartphones drives growth in data services.
“Bharti and Vodafone India Limited are stepping up their 4G capex spending ahead of the 4G launch of Reliance Jio,” Dhruv said.
Moody’s expect Bharti’s adjusted capex to revenue ratio to peak to about 40 per cent in 2015 from 28.4 per cent in 2014, and then to decline to a more normalized level of around 24 per cent-25 per cent in 2016.
“Reliance Communications capex will decline once its network-sharing agreements with Reliance Jio start kicking in by mid-2016,” Dhruv said.
The pressure will also be on the government, which will have to create a mechanism to ensure flow of investment in the sector for job creation and connecting unconnected in remote parts of the country and lower rung of the society without compromising on consumer’s interest.
The issue of net neutrality is also likely to keep the government and regulator Trai busy with the formation of a policy framework. Telecom Regulatory Authority of India (Trai) has already come out with a consultation paper on differential pricing for data.
Telecom operators fear losing a major chunk of voice revenue due to calls made through internet and had sought similar regulatory framework for calls made through over-the-top players like Whatsapp and Skype.
The Indian government has supported net neutrality in principle and is expected to take a final view on the issue post Trai’s recommendations, Ernst & Young India, Partner – Telecom practice Amit Sachdeva said.
In absence of good margins and competitive pressure, telecom sector has begun looking at spectrum sharing and trading.
“Spectrum sharing and trading guidelines are crucial for India’s mobile sector growth but unfortunately had been delayed for years. It was announced this year by the current government and immediately one or two spectrum trading and sharing deals have resulted which are a big win-win for all,” Broadband India Forum President TV Ramachandran said.
Telecom operators Reliance Communications and loss making Sistema Shyam Teleservices were able to benefit under new the norms by signing a merger deal.
Spectrum trading guidelines announced in October provided exit option to telecom operators. Videcon Telecommunications was quick to capitalise on it.
The company was able to sell its airwaves in Gujarat and Uttar Pradesh West for Rs 3,310 crore to Idea Cellular which it purchased for Rs 1,329 crore in November 2012.
In 2016, consolidation can also emerge as a big play in the sector.
E&Y feels that telecom operators have their eye set on spectrum that can help them expand their 3G and 4G services but they may not be ready to buy most premium airwaves in 700 Mhz band.
“Although 700 MHz is a globally harmonised band for 4G, the industry may not be ready for it given the ecosystem is not fully developed and is expected to be highly priced. It is essential to develop an effective roadmap for the efficient use of spectrum that supports the creation of a Digital India,” Sachdeva said.
Though big data volumes are expected to come from urban centres, telecom operators will look at firming their strategy for rural market where teledensity is low but growing.
Telenor India Chief Operating Officer Tanveer Mohammad said that the next wave of data growth will come from rural areas where the Internet penetration there is less than 15 per cent in a population of 922 million.
“Though the mobile phone penetration in rural India is around 42 per cent, the mobile internet penetration is less that 10 per cent. This presents a good opportunity to innovate and come with services that are useful for our those the rural and semi-urban areas,” Mohammad said. (PTI)
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