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Crowded telecom space becomes over-crowded, needs consolidation

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Already crowded telecom space is becoming over crowded – 6 more operators will join the scene. Though Bharti in GSM and Reliance in CDMA dominate the space, the new operators will add to the competition. Indian telecom industry is seeing an explosive growth with 9.22 million new mobile subscriptions in July. This would take the total to 305.24 million. Total telephone connections stand at 343.87, which is a tele-density of 29.83%. 1 in 3 Indians have access to a phone.

Indian telecommunication market

6 new operators who were given start-up spectrum are:

  • Unitech Wireless (22 circles): Sold 49% stake to telecom Italia valued at $3billion
  • Shyam Telelink : Russia based Sistema holds a majority stake.
  • Swan telecom (14 circles): Sold 45% stake to Eilisat (UAE based) for $900 million.
  • Datacom (JV of Dhoot of Videocon and Mahendra Nahata)
  • Loop Telecom (owned by BPL Telecom)
  • Stel

Unitech has received the start-up spectrum of 4.4MHz in Gujarat and Uttar Pradesh, which will take it to 12 circles. There a total of 22 circles in which the telecom players can operate. Unitech will be joining the heated competitive space of GSM. They have to differentiate or face extinction.

Shyam Telelink will launch its services on September 30. Shyam will compete in the CDMA space, which already has 2 established players in Reliance and Tata Teleservices (Tata Indicom). Shyam has chosen CDMA, which has reduced the competition by miles. The same spectrum allocation via the GSM route would have taken a longer time. Smart move by Shyam Telelink.

Reliance communication which is the second leading player overall and the first in CDMA operation is launching their GSM services starting by the end of this year. They are spending a whopping 6000 crores (in their typical Ho toh Big Ho style) to setup their towers and the network. It has already set-up a total of 2500 towers in Delhi and Mumbai circles. There is no doubt Reliance will be the leading player within 6 months. I hate to say this but Reliance looks like the new East India Company.

This entry of 6 new operators is good news and bad news. Good news is consumers will have more choices. Bad news is your phone calls will not be that good going forward. With the number subscriptions only to increase and they are expected to double in the next 5 years. This adds to the existing worries. Of the 6 new operators I would like to see at least 3 companies merging with other bigger companies. I expect Reliance to remain.

Few things can help consolidate this booming industry, which is becoming fragmented.

1. Making the mergers and acquisitions easier: A company can merge with another operator only after 3 years of receiving license. This rule can be eased to help newer companies merge with established players.

2. Spectrum trading: Many new operators are not using the whole spectrum allotted to them; this will lead to crappier services for the consumers. The spectrum can be shared between 2 operators. New deals should be forged to jump from network to network depending upon the availability. This would help consumers. Just like you can use other bank ATM’s you can use other networks when your network does not have a signal.

3. Selling the spectrum to newer players at a realistic price rather than the price set-up in 2004. The new operators who bought the startup spectrum (4.4Mhz) at 1651 crores has sold stake to foreign players for exorbitant prices. This is for a company, which did not have any operations. It is just for the spectrum. They have received a profit of 400%. A part of this could have gone to the government.

Though the competition is good for the consumers, it might lead to crappy connections for the existing subscribers. Bigger players can tie-up with smaller players through spectrum trading for a better connectivity.

Growth is good, but it should commensurate infrastructure. Mobile phones should not become like our roads with frequent congestions.

I hate to hear: “Your call is waiting for spectrum allocation”

Reliance says: “Ho toh Big Ho”. I would say : “Ho toh Big ho aur better be ho”

  1. ashish says

    @telecom solutions: yes i definitly agree, users stand to benefit…a great example of this is the new tariff plans (tatadocomo.com/prepaid.aspx) of Tata docomo….i believe their appraoch is truly revolutionary…charging 1paisa/sec for local as well as STD calls, in addition to almost 10 free SMS’ a day is fantastic..and at the end of the day the common man is benefitting!

  2. Telecom solutions India says

    I think the new players coming into the industry is great for the users …
    due to the competition between them … the users will get better services at cheaper rates …
    and the more the variety .. the more options they have to choose from .. according to their convenience ….

    but yeah .. hearing ” Your call is waiting for spectrum allocation ” might just get a bit frustrating .. lol.. hope that doesn’t happen :)

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