Is the telecom party in India over?


For years the Indian telecom sector has been growing crazily with new players, increasing connections and greater tele-density. The number of mobile subscribers has ballooned to more than 755 million and the teledensity has increased to around 65%. The number of mobile players has gone way beyond 15.

Indian Telecom Sector

People thought that since all the players fought on price, reducing price was no longer an option to pursue and the market had reached saturation. But that wasn’t the case ever as the number of subscribers kept increasing and with the coming in of the Mobile Number Portability scheme; improved customer service has become even more important today. So all is hunky dory in the industry and everyone is happy today, right? WRONG!

The fact that telecom has been a rapidly growing sector since more than a decade made it a prime target for multibillion dollar scams. And with the 2G scam, one’s worst fears were confirmed when it was observed that licences were given without any proper auctions or approvals. Without basic infrastructure, business models and other important considerations in place, players like Uninor, Videocon, Swan Telecom started selling their schemes making all of us wonder how were they going to get back their investments.

First it was Raja’s arrest and then Shahid Balwa, Promoter of Swan Telecom and 50th richest Indian according to Forbes was arrested. Interestingly Reliance was involved in helping Swan as it had more than 10% share in the same. This gives rise to a number of questions.

Can anyone and everyone who has the money get the licences?…. Didn’t the PM have any control over the same as he says that he isn’t aware?…. Doesn’t a mobile player need infrastructure or a good business model before it can get such a licence?…. Is it just a play of the rich?

The result? Players like Videocon, Uninor, Etisalat etc. are all in the red because of no infrastructure, poor business sense and no competitive advantage. They seem to be just money making machines in the name of providing telecommunication to a lot of people.

Unless widespread measures like giving licences on the basis of factors like a basic infrastructure, a sound business model and some kind of competitive advantage, checking the telecom providers previous record and the people associated (Shahid Balwa is alleged to have connections with Dawood Ibrahim), pricing infrastructure, tower locations etc. are looked into, this sector will be prone to many more scams.

Have you wondered how the 67,000 cr was invested during the 3G auctions? Another scam? Who knows! The government has opened up this sector and seen the disaster. Unless it takes some basic measures to clean up things, the party could end soon.

End result? – Only the top 3 mobile providers surviving the fight!

  1. Aseem Rastogi says

    @all – Yeah consolidation is the name of the game. And without that no one will survive. As they say only the best survive and the rest die off :)

  2. Cool Raj says

    yes you are right. good days of telecom companies are over now.only those companies will survive which have sound business model,good infrastructure, right people and deep pockets. i think airtel, reliance, tata indicom have more chances of survival.

  3. liju philip says

    The 15 players will start reducing. Its the nature of the game. When a new sector opens, everyone runs in. Lose money for a few year and the consolidate.

  4. Dev says

    Consolidation (read: mergers) will be the key from here on…

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