For the past two years or so, Idea Cellular has been posting net profits and increases in revenue that meet, and at times even beat, Street expectations. For instance, the GSM operator posted its highest-ever revenue growth of ₹516 crore in a quarter (from the sequential quarter) during the three month-period ended June 30. According to the company’s Managing Director Himanshu Kapania, Idea is swimming against the tide to report these kinds of numbers, quelling an industry myth that a fall in competition following the 2G scam is helping existing operators.
In a tête-à-tête with BusinessLine , Kapania opines that competition in India is still high, with operators even now resorting to predatory pricing. The Aditya Birla group company is making business plans for becoming a payment bank, but there are onerous responsibilities to be weighed before taking this plunge. Kapania reveals details in an interview.
With an average six to eight operators in each circle, compared to about three to four operators a circle in most other countries, India ranks among the highest in terms of competition. In India, many operators are still rolling out predatory tariffs. We are swimming against the tide.
Now with the new government in the saddle, what are the industry’s expectations?
The Prime Minister has articulated his vision of expanding rural telephony and making India digitally ready, banking on the growth of mobile broadband and rural internet. He had, in fact, stated that along with highways, India needs to build i-ways too.
To be able to grow mobile broadband in the country, we believe the Government has to take a lot of action on the spectrum front. First, spectrum trading has to be announced. Second, there is no pan-India 3G operator in the private domain and we are hoping that the large quantum of spectrum that is currently held by the Defence sector will be released to mobile operators for them to expand their service. We are also hoping that the new spectrum-sharing policy will be announced soon.
The 10 per cent customs duty on telecom equipment proposed in the Budget did not go well with the industry. Your comments?
We were surprised that the Government, which wants to encourage infrastructure investment in the country, announced an additional customs duty on telecom equipment. We do understand that the Government is committed to expand telecom infrastructure manufacturing in the country, but we believe that specialised manufacturing should be introduced (first) and only then should the customs duty be bought in.
TRAI, according to reports, has submitted its recommendations on spectrum charges and trading to the Government. What are your expectations?
The spectrum that we have acquired in auctions since November 2010 has been fully liberalised, and it is our belief that even the spectrum acquired earlier will also be liberalised. TRAI (Telecom Regulatory Authority of India) has made very serious recommendations on the spectrum roadmap so that we can expand services beyond 2G to 3G and 4G. The quantum of spectrum, which is not being fully utilised, should also be made available to the telecom sector. We are waiting for the Government of India to adopt TRAI’s roadmap.
Now with the banking regulator rolling out draft guidelines to allow telecom and retail firms, among others, to set up payment banks, will Idea Cellular take the plunge?
There are some onerous responsibilities in terms of capital structure, corporate governance and transaction costs (here), and these has to be balanced with returns. We are in the process of making our business plans and will discuss with the Reserve Bank of India as and when an open house on payment bank happens. Only then will we take the plunge.
You were Chairman of the Cellular Operators’ Association of India for 2013-14. What were your unfinished tasks?
There were a series of unfinished tasks. There is a lot of misconception on electromagnetic field (radiation), and we have to do a lot to educate society. We also need to educate people on the work done to reduce carbon footprints. Separately, the current penalty regime of ₹50 crore, which the Department of Telecommunications follows needs to be modified. India has to now convert from 10 per cent penetration of digital services on mobile to a level around 60-70 per cent. On 3G, none of the operators have pan-India footprint and we look forward to the Government releasing three to four additional bands of spectrum bands of 2100 MHz.
What are your plans with regard to 4G?
Now with the fourth year of 3G running, we have to study the growth of 3G in India. Out of its 140 million subscribers, Idea Cellular has only 10.6 million 3G users, which is just 7.5 per cent. Indian consumers have been very slow in adapting 3G, and unless we reach 50-70 per cent penetration, it does not make economic sense to expand to the next (level of) technology.