For the telecom sector, year 2012 was a tumultuous period. As 2013 dawns, the gloom still lingers, but the industry will have a lot to cheer, even as the regulatory overhang continues.

2012 saw it all — from the Supreme Court cancelling 122 licences, failed spectrum auctions, lower user additions and disputes over interconnect charges, all dampened the industry’s spirits. Bharti Infratel’s initial public offering (IPO) was the saving grace.

“We believe that 2013 and the years to follow will have the potential to witness similar high growth for the telecom sector, as it has witnessed in the past decade,” Reliance Communications President and CEO (Wireless Business) Gurdeep Singh said.

Many in the industry expect 2013 to be a better year.

“I expect three broad trends in 2013. First, the focus on profitability will intensify for telecom companies. Secondly, 3G and data services will see traction, and finally we will see the smartphone ecosystem picking up. I am optimistic that next year will be much better for the telecom companies,” Bharti Airtel CEO (India and South Asia) Sanjay Kapoor said.

DATA EXPLOSION

The sector is expecting data – which now provides up to 15 per cent of an operator’s revenues – to emerge out of its cocoon.

“Mobile data users in the country should cross 100 million in 2013,” said Idea Cellular Managing Director Himanshu Kapania, adding, smartphone prices breaching $100 levels and increasing sales would be the other catalysts.

Mobile device sales in India are forecast to reach 251 million units in 2013, a 13.5 per cent rise over 2012, according to a Gartner study. According to independent industry estimates, India has about 70 million data users.

“The sheer gap between voice penetration (over 70 per cent) and broadband usage (less than 1 per cent) indicates the giant opportunity for data and wireless broadband services. The systemic basis for tremendous growth in data traffic is being created through the roll-out of 3G networks, increasing penetration of smartphones and other positive changes in the overall telecom ecosystem,” RCom’s Gurdeep Singh said.

Broadband is also poised for growth in 2013 by 20-25 per cent a year from next year. At present, there are about 15 million wired broadband users in the country, E.V.S Chakravarthy, You Broadband and Cable India CEO and MD, said.

Citigroup Venture Capital India owns a majority stake in You Broadband, formerly You Telecom.

TECH GAINING TRACTION

3G services were launched as early as 2010, but failed to garner a massive user base. Early this year, operators also resorted to slashing prices by up to 70 per cent, an attempt that did not pay off.

“3G investments are growing at a steady pace, and it is expected that consumers’ response to 3G and mobile Internet will improve considerably in 2013,” Idea’s Kapania said. Apart from 3G, the launches of 4G services would also result in improving data usage, Gartner Research Director Kamlesh Bhatia said.

Operators such as Videocon Mobile Services, Infotel Broadband and Tikona Digital are readying to launch 4G services in 2013. At present, Bharti Airtel is the only operator offering 4G.

“…2013 would still be an early period for 4G. But we will see some shape as operators are still trying to figure out the right price and right schemes,” You Broadband’s Chakravarthy added.

TELECOM TARIFFS

A highly-competitive telecom landscape in the country, with 15 players, has resulted in cut-throat competition and low tariffs in the country. This also resulted in mass adoption of telecom subscribers, with the total number of users at 904.23 million as of October-end.

“We might see an increase in call rates next year. Costs of operations are rising, and either the operators would have to take the impact or pass it on to customers,” Viom Networks Vice-Chairman Sunil Kanoria said.

A joint venture between Tata Teleservices (54 per cent stake) and SREI Infrastructure, Viom operates more than 40,000 cell sites.

“The growth of the telecom sector will also be fed by strengthening of telecom tariffs, which will be another firm and influential trend for the sector in coming times,” RCom’s Gurdeep Singh added.

However, with tariffs rising, will mobile services be affordable? “On the affordability side, the consumers do not expect the sort of discounting that one thinks about. Affordability will have to be pared with overall inflation trends,” said Airtel’s Kapoor.

However, there are others who differ, such as Jagannadham Thunuguntla, strategist and head of research at SMC Global Securities.

“Tariffs should be in the same range, however, there is a risk of low growth of subscribers in 2013 due to high degree of saturation,” Thunuguntla said.

REGULATORY OVERHANG

“Regulation is not to shut down an industry, but also facilitate economic growth of the sector, and by mid-2013, I expect a decent amount of clarity to emerge,” You Broadband’s Chakravarthy said.

Many in the industry expect the regulatory overhang to continue next year mainly in issues in spectrum auction and one-time spectrum fee among others.

According to Kanoria, the regulatory risk is high. “…but we expect clarity to emerge on many fronts such as M&A, spectrum auction and pricing, and dual technology among others,” he added.

Once clarity in M&A norms emerges, consolidation is the next rational step.

“I also see the market consolidating into 7 or 8 players. This will keep the competition at realistic levels. The days of irrationale and uneconomic decisions are over,” Airtel’s Kapoor added.

The Ministry is also looking to launch nationwide Mobile Number Portability by February, but the industry is not very optimistic.

“More than 97 per cent of the subscribers in the country are pre-paid, of which a majority are youngsters,” Gartner’s Bhatia said, adding, “MNP might not be much of a success.”

> rajesh.kurup@thehindu.co.in