Telecom: Blockbuster in making?

The script for the telecom sector in the coming decade is sketched. The draft National Telecom Policy (NTP) 2011 is a 360 degree progressive policy with different flavours for diverse set of stakeholders across the telecom value chain including operators, equipment manufacturers, infrastructure providers and VAS players.

To bridge the rural-urban divide, script writers or DoT has laid emphasis on achieving 100 per cent tele-density in rural India by 2020, which translates into an addition of 500 million connections at a CAGR of 12-13 per cent through 2011-2020. The Government's commitment to ease the bottlenecks surely brings in a favourable plot. The recognition of telecom as infrastructure sector, simplifying sectoral policy for Right-of-way, review of SACFA clearance, USOF disbursements through market oriented methods and encouraging active infrastructure sharing, are a few of them.

With incremental capex investment estimated at $16-18 billion during the period, it is imperative for operators to re-align their strategies, especially when the target audience is single-screen cine-goers.

BUSINESS MODELS

Innovative business models to rationalise capex and opex through leveraging Network Service Operator (NSO) model and existing infrastructure in the region through active infrastructure sharing has become a necessity for those involved, to do whatever it takes to enforce that “must-watch” feeling among the masses in order to win this very competitive race.

After the successful voice market with over 900 million connections, broadband or data is being touted as the next superstar and is on the brink of explosion. According to trade observers, broadband is the next big bet with $40 billion market opportunity and 600 million connections at the minimum of speed of 2 mbps by 2020.

Over 90 per cent of the incremental revenue would be garnered from data, with clear focus on developing application ecosystem such as M2M, M-commerce and M-health, affordable handsets and compelling content.

BRAND LEVERAGING

The most enduring subject in this film-making is one-nation one-license; which is bound to transform the industry and how it is conceived globally. The industry may witness existing operators hiving-off in NSO and Service Delivery Operator (SDO); entry of new players in the SDO space, leveraging on their distribution network and high brand recall – likes of airlines, FMCG giants, large beverage companies etc; existing operators or SDO may diversify into new business ventures and leverage their ‘brand'; potential mergers of NSO and Passive infra companies to provide end-to-end network solutions to the SDO and managed capacity and services model to emerge fully on a revenue share basis. With this, cinema will surely come of age!

SPECTRUM SHARING

Spectrum sharing will have a wide ranging impact on the economy as well as the industry. It will help generate additional revenues for the government through spectrum usage charges and on the other hand it will allow operators to achieve the much needed spectral efficiency by reducing the burden on the crunched network.

No movie is complete without a negative character; the free roaming regime may result in potential damage of $400 million to operators and death of NLD/ILD operators attributed to no-carriage charges.

There is still an upside, in the form of centralisation of sales and marketing and promotional efforts of the operator owing to uniform tariffs across the nation. Telecom has always been a high-budget game, and we need a producer to fund the envisaged $110 billion investments, during the 12{+t}{+h} plan period. It is important to create a special purpose telecom finance corporation and rationalise the taxes and levies on the over-burdened telecom sector; whose spend in levies is 23-25 per cent higher than other Asian counterparts.

Encouraging indigenous manufacturing is important to create the “brand India” and reduce the trade deficit with an estimated import bill of $300 billion, by 2020.

What we watch on celluloid, cannot be brought to live without the commitment of crew members. It is pivotal to assess the manpower requirement and put in coordinated efforts to meet the demand for human resources in different parts of the telecom eco-system. According to COAI estimates, the Indian mobile sector is likely to provide direct employment to 2.8 million people and indirect employment to 7 million people, by 2012.

The role of censor board or improved governance is the need of the hour with emphasis on quality of services, protection of consumer interest and security. The blueprint for the movie is promising, but receiving a blockbuster verdict is dependent upon all the stakeholders and most importantly the time of release.

The telecom industry is geared for record-breaking gross collections in the coming decade. Who will emerge as a real hero and deliver a power house performance – wait and watch.

(The author is Partner in member firm of Ernst & Young Global.)