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Indian Telecoms:
Competitiveness &
Globalisation
By
Dr T.H. CHOWDARY*
* Director: Center for Telecom Management and Studies
Chairman: Pragna Bharati (intellect India )
Former: Chairman & Managing Director
Videsh Sanchar Nigam Limited &
Information Technology Advisor,
Government of Andhra Pradesh
T: +91(40) 6667-1191/ 2784-6137(O) 2784-3121®
F: +91 (40) 6667-1111, 2789-6103
hanuman.chowdary@tcs.com
thc@satyam.com
Presentation # II
At BUPT, Beijing on Monday, the 16th October, 2007
INDIA
Globalisation (1)
Indian Telcos foray abroad
(1)
o VSNL acquired
• TYCO’ globe-girdling OF submarine cable
system for just$ 130 mln (US Chapter II
distress sale)
• Teleglobe of Canada
• A telephone Operating licence in South
Africa providing every type of Telecom
service
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Globalisation (2)
Indian Telcos foray abroad
(2)
o VSNL (Contd)
• Opened overseas offices in Sri Lanka,
Singapore serving global-multi-nationals
• 2007 revenues $2.0 billion
o Reliance Infocom
– Acquired FLAG (a US Chapter II company)
– Is laying a large capacity submarine cable to
West Asia and Europe
– Bought US datacoms Company with 1000
enterprises customers
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Globalisation (3)
Indian Telcos foray abroad
(3)
• Bharti Telecom laid an undersea cable
across the Bay of Bengal to Singapore and
connects to trans-pacific cable systems
• Bharti Telecom is second telecom service
provided in seychelles
• MTNL/BSNL State-owned enterprises
have public telephone service provider
subsidiaries in Mauritius, Nepal and Sri
Lanka
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Globalisation (4)
Foreign Telcos into India
(1)
•
Are two varieties
a)
b)
•
Network & service operators/partners
Equipment suppliers
In the 1st phase of entry of P-Telcos into services sector
1993-1996, the essential licence condition was foreign
Telco Equity participation of a minimum of 10% and a
maximum of 49%
AT&T, US West, Nynex, Hutch, SingTel etc got in.
NTP:99 removed this obligatory equity share-holding by
foreign Telcos
In 2006, WTO obligations hastened the process
•
•
•
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Globalisation (5)
Foreign Telcos into India
•
•
•
(2)
AT&T, BT, US Sprint, etc. foreign
Telcos are competing with about a dozen
Indian companies in all varieties of
telecom services.
WTO & Globalisation have exposed
Indian Telcos to foreign competition.
Foreign Telcos largely serve India-based
foreign enterprises (banks, consultancy,
insurance, BPO/KPO, construction,
Internet i/c SKYpe etc. enterprises
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Globalisation (6)
Foreign Equipment
Manufacturers
•
•
•
•
Have a field day
Foreign equity can be 100%
They can go into SEZs
Nokia, Motorola, Ericsson, LG, CISCO,
IBM, Microsoft, Google, Intel, ZTE,
HUAWI, have US $ 10 bln sales/annum
• Bharti Airtel alone placed contracts worth
$ 2.0 bln with Ericsson and $ 900 mln with
Nokia-Siemens Networks
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Globalisation (7)
Chief Consequences are
(1)
• Global broadband connectivity and
competition (local and foreign)
• Enables India as s/w, BPO, KPO services
supplier to the world
• Killed local telecom network and devices
manufacturing & R&D owned by Indians.
• Some Indian companies have become global
companies (eg.VSNL, Bharti....)
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Globalisation (8)
Chief Consequences are
(2)
• Foreign companies are buying & investing in
Indian companies; selling their equity after
appreciation; cashing the profit & quitting
(eg.Hutch, AT&T-Nynex, US West...)
• Mergers & Acquisitions begun [Tata Tele
+AT&T; Birla AT&T –Tata (BATATA)
• Vodafone acquired 67% equity from
Hutch-Essar; now sells Vodafone brand
• Orange (France Telecom) bought the
managed enterprise services division of
India’s GTL
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Competition
(1)
• Skewed, imperfect because P-Telcos had to
compete against the incumbent which was a
government Department; which was also licensor &
regulator
• Under foreign company/government pressure &
WTO
– Statutory regulator created in 1997
– Department’s telecoms were corporatised
– Going through restructures to correct flaws & over a
period of six years [2001-07]
– Regulators have become powerful & competition is
market-driven; full and fierce in every segment; it is
global and beneficial to customers
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Competition
(2)
• Competition is technology neutral;
national/foreign company neutral
• Indirect subsidies (from rival pts) to SOEs (BSNL
& MTNL) wound down
• Domestic competition prior to 1992 followed by
foreign competition completely killed the stateowned Hindustan Cables Co & debilitated the
Indian Telephone Industries Corporation (ITI).
ITI kept ‘alive’ by reserving one-third of
procurement by BSNL/MTNL to ITI but at the
(lowest) price paid to private company.
•
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Competition
(3)
• 2007 – Addl licences offered using
spectrum released by Defence services
• 500 applications from about 50 companies
[i/c Real Estate, Retail etc.) Entry Fee
$375 mln
• An operator is allowed to acquire 10% (to
be raised to 20%) in rival Telcos in the
same licenced area. Telcos in the same
licenced area
• GSM operators are given 15 MHZ/state
• Telcos pay 1% of their revenue to
government for addl spectrum (2x5 MHZ)
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Competition
(4)
• Dual-SIM Handsets (GSM-CDMA)
• SPICE P-Telco (Brand Ambassador –
Priyanka Chopra, a Miss World Beauty)
Rs.9849 [$240]
• Tata Indicom [Samsung Duo Rs.11,999
($300)]
• Cell talk is US 1cent/mnt
• ARPUs falling [$ 10.0 or less] even as
minutes of usage increase
• Content creators emerge
• Cable TVs & ISPs & Telcos now offer VOIP
& IPTV
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Constraints and burdens on
competition (1)
• India is divided into 23 separate service
areas; each requiring a separate licence
(ET 27.8.2007)
• A call from one P-Telco’s subscriber, to a
subscriber on another Telco’s network is
subject to
– A port (point of inter-connection) charge
• Roaming is app.10% of an operators
earning;
• Interconnect accounts for 30% of call
charge
• Roaming +Interconnect revenues are taxed
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Constraints and burdens on
competition (2)
• Tax deducted at source (TDS) and is
to be deposited within one week of
the monthly inter-company billing
• Burdened with USF cess @5%
service tax @ 10% in addition to
revenue share as condition of licence
• The financial impositions amount to
about 30% of the cost of service. if
removed, demand will go up by (50 to
60)%
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THANK YOU:
DHANYAWAD
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