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Rajnish Khare
Head - Digital Transformation, Social Business & New Media and Mobility Banking
HDFC

Telecom – The Journey So Far And The Road Ahead

It is said that Ohm was the first sound that was created when universe as we know it was born. As the universe evolved, and more specially, life on earth, sound became the first mode of communication among the life which came into being. No wonder till today, the best way to communicate is by conversing with people.

The invention of sound transmission over wire and later, wirelessly, has since them come of age. We started with telegraph, telephone, mobile phones, and now, satellite telephony and broadcast of live events.

There is another interesting reason for growth in voice telephony in India and that is moving from a large family structure to nuclear family to even unit family now, growth in opportunities making migration across the globe inevitable and more opportunities meaning less time available to spend time with each other. But the need to stay connected as we move far away has also become even more pressing and that is what is possibly one reason, other than great advancements in technology, that telecommunication including data transmission and reception have seen explosive growth.

If we look at Indian telecom industry, from a mere basic mobile telephony in 1990s, it has seen the fastest rollout of 4G in the world and 5G networks are already being tested and 7G is not far away. The call minutes have just simply grown to the extent that people today do not even realize that they are talking over phone than in person. Agreed, data is consumed more than voice, but data is part of telecom as well and now data networks have come into being which offer voice as add on though the underlying technology remains the same; that is, data over sound waves to over simplify it.

From an oligopolistic structure, when Indian telecom started with BSNL and MTNL being the giants in an open market structure when private players entered the field, and now again consolidation happening leading to possibly oligopolistic structures once more, Indian telecom industry has seen it all.

The booming subscriber base with India being only second to China, improvement in technology, falling cost of computing power leading to hardware being more efficient and economical and opening up of spectrum by government has led to rapidly falling tariff to the extent that India today has possibly the cheapest data and voice network. The smart phones entry has changed the game and now with price falling below 100 dollars, the party is on and bound to stay.

India also saw emergence of telecom regulator while the markets were evolving and perhaps has the best telecom regulator across the world. The regulator has done its best to ensure a level playing field with consumer and telecom companies’ interest at the core. This is one reason why India has seen emergence of both local and foreign players as giants and not one at the cost of another.

On the consumer side, there are lot of opportunities emerging with Fiber-to-the-Home (FTTH) becoming a real possibility and being economical enough to provide data, content, entertainment, commerce, and even care services. DTH is mushrooming and companies like Airtel, Reliance, and Tata are making it a necessity rather than a luxury for people to be entertained.  Pure content players like Netflix, Amazon, and Hotstar are emerging, and with smart TVs prices becoming affordable, the telecom markets supplying the backbone are bound to flourish. Television channels by big corporates are multiplying, providing content on almost anything one would like to watch or can watch till one crashes. All this augurs well for future of telecom companies but the jury is out on how they will perform or perish.

Having looked at the brighter side, one must also look at the other side of the coin. With increasing traffic, falling prices due to intense competition, spectrum availability still being a challenge with government extracting its pound of flesh coupled with bureaucracy still being there, many telecom players are feeling the heat.

The basic telephony is yet to cover entire nation; 2G, 3G networks have not lived to their potential and promise, GSM versus CDMA debate still taking a toll, choice of data over voice coupled with smartphone prices still being unaffordable for many, has led to deterioration in service. The call drop has become a hot topic and not much is being done either by telecom companies nor by regulator to bring in a QoS for telephony and data services.

The absence of quick customer consumer grievance redressal, laws lacking teeth, and consumer courts being not so effective, are leading to dissonance among consumers with no real solution being in sight. This is leading to no loyalty for one’s preferred telecom operator and this, along with mobile number portability has led to making the retention of a customer difficult, leave alone creating loyal and profitable customers. This is hampering investments in infrastructure investment, further compounding the problem of QoS.

India also is a predominantly prepaid market, unlike markets in US and Europe, and therefore, customers are neither tied nor are bundled plans available. This means customers cut down on their recharges if they feel they are being charged unfairly and this leads to lot of abandoned SIMs, thereby saddling the telecom operator with even more problems.

The corporate customers are also very demanding and this is leading to not much opportunity being available to increase revenue. The advancements in technology are making the concept of a backup operator not such a dire need and therefore, once a customer subscribes, he needs to be retained, further putting pressure on telecom operators.

Having said all this, in 2018, telecom industry has seen huge shake ups with small operators dying and bigger operators merging to survive and grow. But there are players like Reliance who have another business as a cash cow and therefore they have the ability to invest in their telecom business more than a pure telecom player can. Thus, they have made going real tough for pure telecom players even though the latter are merging to gain economies of scale and to increase their customer base to hold on to the customer base they have.

The future though seems brighter with content needs multiplying exponentially, data becoming currency, and drive of digitization in service industry. The data consumption in India is increasing at a rapid pace, internet telephony may soon be a reality, shopping at home using VR/AR is going to be a reality, need for entertainment increasing with quality content being added, smart and intelligent buildings, complexes and cities taking shape, wireless coverage increasing, and streaming becoming mainstream; all this should be able to drive the average revenue per customer up.

Mergers and acquisitions with a few big telecom players remaining will draw out weaklings and with few players to deal with, bleeding can stop and wounds can heal. The regulator and government are pragmatic and soon more spectrum may be in the offing with telecom players lobbying for better deals. If 5G and FTTH can live up to their promise, they can be game changers with increasing coverage and better disposable income, leading to aspirational content needs and availability of content in vernacular languages. With the world increasingly turning global, as the need to connect all-the-time grows, messaging apps become more versatile.

What is needed is better regulation, more investment in data networks, wider coverage, bundled offers to retain the customers, and a favorable economic environment and telecom policies. I believe that going forward in 2019, we will see consolidation of the market leading back to an oligopolistic industry, improving financials on the back of better data consumption, further fall in telecom duties and associated hardware prices, and most of all, spectrum being available at right parameters.

To sum it up, as the telecom industry gears up, further and dramatic improvements in technology continue, and regulation creates a level playing field, good days are going to be coming sooner than later. The telecom industry to my mind has seen the bottom and it is now going back to an upward trajectory. To quote, If voice is what started the formation of human societies, data will see they stay joined together and whoever controls the information highway will rule the roost!

The views expressed are solely personal and do not reflect views of the organization.

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