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Home > Business > Special


Zipping on the telecom highway

Joji Philip Thomas | December 30, 2005

If 2005 saw over Rs 15,000 crore (Rs 150 billion) in fresh investments on the ground (not financial investments of the Vodafone type), an addition of about 32 million customers to the nation's telecom subscriber base, and foreign direct investment of over Rs 12,000 crore (Rs 120 billion), the coming year may better it by a long margin.

According to industry and government projections, 2006 will see a 50 per cent increase in investments and over a 100 per cent rise in FDI inflows, with a near doubling of the subscriber base. In just the last six weeks, Tata Telecom has gone into overdrive and netted a million subscribers.

Rivals Airtel, Hutch and Reliance have immediately come up with similar lifetime free-incoming offers, reducing effective tariffs even further.

Not surprisingly, valuations have risen phenomenally. The value paid per subscriber rose from $570 in Essar's acquisition of BPL Mobile, to $1,000 when Vodafone bought a 10 per cent stake in Bharti. Over the year, the Bharti share, the only one publicly quoted, has risen from Rs 218.90 to Rs 356.45.

"2006 should be another landmark year. The most affordable tariffs will help establish India amongst the top five telecom markets with over 170 million subscribers," says Mukund Govind Rajan, president, Association of Unified Service Providers of India and Director, Tata Teleservices.

While the industry is now focused on how on the new 3G spectrum policy will play out, since this will spawn a new range of broadband mobile applications like gaming and IP TV, there's a lot more in the works.

For those using long distance telephony, Telecom Minister Dayanidhi Maran's new plan comes into operation in a few days, and will see new players coming in since the licence fee has been slashed -- from Rs 100 crore to Rs 2.5 crore (Rs 1 billion to Rs 25 million) for a National Long Distance licence, and onerous investment obligations have been waived), Skype-type Internet telephony has been permitted and will further crash tariffs, and the long-awaited Carrier Access Code will also be in place -- this will allow subscribers from a Hutch phone, for instance, to dial a code for Reliance Infocomm and use its service to call from Delhi to Mumbai, and will increase subscriber choice.

Hutch, Spice and Idea Cellular have already announced their plans on the NLD front, and BSNL and MTNL have joined hands to enter the international long distance sector.

The dampener, however, is the cost of the access licence (a fixed line and a mobile phone licence still costs Rs 1,508 crore (Rs 15.08 billion) ) and since Internet telephony can only be offered by those with such a licence, Skype-type players are unlikely to come till this is fixed.

Rural telephony is also likely to see action, with the government finalising its plan to change the current USO-system of subsidising each rural line and instead funding infrastructure like mobile phone towers.

The coming year will also see manufacturing take centre-stage. Global leaders such as Ericsson, Alcatel, Elcoteq and LG have already set up their manufacturing base in India, while Nokia, Samsung, Flextronics, Siemens, Motorola, Foxcon and Aspcomomp are setting up their production facilities -- all told, $855 million will be invested in this part of the sector. Others such as Alcatel and Cisco have announced plans for R&D investment.

The only cloud on the horizon is the emasculation of the regulator.



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