Sunday, May 22, 2022 | Last Update : 11:16 PM IST

  Business   In Other News  25 Dec 2016  Telecom sector to face action packed 2017

Telecom sector to face action packed 2017

PTI
Published : Dec 25, 2016, 7:21 pm IST
Updated : Dec 25, 2016, 7:21 pm IST

High-voltage narrative of 2016 has left mobile subscribers craving for more in the coming year.

According to global mobile industry body GSMA, India will add 330 million unique subscribers by 2020 (from 616 million unique users as of June 2016).
 According to global mobile industry body GSMA, India will add 330 million unique subscribers by 2020 (from 616 million unique users as of June 2016).

New Delhi: Crashing data tariffs, free voice calls, disruptive entry of Reliance Jio and a no-holds-barred turf war to safeguard Rs 9 lakh crore worth of cumulative investments have set the tone for an action-packed 2017 for the telecom sector, which also had to grapple with the thorny issue of call drops this year.

If anything, the high-voltage narrative of 2016 has left mobile subscribers craving for more in the coming year both in terms of tariffs which have touched new lows, and technology.

 

4G has boosted mobile speeds to levels never experienced before by the data-hungry Indians. "About Rs 9,27,000 crores have been invested so far by telecom service providers (TSPs) in building world class telecom infrastructure," industry body COAI's Director General Rajan S Mathews said.

Incumbent telecom operators in representations throughout the year have shared how their revenues have taken a hit on various accounts ranging from Trai's decision to bar differential tariff platforms like Facebook's Free Basics, Airtel Zero, to Reliance Jio unveiling free services.

Deloitte Haskins & Sells LLP Partner Hemant Joshi said however that the prohibition on discriminatory tariffs has played a significant role to make data services affordable and accessible by everyone and is one of the important factors behind the rising adoption of data services in India.

 

The telecom regulator's latest recommendation to allow third party platforms to provide free data without bias towards a particular telecom operator or internet content is likely to rekindle the debate on net neutrality in 2017.

Looking back, the going year started-off with a setback- of-sorts for consumers when the Supreme Court quashed penalty provision for call drops, prompting the regulator to seek more powers to penalise errant telecom operators.

The Telecom Department and regulator launched a combined offensive -- in form of review meetings and drive tests – to ensure that service quality issues remain at the forefront all through the year.

 

To address the problem of call drops, operators have added about 3.51 lakh BTSes in last 12 months, according to Mathews. Besides this, Trai continues to work on review of service quality norms, ombudsman model, and interconnection all of which are expected to take shape in 2017.

There was never a dull moment for the telecom sector this year, and the market pulsated with action thanks to improved affordability, falling handset prices and operator investments in improving network coverage (helped by policies like Right of Way and spectrum sale).

The year saw India overtaking US to become the world's second-largest smartphone market with an installed base of 275 million devices. It has also predicted that 4G connections will grow to 280 million by 2020.

 

According to global mobile industry body GSMA, India will add 330 million unique subscribers by 2020 (from 616 million unique users as of June 2016). In addition, the industry is set to invest heavily, with operator capex growing to USD 34 billion between 2016 and 2020, says GSMA.

If anything, demonetisation and digital push  resulting in increased adoption of mobile wallets -- will put the market on a turbo charge, say industry watchers. Already, the average Indian is consuming data -- movies, gaming, connecting on social media -- like never before, in the aftermath of the industry price war triggered by the entry of India's richest businessman Mukesh Ambani in the telecom industry.

 

Jio, which launched full-fledged 4G services in September, has promised free voice calls for life along with rock-bottom data prices, once its ongoing free services come to an end on March 31, 2017.

The market's appetite for data can be gauged from the fact that Ambani had set a target of 100 million customers in the "shortest time possible" for Reliance Jio, but the new venture notched 52 million customers in just 83 days, growing faster than Facebook and WhatsApp. The data and voice charges are likely to see further fall in 2017 as Bharti Airtel, Vodafone and Idea Cellular and the new entrant Reliance Jio slug it out to capture a larger chunk of what is now the world's second largest mobile market.

 

"2016 ushered in bundled voice and data integrated plans. Increasingly, this is going to be the norm in 2017, with more innovative and segmented packages in the offering. Headline mobile data tariffs have largely remained stable, but operators have increased data allowance significantly," EY Global Telecommunications Leader Prashant Singhal said.

He has cautioned that in the long term, lower tariffs are not sustainable, with high spectrum fees and ongoing capex requirements. "To put it into perspective, the cumulative bid in spectrum auctions since 2010 amounted to Rs 3.5 lakh crore, which is quite significant considering sector revenue of about Rs 2.6 lakh crore. As a result, the sector debt level has increased to approximately Rs 4.2 lakh crore after the 2016 spectrum auctions," Singhal said.

 

Deloitte's Joshi says that the downward trend of mobile tariffs in India has always been a challenge for the service providers as they operate in a market with rock-bottom Average Revenue per User (ARPUs).

"Though the voice ARPU is going down, the high adoption of data services is transforming telcos' offerings in the data sector," Joshi said. Tariffs apart, Jio's entry opened up new battlefronts in telecom sector and a large part of the year was mired in bitter exchanges between the newcomer and incumbent operators over network connectivity issues.

Jio has been accusing incumbent operators of not providing it sufficient points of interconnect leading to massive call failures while the operators have blamed the free calls offered by the newcomer for unleashing a "tsunami" of network traffic.

 

Trai called the warring sides for meetings, and when the call failures continued to surpass prescribed limits despite warnings, it recommended a cumulative penalty of Rs 3,050 crore on Airtel, Vodafone, and Idea Cellular for denying interconnectivity to Jio.

The penalty recommendation has now been challenged in court by Vodafone, which has called Trai's move 'arbitrary' and sought quashing of the regulator's recommendations.

The year also saw incumbent telecom firms under the aegis of industry body COAI clashing with the regulator and Reliance Jio to the extent that the industry body alleged that Trai was favouring new entrant.

 

 

Elsewhere, another corporate tussle brewed as an international arbitration court ordered the now-embattled Tata group to pay nearly Rs 7,956 crore to the NTT DoCoMo for alleged breach of agreement over telecom JV Tata Teleservices.

While estranged partners traded charges, fresh mergers and acquisitions were solemnised in the sector. Anil Ambani-led Reliance Communications announced the merger of its wireless telecom business with smaller rival Aircel to create the country's 4th-biggest mobile phone operator.

On the flip side, spiralling debt and steep pricing of 700 MHz band, turned India's biggest-ever spectrum sale into a damp squib. Seven telecom companies including Vodafone, Bharti Airtel, Idea cellular and Reliance Jio made commitments of Rs 65,789 crore for buying 964.80 MHz of spectrum in various frequency bands, as against 2,354.55 MHz of radiowaves on the block.

 

Government had hoped to raise as much as Rs 5.63 lakh crore from the auction, but even at the end of the five-day auction, nearly 60 per cent of the spectrum remained unsold, including in the premium 700 MHz band.

The Telecom Department maintained however that the auction was successful as government was able to end the spectrum scarcity nudging the sector towards better services and fewer call drops.

Tags: reliance jio, india telecom sector, telecom department
Location: India, Delhi, New Delhi