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Tuesday, December 30, 2008

2008: Watershed Year for Indian Telecom

For a country that stood at the bottom of the pyramid in terms of telecom penetration a decade ago, 2008 was a watershed when India's subscriber base topped 350 million users to make its network the second largest in the world after China, displacing the US. The significant achievement was made possible by the mobile telephony segment of communications, which was once thought to be a gizmo for the rich - what with a tariff of Rs.16.80 per call when the telecom revolution began in the country in the early 1990s. But with tariff falling to 40 paise a call and incoming calls becoming free, mobile telephony began to appeal to the masses. In fact, 2008 also saw Indian telecom operators add a whopping 8-10 million new subscribers to the network each month, making a host of global companies to look at the country as their next big market for growth, especially in the hinterland. And the statistics speak for themselves.

As per the watchdog for the sector, the Telecom Regulatory Authority of India (TRAI), the total number of telephone connections in the country reached 363.95 million at the end of October 2008 against 256.55 million in the corresponding month last year.

This, despite the fact that the number of plain vanilla landlines in the country actually fell from 39.41 million in October 2007 to 38.22 million the same month this year. Tele-density shot up from a mere 12.7 percent in March 2006 to 31.5 percent as on Oct 31.

The projection by several leading global consultancies is that India's telecom network will overtake China's in the next 10 years.

"The telecom sector in India has registered a remarkable growth during the last few years propelled largely by the unprecedented growth of mobile telephony," said Nripendra Misra, chairman of the watchdog.

"Three years back, a target of 250 million telephone subscribers by 2007 was considered too ambitious. We could achieve this target a few months ahead of schedule," Misra told IANS.

"Telecommunication access to rural India is going to be the most important development since the Green Revolution. Research analysts feel that mobile voice is overwhelmingly the engine of growth followed by next generation network, broadband and data."

The sector, which will go through a major revamp with the launch of third generation (3G) mobile services, has seen a number of ups and downs in the recent past.

A key development in the history of the telecom industry was when Bharti, in collaboration with 15 telecom players, signed a deal to build the first direct, high-bandwidth optical-fibre undersea cable system from Britain to India in May.

Technology travelled distances with Apple iPhone 3G being launched in India by telecom majors Bharti and Vodafone Aug 22.

The international investor community also continued to bet on the Indian market. Norway-based Telenor, the world's seventh largest telecom operator, bought a new-generation telecom company Unitech Wireless by paying $1.29 billion for a 60 percent stake.

Similarly, another start-up, Swan Telecom, which did not have a single subscriber, sold a 45-percent stake to the UAE's Etisalat for $900 million, taking the company's book value to $2 billion.

Another major foreign inflow was announced when Japanese telecom giant NTT DoCoMo picked up 26 percent stake in Tata Teleservices for $ 2.7 billion.

However, the entry of foreign players was marred by major controversies surrounding Swan Telecom and Unitech Wireless. The communications minister was charged with flouting TRAI norms and allocating second generation (2G) spectrum on preferential treatment.

The now estranged government ally, the Communist Party of India-Marxist, raised a hue and cry over the government's "first-come first-served" principle and the resultant alleged loss of Rs.60,000 crore (Rs.600 billion/$13.2 billion) to the exchequer.

The minister has claimed that the allocation of spectrum was purely based on TRAI's policies and clarified that both Swan and Unitech had only diluted their stake and that it wasn't an outright sale.

2G spectrum is nearing saturation, and with the defence yet to vacate the spectrum for both 2G and 3G that it holds, the problem persists.

December saw the much-touted third generation (3G) services being launched by the state-run telecom operator Mahanagar Telephone Nigam Ltd (MTNL). Under the brand 'Jaadu' (magic), MTNL ushered in the next wave of Indian telephony Dec 11.

With 3G and broadband wireless access (BWA) auctions a fortnight away, the government held a pre-bid conference to clarify on bidding related issues to the telecom operators and to make them aware of the rules of the game.

Though the turnout of foreign players for the pre-bidding conference was dismal, the Department of Telecommunications (DoT) hoped that it would get a good response Jan 5, the last day for filing applications.

"We are hoping that the auction will draw in bids that are a few times higher than the reserve price of Rs.2,020 crore (Rs.20.2 billion). The global financial crisis will not affect the auction for 3G services," said R. Ashok, member (Finance), Telecom Commission, the apex government body for the sector.

Consumers had more good news in store, with the government announcing that the much-awaited mobile number portability (MNP) would be implemented in the four metros by June 2009 and extended to other parts of the country.

Key Milestones in India's Telecom Industry in 2008

Following are key milestones and timeline of developments in India's telecom sector in 2008, when the country's network emerged as the second largest in the world after China's, displacing that of the US:

Jan 1: Telecom watchdog issues status paper to ensure Internet service providers adhere to minimum prescribed speeds for broadband connectivity

Jan 3: Delhi High Court issues notice to the government, regulator, Reliance Communications and Tata Teleservices on a petition challenging allocation of radio spectrum

Jan 9: Vodafone moves the Bombay High Court challenging an income-tax notice slapping a $1.7-billion capital gains tax on the acquisition of stake in Hutch-Essar

Jan 10: The communications ministry decides to allot scarce spectrum to all existing mobile phone service providers, irrespective of the technology they use

Jan 31: India's Internet connectivity is disrupted as two undersea cables in the Mediterranean are damaged

Feb 15: Spice Corp unveils a no-frills mobile phone that will retail at about Rs.800 ($20) from early April

Feb 21: Anil Ambani-led Reliance Communications announces acquisition of Uganda's telecom service firm Anupam Global Soft and commits $500 million investment

Feb 22: Telecom watchdog says Indian operators added 8.74 million new phone subscribers to the network in January

Feb 28: The Department of Telecommunications issues licences to 22 more operators

March 2: Virgin Mobile, part of Britain's communications group Virgin Media, launches youth-oriented mobile services in India through Tata Teleservices

March 17: Watchdog announces stricter measures to rap telecom operators who fail to rein in unsolicited telemarketing calls

March 20: Reliance Communications teams up with Taiwan-based handset manufacturer High Tech Computer to tap the market for high-end CDMA mobile phones in India

March 25: The Supreme Court asks the government to amend its law in eight weeks to provide for imposing stiff penalties on service providers and telemarketers for making unsolicited calls

March 27: Regulator says it will remove a levy imposed on service providers to fund rural connectivity

April 1: The government unveils new guidelines for sharing of infrastructure, such as transmission systems and cables, by telecom operators in a bid to lower operational costs and help consumers

April 10: Indian telecom officials and the makers of BlackBerry, the Canada-based Research in Motion, meet to discuss security concerns raised over the services provided by the company

April 11: India adds 7.6 million new mobile phone users under the GSM technology in March, surpassing the US as the second largest wireless market, according to the Cellular Operators Association of India

April 16: The home ministry asks telecom operators not to offer certain types of BlackBerry services until a proper monitoring system is put in place to address security concerns

April 22: New government guidelines say mergers and acquisitions among telecom operators will not be allowed if the number of service providers falls below four after any such move

May 9: Bharti Airtel and 15 other leaders in the global telecom industry sign a deal to build the first direct, high-bandwidth optical-fibre undersea cable system from Britain to India

May 13: The Delhi High Court says it is shocked to hear that even the telecom regulator does not have the powers to regulate direct marketing agents and others in curbing unsolicited calls

May 14: Bharti enters final rounds of consolidation talks with South Africa's largest telecom operator MTN in a deal estimated to be worth nearly $45 billion

May 24: Bharti-MTN call off consolidation talks

May 26: Reliance Communications says it is entering exclusive negotiations with MTN to discuss potential combination of their businesses

May 27: Arun Sarin stuns the world of business by announcing he is stepping down as chief executive of Vodafone after leading the world's largest mobile phone company to record profits during his five years at the helm

June 18: State-run Mahanagar Telecom Nigam Ltd received much-awaited licence for international long distance telephony, raising hopes for further cut in tariffs

June 25: India's fifth largest cellular operator Idea Cellular says it is buying 40.8 percent stake in Spice Communications

July 2: Telecom Secretary Siddharth Behura says Blackberry mobile services do not pose a threat to national security, indicating a government go-ahead for its operations in the country

July 18: The globally-watched consolidation talks between Reliance Communications, India's second largest private telecom company, and South Africa's MTN called off

Aug 1: Communications Minister A. Raja announces the much-awaited guidelines for the auction of radio spectrum, or airwaves, to launch third-generation mobile phone services in the country

Aug 7: The government approves release of airwaves to two state-run companies, MTNL and Bharat Sanchar Nigam Ltd, for the launch of third generation mobile services in the country

Aug 8: Mobile telephony has grown rapidly in India, especially during the last three years, with India becoming the second-largest wireless market in the world after China and ahead of the US, says a World Bank study

Aug 18: Regulator permits Internet service providers to offer products that allow calls from computers to fixed line as well as mobile phones

Aug 22: Apple iPhone 3G (third generation) launched across India by telecom majors Bharti and Vodafone

Aug 25: Out of 594,000 villages in India, 550,000 now have telephone connections whether through satellite technology or conventional lines, while 30,500 villages even have broadband cover, says the government

Sep 1: The International Chamber of Commerce, the global arbitration tribunal, asks Tata Communications to pay a Reliance Communications $19 million plus interest from May 2006 as damages over a cable dispute

Sep 8: The Indian government kick-starts process to e-auction radio frequencies to telecommunications operators who want to offer third-generation mobile phone services

Sep 23: The UAE's Etisalat says it has bought 45-percent stake in Swan Telecom for a cash consideration of $900 million

Oct 29: Norwegian telecom giant Telenor picks up controlling 60-percent stake in Unitech Wireless, the telecom arm of real estate major Unitech, for $1.2 billion

Nov 6: Taking the stake sale by Swan Telecom and Unitech as case points, the Communist Party of India-Marxist alleges major scandal in the latest round of radio frequency allocation to mobile telecom operators but the government denies the allegation

Nov 11: The Telecom Commission recommends a licence fee of three percent of average gross revenue on those mobile operators who will offer stand-alone third generation mobile services

Nov 12: Japan's leading mobile telecom operator NTT DoCoMo says it will pick up 26-percent stake in Tata Teleservices for $2.7 billion

Nov 25: Communications Minister A. Raja says mergers and acquisitions among new telecom operators will be allowed only if they have completed three years of operations after being issued licences

Nov 26: The allocation of radio frequencies to telecom operators comes under judicial scrutiny again with the Delhi High Court seeking a response from the government on a petition that said the scarce resource should have been auctioned

Nov 28: Telecom watchdog says the government ignored its suggestion that the second-generation radio waves be auctioned, which would have generated higher revenue

Dec 5: Vodafone says it would challenge in the Supreme Court the government's decision to impose capital gains tax of $1.7 billion on it following its acquisition of majority stake in Hutchison Essar

Dec 11: Communications Minister A. Raja says the government was looking into the security concerns surrounding BlackBerry phones and would soon come up with some solution after objections that e-mails on the service cannot be intercepted by security agencies

Dec 11: Prime Minister Manmohan Singh launches third generation mobile phone services of the state-run MTNL under the brand name "Jaadu" or magic.

Dec 23: The Telecom Commission says successful bidders for spectrum allocation for third generation telecom services will also be eligible to get frequencies for second generation services, as and when any space becomes available.


Priyanka January 9, 2009 at 8:45 AM  

Hi, A very good post. Could you point out the resources where you picked up the information from? Thanks, Priyanka

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