Telecoms, Internet, Broadband -Hope and Despair

By DR T.H. CHOWDARY

Director: Center for Telecom Management and StudiesFellow: Tata Consultancy Services

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(O) 2784-6137& 2784-3121®F: +91 (40) 6667-1111

hanuman.chowdary@tcs.com

Talk at IETE, Hyd: 17 May 2014

* Unless otherwise specified data as of 30 Sept 2013* Source: COAI & TRAI

S710_May2014 2

Telephones as of March 2014

• Total : 933 mln ( 0.11% increase over Feb)

• Mobiles : 904.31 mln• Wire line : 28.69 mln• Urban (wireless) : 58.90%• Rural (wireless) : 41.10%• Wireless Teledensity : 72.94%• Wired Teledensity : 2.29%• Composite Teledensity: 75.23% thc_ctms

S710_May2014 3

Internet & Broad Band

• Internet subscribers : 210.36 mln• Broadband : 15.35 mln• Subscribers who access Internet thro’ mobiles : 188.20 mln

thc_ctms

S710_May2014 4

Gainers & LosersGainers

Company Idea Vodafone BharatiNos (mln) 2.24 2.22 1.90

LosersCompany RCom BSNL TataTeleLoss 7 mln 185,491 147,736Company MTNL LoopLoss 134,914 40,294

thc_ctms

S710_May2014 5

We are adding per month2007-08 2008-09 2009-10 2010-11 2011-12

8m 10 m 16m 19m 9m

Intense competition Raja Licences

Supreme Court cancelled 144 licences

thc_ctms

S710_May2014 6

Speeds of Data Transmission2G 3G 4G 5G*

256 KBPS 1MBPS 10MBPS 1GBPS

thc_ctms

S710_May2014 7

% of mobile connections according to generation

Country S.Korea Malaysia China India

2G 47% 48% 73% 88

3G 53% 48% 27% 12%

4G Nil 4% Nil Nil

India ‘s 3G subs. are a mere 12% ; India’s 4G – zero; DOT has to be pro-active

thc_ctms

S710_May2014 8

Price/MHZ/Pop of 1800 MHZCountry Germany Italy Portugal

US$ 0.003 0.028 0.058

Country Sweden UK India

US$ 0.016 0.012 0.361

•The price of spectrum in India is 120 times more than in Germany, 30 times that in UK, 23 times that in Sweden, 12 times more than in Italy & 6 times more than in Portugal

*This high cost for spectrum is a gift (?) of the UPA government to aam admis in India!

thc_ctms

S710_May2014 9

No of GSM operators in different countries

Country France Spain UK Holland

No 3 3 4 5

Country Germany China IndiaNo 4 2 8-12* More licences, more money-making permit-licence-quota in DNA of Nehruvian “Socialism”

thc_ctms

S710_May2014 10

GSM spectrum licenced to operators

Country India Denmark EU Average France

MHZ 50-60 118.4 92.6 138.5

Country Germany Italy Spain Sweden

MHZ 65 72.7 100.6 92

Country UK USA

MHZ 82.2 75.96* India gives lowest spectrum for the largest number of Telcos!

thc_ctms

S710_May2014 11

The total industry profit/ Loss over the last 7 years ( Rs. Crores)

Year 2012 2011 2010 2009

(Loss)/Profit (3745) (10,958) 4140 12,575

Year 2008 2007 2006

(Loss)/Profit 17,722 15, 751 9,965

1) Figures exclude BSNL & MTNL losses of about Rs. 12,000 cr for each of the last 3 years

2) Note the declining profits

thc_ctms

S710_May2014 12

Debt of Telcos (in crores)2008-09 2010 2011 2012 2013

Rs. 82,726 1,23,775 1,59,955 1,85,720 2,50,000

Banks are shy of further exposure

thc_ctms

S710_May2014 13

12th Plan (2012-17) Investment

• In the 12th Plan period 2012-13 to 2016-17, telecoms would require an investment of Rs.9,43,899 crores!

• When industry as a whole is making losses and when their debt is already Rs. 2,50,000 cr where will the investments come from?

thc_ctms

S710_May2014 14

Universal Service Fund ( Levied as 5% of Telco revenues)

Year 2009 2010 2011

Levy 7,338 7,680 7,960

Used 2,260 3,180 4,140

The unused Rs. 13,398 crores could be used to fund R&D put broadband Internet in universities & colleges. It will fund the Rs. 20,000 cr broadband optical fiber connecting over 250,000 panchayats

thc_ctms

S710_May2014 15

Contribution of Telecom sector to GDP

1980-81 1990-91 2000-01 2011

0.7% 0.79 1.9 4.0

• The contribution of the IT sector is 8% together ICTs information sector contribute 12% to India’s GDP

• In the developed OECD countries, it is 10!

thc_ctms

S710_May2014 16

Friend or FoeGovt. Against ( Companies & users)

Country China Malaysia India

Service Tax 3% 5% 12.36

Licence fee Nil 0.5% 8%

Spectrum usage charge *

0.5% Nil (2 to 6)%

USF Nil 1% 5%

Total 3.5% 6.5% 30%+

+ including octroi, stamp duty & levies on Towers* This is atrocious because Telcos paid outright huge amounts in spectrum auctions (eg. Rs. 60,000 cr for 3G in 2010)

thc_ctms

S710_May2014 17

Prohibitions

• 3G Inter circle Roaming• VOIP for long• ISP (1998) NLD & ISD (2000) (year when

prohibition lifted)

thc_ctms

S710_May2014 18

Penalties (on roll-out/provision default)

• Rural telephones• 3G & 4G Roll out• Tax claims ( Vodafone, Uninor, Bharti)• Retrospective excess spectrum holding

charges at currently determined rates ( after auctions)

thc_ctms

S710_May2014 19

Impositions

• Refarming ( on renewal) ( move from 900MHZ to 1800 MHZ)

thc_ctms

S710_May2014 20

Witholding

• Universal Service Fund• Broadband to Panchayat (OF connectivity

work given to PSUs only)• Application of Telegraph Act to BTS locations

thc_ctms

S710_May2014 21

DOT’s Duty

• Raise & increase revenue to Government? Or

Nurse Health of Telcos &Reduce price for service &Increase Affordability

thc_ctms

S710_May2014 22

Dhanyawad:Thank You

thc_ctms