The "Operator Perspective" session included a discussion with Anil Sardana, managing director, Tata Teleservices Limited (TTSL), and Sanjeev Aga, managing director, Idea Cellular. They shared their views on issues such as the impact of 3G, falling tariffs and expected future trends. The key points touched upon by them were as follows...
Sanjeev Aga: The per-second tariff is just a fad and six months from now, nobody will even remember this. In the past, there were many similar fad tariffs which took everyone by storm for two to three months and were then forgotten. Nevertheless, I think we are in a spiral of prices heading south. It is even desirable, because this is the only way that the market works out extra capacity from the system. The stronger companies will feel the least pressure because their cost curves are more resilient.
However, at the current tariffs, the overwhelming majority of players will not be able to make profits in the coming two, five or even 10 years.
In the future, consolidation is very likely. There are players who have been clearly delaying their launches, indicating that they may perhaps not launch services at all and instead tie up or sell stake.
Sanjeev Aga: The year 2009 has been the bubble period in Indian telecom. There was too much capacity built up and this resulted in price competition. Subsequently, everyone will be affected in terms of profit, but the very weak may not be able to survive. Now, whether such a scenario leads to consolidation cannot be forecasted, but three years from now, there will certainly be far fewer independent operators, maybe four in one circle and five-six overall.
Sanjeev Aga: It is very difficult to forecast what 3G would do in the intermediate or in the long run. I think the key application is going to be faster internet access on the wireless. Such services will be limited by the kind of pricing that is available for similar access on wireline. Also, in the short run, the 2G spectrum crunch will be freed up.
I think 3G may become hugely popular, or may remain just another spectrum band.The demand for 3G is not necessarily going to come from only high ARPU customers.There is a correlation, but it is not a one-toone correlation. The worry is that the ability to price the product is limited by what is happening in the market. Thus, having an economic justification for your investment based only on incremental revenues from 3G is not a promising prospect. However, things could change in two-three years and 3G may give a better return on investment.
Sanjeev Aga: Wi-Max works better when there is a concentration of data usage.However, the problem is that to build up Wi-Max connectivity and transmission, very high costs may have to be incurred and therefore, paradoxically, Wi-Max deployment in hotspots works most economically where there is already an underlay of 3G.
We might find a newer concept of how spectrum is to be sourced and shared. We have suggested that spectrum should be subsumed from the operator and RF planning done for the complete circle. Then an independent network authority can be created which will monitor and control the network operations.
Sanjeev Aga: This year is without doubt a tipping point, where there is a sharp discontinuity because there has been the sharpest ever reduction in prices. It is very hard to predict whether the elasticity of demand increase in subscriber uptake will fully mitigate this. I think the revenue growth rate for this sector will be less than Rs 240 billion. This is going to be a year of profit pressure, which will continue into the first half of 2010-11.