Sunday, October 05, 2008

Perfect Telecom Market

Vasu Reddy from Chicago

Unprecedented growth in users usually creates great opportunities for investors and customers. Be it a capitalistic society or a socialistic society, market forces typically take over in managing the imponderables with rapid growth in users and revenues and profits of any industry.

Last year, this year and future years hold great promise for the Indian telecommunications market, as the user base continue to grow at a pace that by most optimistic projections looks continuously attainable. Manufacturers, operators, suppliers, distributors and marketers are all beating their expectations and the users don’t seem to complain about what is being offered to them. Every inexpensive or most expensive offering seem to be lapped up in big numbers and customers hungry for more innovative products and services will keep the telecom market robust for years to come.

The latest developments with 3 G, VoIP and WiMax will deliver more products and services, along with bringing multitude of new users into the Indian telecom market. A 50% plus market penetration in the next few years from the close to 30% today is not a far reaching goal. Adding the rural landscape to the telecom network will certainly improve the ability of all of India with the rest of the world and bring economic opportunities along with the communications.

Indian Telecom market is almost perfect for consumers and investors. The market is delivering continued and rapid growth in services and growth in value of product offerings, while delivering growth with ROI for investors. The intermittent interruptions with the regulators interference seem to be just noise with the growth in the market. There is no question on the confusion that prevails with each new offering in Telecom market when it involves licensing and fee structure. There is also confusion with technology choice and which technology is robbing more from the government treasury. There is always tension between policy and implementation. There is no communications between various government departments. As usual in the Indian political landscape there is a debate on which one of them is right more correct for the country.

The backdrop of the super rich and already big telecommunications companies interfering and influencing the political and bureaucratic process is ever hanging on the Indian markets (including the telecom market). This is not an uncommon phenomenon in any other global market, but especially so in the Indian market as the government itself sides with the needs of its own political interests. We survive in a capital market with a system that is based on bias, influence and continued socialistic philosophies. Political parties can undercut major development simply to get vote blocks in the short term. Industry has the money and muscle to influence monopolistic business practices to ensure that the industry is curtailed and favors the very rich. The country seem to have innumerable vows of its own making and still the Indian telecom market seems to be a perfect place for growth while meeting the demands of the consumers.

It is almost perfect, while surviving the gaffs of policy and implementation. Bharti and Reliance losing out on the deals with MTN is not as surprising as both the companies have inherent limitations. Whatever the issues that have caused these big deals to make Indian telecom global, they were not insurmountable and should have been resolved, but were not. The worst part was one of them got derailed by a brother. The failures with making MTN deal will certainly be case studies for many years to come with what not to do with global telecom deal making.

DOT and TRAI and other ministries have constant been in the news for disagreement more than policy making. Instead of concentrating on quick delivery of spectrum to the market and making the new telecom services possible, years of delays have been caused by internal disagreements. Worst kind of planning is heaped on in organizing the next round of licensing. The incumbents certainly don’t want additional competition and also don’t like to pay up as they feel they have contributed to the growth but don’t like to admit that the current value of the franchises are much greater than what the government valued them. The incumbents certainly want to tax prospective new entrants with heavy burdens to discourage international majors to come into the market. Even the GSM and CDMA organizations fight, go to court and file law suits against anyone and everyone rather then seek consensus leading to the best practices in the market.

For the first time in global trends in telecom, manufacturers are releasing products in Indian market before anywhere else. Some of the announcements from Nokia offering its sophisticated mobile in India prior to anywhere else demonstrate the clout of Indian telecom market.

No matter how many distractions with policy and incumbents, the market seems to be going in one direction, up. With some important adjustments to the policy we will have big telecoms join the incumbents and keep making the Indian network progressive. Next few months promise introduction of 3 G and VoIP networks, and more of our people into the talking sphere.

There is nothing stopping our country with its drive towards greater communications standards, and someday towards every Indian with availability of telecommunications services.

October 5th 2008
Vasu Reddy
Optus Technologies, Inc.

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