Namaskar Namaskar 你好你好 Indian Telecoms:Indian Telecoms:Competitiveness &Competitiveness &

Globalisation Globalisation

Namaskar Namaskar 你好你好 Indian Telecoms:Indian Telecoms:Competitiveness &Competitiveness &

Globalisation Globalisation ByBy

Dr T.H. CHOWDARY*Dr T.H. CHOWDARY** Director: Center for Telecom Management and Studies* Director: Center for Telecom Management and Studies

Chairman: Pragna Bharati (intellect India )Chairman: Pragna Bharati (intellect India )Former: Chairman & Managing DirectorFormer: Chairman & Managing Director

Videsh Sanchar Nigam Limited &Videsh Sanchar Nigam Limited &Information Technology Advisor, Information Technology Advisor, Government of Andhra PradeshGovernment of Andhra Pradesh

T: +91(40) 6667-1191/ 2784-6137(O) 2784-3121®T: +91(40) 6667-1191/ 2784-6137(O) 2784-3121®F: +91 (40) 6667-1111, 2789-6103F: +91 (40) 6667-1111, 2789-6103

hanuman.chowdary@tcs.comhanuman.chowdary@tcs.comthc@satyam.com thc@satyam.com

Presentation # II Presentation # II At BUPT, Beijing on Monday, the 16At BUPT, Beijing on Monday, the 16thth October, 2007 October, 2007

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Globalisation (1)

Indian Telcos foray abroad (1)

o VSNL acquired• TYCO’ globe-girdling OF submarine

cable system for just$ 130 mln (US Chapter II distress sale)

• Teleglobe of Canada• A telephone Operating licence in South Africa providing every type of Telecom

service

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Globalisation (2)

Indian Telcos foray abroad (2)

o VSNL (Contd)• Opened overseas offices in Sri Lanka,

Singapore serving global-multi-nationals• 2007 revenues $2.0 billiono Reliance Infocom

– Acquired FLAG (a US Chapter II company)– Is laying a large capacity submarine cable to

West Asia and Europe– Bought US datacoms Company with 1000

enterprises customers

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Globalisation (3)

Indian Telcos foray abroad (3)

• Bharti Telecom laid an undersea cable across the Bay of Bengal to Singapore and connects to trans-pacific cable systems

• Bharti Telecom is second telecom service provided in seychelles

• MTNL/BSNL State-owned enterprises have public telephone service provider subsidiaries in Mauritius, Nepal and Sri Lanka

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Globalisation (4)

Foreign Telcos into India (1)

• Are two varietiesa) Network & service operators/partnersb) Equipment suppliers• In the 1st phase of entry of P-Telcos into services

sector 1993-1996, the essential licence condition was foreign Telco Equity participation of a minimum of 10% and a maximum of 49%

• AT&T, US West, Nynex, Hutch, SingTel etc got in.• NTP:99 removed this obligatory equity share-

holding by foreign Telcos• In 2006, WTO obligations hastened the process

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Globalisation (5)

Foreign Telcos into India (2)

• AT&T, BT, US Sprint, etc. foreign Telcos are competing with about a dozen Indian companies in all varieties of telecom services.

• WTO & Globalisation have exposed Indian Telcos to foreign competition.

• Foreign Telcos largely serve India-based foreign enterprises (banks, consultancy, insurance, BPO/KPO, construction, Internet i/c SKYpe etc. enterprises

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Globalisation (6)Foreign Equipment

Manufacturers• Have a field day• Foreign equity can be 100%• They can go into SEZs• Nokia, Motorola, Ericsson, LG, CISCO,

IBM, Microsoft, Google, Intel, ZTE, HUAWI, have US $ 10 bln sales/annum

• Bharti Airtel alone placed contracts worth $ 2.0 bln with Ericsson and $ 900 mln with Nokia-Siemens Networks

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Globalisation (7)

Chief Consequences are (1)

• Global broadband connectivity and competition (local and foreign)

• Enables India as s/w, BPO, KPO services supplier to the world

• Killed local telecom network and devices manufacturing & R&D owned by Indians.

• Some Indian companies have become global companies (eg.VSNL, Bharti....)

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Globalisation (8)

Chief Consequences are (2)

• Foreign companies are buying & investing in Indian companies; selling their equity after appreciation; cashing the profit & quitting (eg.Hutch, AT&T-Nynex, US West...)

• Mergers & Acquisitions begun [Tata Tele +AT&T; Birla AT&T –Tata (BATATA)

• Vodafone acquired 67% equity from Hutch-Essar; now sells Vodafone brand

• Orange (France Telecom) bought the managed enterprise services division of India’s GTL

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Competition (1)

• Skewed, imperfect because P-Telcos had to compete against the incumbent which was a government Department; which was also licensor & regulator

• Under foreign company/government pressure & WTO– Statutory regulator created in 1997– Department’s telecoms were corporatised– Going through restructures to correct flaws & over a

period of six years [2001-07]– Regulators have become powerful & competition is

market-driven; full and fierce in every segment; it is global and beneficial to customers

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Competition (2)

• Competition is technology neutral; national/foreign company neutral

• Indirect subsidies (from rival pts) to SOEs (BSNL & MTNL) wound down

• Domestic competition prior to 1992 followed by foreign competition completely killed the state-owned Hindustan Cables Co & debilitated the Indian Telephone Industries Corporation (ITI). ITI kept ‘alive’ by reserving one-third of procurement by BSNL/MTNL to ITI but at the (lowest) price paid to private company.

•

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Competition (3)

• 2007 – Addl licences offered using spectrum released by Defence services

• 500 applications from about 50 companies [i/c Real Estate, Retail etc.) Entry Fee $375 mln

• An operator is allowed to acquire 10% (to be raised to 20%) in rival Telcos in the same licenced area. Telcos in the same licenced area

• GSM operators are given 15 MHZ/state • Telcos pay 1% of their revenue to

government for addl spectrum (2x5 MHZ)

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Competition (4)

• Dual-SIM Handsets (GSM-CDMA)• SPICE P-Telco (Brand Ambassador –

Priyanka Chopra, a Miss World Beauty) Rs.9849 [$240]

• Tata Indicom [Samsung Duo Rs.11,999 ($300)]

• Cell talk is US 1cent/mnt• ARPUs falling [$ 10.0 or less] even as

minutes of usage increase• Content creators emerge• Cable TVs & ISPs & Telcos now offer

VOIP & IPTV

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Constraints and burdens on competition (1)

• India is divided into 23 separate service areas; each requiring a separate licence (ET 27.8.2007)

• A call from one P-Telco’s subscriber, to a subscriber on another Telco’s network is subject to – A port (point of inter-connection) charge

• Roaming is app.10% of an operators earning;

• Interconnect accounts for 30% of call charge

• Roaming +Interconnect revenues are taxed

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Constraints and burdens on competition (2)

• Tax deducted at source (TDS) and is to be deposited within one week of the monthly inter-company billing

• Burdened with USF cess @5% service tax @ 10% in addition to revenue share as condition of licence

• The financial impositions amount to about 30% of the cost of service. if removed, demand will go up by (50 to 60)%

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THANK YOU:DHANYAWAD

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