OWN ASSESSMENT : VOIP
VOIP is not a new phenomenon. Having been around for a while, it has been unable to replace the landline, primarily because of Quality of Service (QOS) issues. Coupled with the fact that a VOIP provider would have to be an Internet Service Provider (ISP) and pay the various regulatory fees to include interconnect charges, it doesn’t seem to offer any distinct advantage over the humble land line. If there is any tariff arbitrage available, it remains to be seen. In any case VOIP cannot offer an alternative to mobile telephony. Also telephony services, by going mobile, are moving up the value claim and converging the Internet with it. In that sense, VOIP is a retrograde step. Last but not the least, let us not forget the low broadband penetration in India, which stands at a total of only 4.57 Million as on Jun 2008 (Compare this to the over 9 Million mobile connections added every month in the country!).
3G : DEMYSTIFIED
You know the scariest place to be in ? It’s a Telecom Regulatory Authority of India (TRAI) briefing room. The number and kinds of adjectives and terminologies flying around are mind boggling! MVNO, ISP, UASL......the list goes on! One such issue which bogs the old cranium is 3G. Let us try to wipe away some of the mist here.
3G in a broad sense permits a telecom services provider to launch the next step in integration between voice and data, towards achieving convergence. Hence theoretically a player can have a 3G license without 2G (the current) services. However that would leave the existing 2G customers out of the loop, forcing them to upgrade their handsets. As the radio frequency (RF) for 2G & 3G is different, switching from 2G to 3G i.e. transfer of signal etc and change of handsets will escalate the price further. Critical will be deployment of supporting network infrastructure i.e. base stations and transmission networks and acceptance of 3G-based mobile devices. Spectrum is a costly entity, which coupled with the cost of deploying infrastructure, will raise the bar for entry.
Hence the ideal proposition would be for an existing 2G operator to shell out an initial fee of Rs 1650Cr for a Unified Access Service License (UASL) for 3G and for that kind of money the operator will get only 5 MHz of spectrum. 3G is currently functional in over 25 countries with countries like Korea and Japan attempting a 3.5G before migrating to 4G.
MERGERS AND ACQUISITIONS (M&A)
GOVT/REGULATORY ISSUES IN M&A
Telecom licencees have to seek prior govt approval for M&A.
No M&A is allowed if the no of service providers in a circle are less than four consequent upon M&A.
Also all dues of the merged entity has to be cleared before merger.
The combined market share of merged entity should not be greater than 40% either in terms of subscriber base separately for wireless as well as wireline subscriber base or adjusted gross revenue (AGR).
Merger of licence is restricted to same service area. Excess spectrum is to be returned to govt, if any. Annual licence fee and spectrum charges are to be paid as a percentage of ADR.
10% or more equity holding by any indiviual/company in more than one licence in same service area not allowed.
Permission of merger is given only after completion of three yrs from effective date of licence.
Pace of growth is also restricted by delay in allotment of spectrum. M&A is likely to be the norm since permissible FDI in telecom is 74%.Less foreign players are likely to bid directly due to :
-Initial fee of Rs 1650 cr for UASL with no spectrum in 2G
-3G operators can not acquire 2G operators before 3 yrs period
-Spectrum not likely to be given beyond 5 MHz
-Administrative issues like No of blocks / circle, timing of auction rules on transfer and sharing of spectrum. However these issues are likely to be resolved in due time