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Telecom: India Vs India - Views on News from Equitymaster
 
 
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  • Dec 19, 2006

    Telecom: India Vs India

    As per the agenda outlined by the Union Communication and IT Ministry in May 2006, the telecom sector had been given a guiding framework, in terms of point wise targets, to ensure its planned development and the percolation of accruing benefits across all strata of the society. The agenda revolves around telecom network expansion, bridging the urban-rural divide, broadband coverage, infrastructure sharing and 3G mobile services to name a few. Let us understand the targets set by the ministry and the actual achievement on ground.

    I. Network expansion

    Targets

    • 250 m connections (mobile plus fixed lines) by the end of 2007; 500 m by 2010.

    • Provision of mobile coverage to 85% of the country's geographical area by the end of 2007.

    • 45 MHz of additional spectrum from Defence to be made available for growth of mobile services by the beginning of 2007.

    Achievements

    • At the end of November 2006, the total subscriber base in the country (including GSM & CDMA mobile and fixed line) stood at nearly 200 m. Out of this, the GSM base alone accounted for 100 m, or a 50% share. As such, the stated target of 250 m connections by the end of 2007, which includes 200 m on the mobile front, does not seem improbable. This is considering that achievement of the same requires an average monthly addition of nearly 6 m subscribers, something that has been achieved over the past few months.

    • The project of providing mobile coverage to 85% of the country's geographical area by 2007 is rather ambitious. As per the ministry, the Universal Services Obligation Fund (USO) is undertaking a mobile service project to cover 2.5 lac villages across 27 states. The proposed project is to focus only on those rural or remote areas where fixed or wireless mobile services are not being provided currently. Currently, on an average, mobile operators cover only 25% of the geographical area.

    • The project for release of 45 MHz spectrum from Defence for growth of mobile services has been launched. This additional spectrum is likely to be made available by the beginning of 2007. The ministry has already outlined the scheme of sharing of infrastructure by mobile operators (already launched in Delhi and Mumbai).

    II. Rural telephony

    Targets

    • One phone per three rural households by the year 2007 (about 5 crore rural connections) and one phone per two rural households by 2010 (about 8 crore rural connections)

    • Mobile access to all villages with population more than 5,000 by the year 2006 and more than 1,000 by the year 2007

    Achievements

    • Under the Bharat Nirman, BSNL was awarded the work of providing of Village Public Telephones (VPT) to 66,822 uncovered villages by November 2007, with support from the Universal Service Obligation fund. As of 30 April 2006,there were 25,000 VPTs provided with the target of completing the remaining in 2006 itself.

    • To enhance rural mobile coverage and have greater rural penetration, the government has devised schemes for sharing of infrastructure, which are in the stages of finalisation.

    • The government has made change to its earlier plan of providing mobile access to villages with a population of more than 100 by 2007. As per the revision it will now provide mobile access to villages with a population of more than 2,000, by 2007, which means villages having population between 1,000 and 2,000 will have to wait before technology can reach them.

    • To speed up the process rural penetration, handsets with price tag of as low as Rs 1,700 have bee launched, with future plans to launch handsets priced at Rs 1,000.

    III. Broadband

    Targets

    • Broadband coverage for all secondary and higher secondary schools by 2007

    • Broadband coverage of all public health care centres by 2007

    • Broadband coverage for all Grampanchayats by 2010

    Achievements
    While addition to the mobile subscriber base has created higher benchmarks in the past, it is the broadband subscriber base that continues to be an ailing factor. As was pointed out in an earlier article, we have underperformed on this front by a large margin in the past year.

    As India increasingly moves into the digital space, the Internet is set to play an increasingly important role in the growth of the economy, by way of high-speed access to communication (data and voice). The strong growth in the size of e-commerce (business done through the Internet medium) market over the past few years is a reason compelling enough for the government to sit up and take serious note of this issue. As per the TRAI, the e-commerce market in India, which stood at a size of Rs 1.3 bn in 2002-03, is estimated to grow to Rs 23 bn by the end of 2006-07, representing a compounded annual growth of 105%. With further strong growth expected in this market in the future, there can be no denying that the current slow pace of Internet penetration in the country will act as a major roadblock for this growth.

    IV. Manufacturing R&D

    Targets

    Achievements

    • The total number of SEZs approved so far in India is 164. Of these, Nokia's SEZ in Sriperumbudur, Chennai is already functional and two more telecom specific SEZs are in advance stages of approval.

    • Global telecom equipment and technology majors like Flextronics, Motorola, Foxconn and Aspocomn have decided to set up their manufacturing bases with an investment of about US$ 650 m.

    • Revival of Indian Telephone Industries (ITI) started with the plan of Rs 10.2 bn. GSM equipment manufacturing started at ITI plants at Mankapur and Rae Bareli with technology partnership of Alcatel, France.

    • Telecom manufacturing sector expected to attract about US$ 1.5-2 bn over the next few years. Telecom services sector also expected to attract US$ 2-3 bn as FDI during this period.

    Conclusion
    Unlike its interventions in a host of other industries, the government has made sincere efforts to keep the Indian telecom sector in the high growth trajectory. Some positives are likely to emanate from its efforts. For instance, going forward, as telecom service providers add a greater number of subscribers to their networks, there will be an increasing need for telecom equipments. The government's initiatives of promoting the setting up of such facilities within the country will thus be of great benefit to the industry. Also, the efforts to bring down prices of handsets should see the teledensity rise significantly faster, especially in the rural areas where only 2% of the population has access to mobile connectivity. There is also a need to move towards a regime with lower taxes for the sector. Looking at the significant role that telecommunication sector has to play in the overall development of the economy, these initiatives will go towards giving a further boost to the growth prospects of the sector.

     

     

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