1 May 2009

Picture of contrast in India’s telecoms market

India is a land of contrast, and it seems that its telecommunications industry reflects this. In the past week or so, news coming from India have given very different pictures of the industry: on the one hand, strong 2008 results from the market’s operators, while on the other hand, regulatory uncertainty still prevails.
The results for the last quarter of 2008 published this week show a healthy situation. Mobile subscription growth is still strong, boosted by operators expanding into new territories as well as the launch of new ones. Operators’ financial performances are healthy, with Bharti Airtel and Reliance Communications showing EBITDA growth. The market is still attracting foreign investment, as Etisalat joined in with a stake in new operator Swan Telecom. Above all, operators are still investing in their networks and services, in order to be ready for the increased competition on the market (only today, Bharti and Alcatel-Lucent announced a network management over the operator’s fixed-line and broadband business). In a context of global economic uncertainty, India seems to be a great example of the fact that emerging markets are the best places to do business at the moment.
However, the market is still experiencing drawbacks, a major one being its relative uncertain regulatory situation. New decisions take a very long time to be made, due to the constant bouncing back and forth between regulator TRAI and the government’s Department of Telecommunications. 3G licences took years to be awarded, with yet further delays earlier this year. Particularly telling was a debate among emerging market operators in February at Mobile World Congress: while all operators where discussing their great plans for mobile broadband, the Indian operator on the panel explained he had to make do with 2.5G networks while awaiting the regulator’s decision. Similarly, the situation with MVNOs took years to be sorted, with Virgin Mobile launching while arguing that it was only a branded offer, in order to bypass the regulatory uncertainty.
As reported in the last week, one of the interesting ‘up-and-coming’ new operators, Loop Telecom, may be another victim of regulatory challenges: its license may be under threat following an enquiry by the Ministry of Corporate Affairs over its indirect ownership by Essar Group. As Essar already owns a stake in mobile operator Vodafone-Essar, its link with Loop means that the new company may be in breach of its Universal Access Service License (UASL) conditions, and risk losing it altogether.
An interesting market then, that I’ll be happy to explore further at the India & South Asia Com event in Mumbai next week. A number of senior representatives of the abovementioned companies will be there, and I’ll be particularly attentive to the contributions of the Department of Telecommunications representatives. More news to come!