‘Time Has Come for Set­ting up Net­work Op­er­at­ing Com­pa­nies’

Gov­ern­ments want more in­no­va­tion as well as higher taxes. They have to de­cide — should they milk this sec­tor or should they sup­port the sec­tor with var­i­ous forms of in­cen­tives to the sec­tor?

The Economic Times - - Telecom: The Wide Spectrum -

Sunil Bharti Mit­tal, chair­man of global tele­com body GSMA, said that his strat­egy for im­prov­ing the fi­nan­cial health and cred­i­bil­ity of the in­dus­try world­wide rests on four pil­lars — deep­en­ing ac­tive shar­ing by pool­ing spec­trum in a sep­a­rate com­pany run by a third party; more con­sol­i­da­tion; a change in the at­ti­tude of gov­ern­ments to­wards tele­com; and abol­ish­ing roam­ing charges while im­prov­ing trans­parency in billing. Mit­tal, chair­man of In­dia’s largest telco Bharti Air­tel, told Romit Guha that de­spite bil­lions of dol­lars in an­nual in­vest­ments, the in­dus­try was be­ing val­ued at lev­els sim­i­lar to util­ity com­pa­nies. Mit­tal is in Barcelona for the Mo­bile World Congress, where he de­liv­ered the key­note ad­dress. Edited ex­cerpts:

What is your vi­sion/strat­egy for the global tele­com in­dus­try? I will use four pil­lars to out­line my strat­egy – cred­i­bil­ity/rep­u­ta­tion, time for a netco (net­work com­pany), con­sol­i­da­tion and change in the at­ti­tude of gov­ern­ments to­wards tele­com. vely suf­fered.

What is go­ing wrong? First and fore­most is roam­ing, which is the big­gest bug­bear of this in­dus­try. In our (In­dia) case, we have do­mes­tic roam­ing as well but in­ter­na­tion­ally, peo­ple go out with the fear of even open­ing their phones. We, as an in­dus­try, should work on re­duc­ing in­ter­na­tional roam­ing (charges). Air­tel will do away with In­dia roam­ing from April 1. We will also make in­ter­na­tional roam­ing bills shock­free. The (In­dian) gov­ern­ment should get rid of the 22 cir­cles, just make it one In­dia, one net­work. The sec­ond part is that peo­ple all over the world feel that billing lacks trans­parency and clar­ity. This has to change, glob­ally. We are mov­ing to­wards bun­dled plans. So, sim­plic­ity of billing is needed. Third, con­tent also has a lot of charges. They must also be part of key bun­dles and what is not part of the bun­dle must be clearly spelled out. Dif­fer­ent charges for con­tent could be a prob­lem in In­dia, which has barred dis- crim­i­na­tory pric­ing of data. These are not global is­sues at all. Even­tu­ally, In­dia will have to align with the world. It (bar on dis­crim­i­na­tory pric­ing of data ser­vices) should go away.

How can RoCEs of tel­cos im­prove? Time has come for set­ting up net­work op­er­at­ing com­pa­nies (net­cos). The cur­rent sys­tem of build­ing net­works for each op­er­a­tor needs to be com­pletely dis­man­tled. Some progress has been made in tow­ers. The best progress has hap­pened in sub­sea ca­bles, al­most all of which are un­der con­sor­tium. But fi­bre is still far be­hind on the ground. In In­dia, Tata, Voda­fone, Jio, BSNL have their own and, on top of it, We, as an in­dus­try, should work on re­duc­ing in­ter­na­tional roam­ing (charges). Air­tel will do away with In­dia roam­ing from April1. Equally, we will also make in­ter­na­tional roam­ing bills shock free. The (In­dian) gov­ern­ment should get rid of the 22 cir­cles, just make it one In­dia, one net­work BharatNet is com­ing. Far too much wastage is hap­pen­ing and no won­der RoCEs are low. Every fi­bre must be built in a con­sor­tium.

Net­cos and mo­bile com­pa­nies should sep­a­rate them­selves. Spec­trum should be pooled in a netco. You build one mas­sive net­work from which ev­ery­one is served. Ben­e­fit is that it is not just lower in­vest­ment in capex but your spec­trum ef­fi­ciency rises sig­nif­i­cantly. The need for base sta­tions is halved im­me­di­ately. Ev­ery­body will not come to­gether, but my views are: they should... at least two must build, ide­ally three. So, I say time for a netco has come.

In this netco, fi­bre, spec­trum and tow­ers will all get com­bined? Pas­sive side can be sep­a­rate, the ac­tive side should be net­work. It could be like tow­ers where ev­ery­body comes and co-builds. An in­de­pen­dent third-party netco has to come and run it which has a clear method of charg­ing per MB per minute or what­ever. The job of that is of a util­ity. Then we (tel­cos) be­come dig­i­tal com­pa­nies, pro­vid­ing con­tent. We will be true mar­ket­ing com­pa­nies. In­dia doesn’t al­low it yet.

How will gov­ern­ment re­act given a lot of rev­enue comes from spec­trum? That is the fourth point. What do they (gov­ern­ments) want? A dig­i­tal na­tion or spec­trum auc­tion and money? Gov­ern­ments need to start look­ing at in­dus­try in a very dif­fer­ent way. You need mas­sive con­sol­i­da­tion in the sec­tor.

In 2008 when we (In­dia) took from five to 12 op­er­a­tors, the idea was that they will serve cus­tomers bet­ter. But in­vest­ments in net­work slowed. Video­con, MTS are gone. Air­cel and RCom will merge. Now, with Voda­fone and Idea, look­ing at just for In­dia, $25 bil­lion of hard in­vest­ments blown off in smoke. If we had three pri­vate sec­tor com­pa­nies with BSNL, solid, vi­able, strong bal­ance sheets, In­dia would have ac­cel­er­ated its roll­out, in­vested more in capex and con­sumers would have en­joyed the ben­e­fits of com­pe­ti­tion.

US has stopped Sprint and TMo­bile merger, which should have been en­cour­aged.

5G is com­ing in the next two-three years. You want strong bal­ance sheets. Gov­ern­ments and reg­u­la­tors have enough pow­ers in their hands to in­ter­vene should they see any ex­tra profit-mak­ing ten­den­cies of any of the op­er­a­tors. On one hand they (gov­ern­ment and reg­u­la­tor) want more in­no­va­tion, on the other, they want the high­est taxes. Gov­ern­ments should there­fore de­cide — should they milk this sec­tor or should they sup­port the sec­tor with var­i­ous forms of in­cen­tives?

Which of your pil­lars do you ex­pect will face the most chal­lenge? Netco will be one big chal­lenge be­cause gov­ern­ments will have to change all their poli­cies. Spec­trum shar­ing is now al­lowed, but even now there are many re­stric­tions. Such re­stric­tions, which are ex­clu­sive to In­dia, must go. ( The writer is in Barcelona on a trip spon­sored by Oppo)


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