EXPECTATIONS 2014
Industry recommendations for the new Government
Voice & Data: The next phase of growth in telecom is said to be about data. And here is MTS, stuck with only 9 circles.
Dmitry Shukov: In my point of view, this spectrum story is one of the most interesting for the Indian telecom industry. But if we have to discuss the 800 MHz auction, operators have three queries for the Indian telecom authorities. First is the reserve price likely to come up for 800 MHz. Second, the likely dates of auction; and third but equally important, are some of the other related issues and policies like spectrum trading, sharing and harmonization.
According to the Supreme Court’s decision, all spectrum in 800 MHz and 900 MHz should have been auctioned by February 2014. But unfortunately, the 800Mhz spectrum auction has been withheld for reasons unknown. We are all keen on its status, because we believe that if the auction is done then it will clear the grey areas with regards to deploying of our network, our business and most importantly, our network would be modernized for the next generation of mobile communication. However, it is beyond our understanding that why the auction of the 800MHz spectrum is delayed. We have made representations to the DoT and the TRAI, and all information and clarifications from our side have been provided. It is a matter of big concern for us.
Voice & Data: How long are you ready to live with this uncertainty? Your business will almost come to a halt.
Dmitry Shukov: We cannot recommend the government to do specific things, but I hope that the decision of the Supreme Court is obligatory on Indian telecom authorities and action is taken at the earliest. Let me also add that our business has not come to a halt. In fact, we have recently launched new Smartphones. This is a regulatory battle which I hope will be resolved, but when it comes to the market, we still continue to fight and do better. In Q3 2013, we launched our 3GPLUS network, and now our data service is one of the most competitive in the market and we also see our data revenues going up significantly. Almost 35% of our revenue now comes from non-voice elements.
Voice & Data: India and Russia have old business ties, and the leadership of the two countries has worked closely on many areas. In telecom, policy makers from Russia have been in conversation with their counterparts here, what is the sense you get from them about the support you are likely to get ?
Dmitry Shukov: I am not a politician, I am a business manager, so I really do not know what is happening on that front. But I can tell you that the Russian Federation has over 17% stake in our company, so our relationship cannot be only about business. It is a very sensitive issue, but our stake holders are interested about working in India. On the regulatory front we have explained to them all the tensions and uncertainty.
In my view they have concerns, and I think it will be discussed at the top levels. Russian Federation’s stake in SSTL is more than $600 million, and that is significant. But our engagement with the regulatory authorities and government agencies is at the company level. On issues like reserve price of spectrum, we have submitted all our papers to the DoT and TRAI, and it is on the principle of level playing field. For instance for 900 and 1800 MHz, there were recommendations from us, the DoT and TRAI considered it positively
“I hope that the decision of the Supreme Court is obligatory on Indian telecom authorities and required action is taken at the earliest.”
and reduced the price. Similarly, we are now waiting for the pricing of 800 MHz. And we are certainly very hopeful. Maybe some people know what will be the reserve price and when will it be announced, but I don’t know.
Voice & Data: You have taken up the challenge to run MTS in India, and also drive growth and penetration ? What are your views about the potential of Indian market ?
Dmitry Shukov: I see great potential and capacity in India when it comes to growth in the IT and Telecom sector mainly because of its huge population, good literacy levels, especially knowledge of English which is generally treated as a second language here. All these factors make India a big market with a very high growth potential. Moreover, taking note of the uptake of internet services in the country, we see a lot of hope for the telecom sector to prosper. I think in the next couple of years, internet penetration will more than double up.
But for all this to happen, there should be regulatory clarity and predictability. Any business plan, especially for large telecom investments, is made with a 1015 year perspective. If you start tweaking the rules of the game every now and then it is like shifting goalposts. But I still believe that telecom is a very lucrative business to be in for investors.
Voice & Data: You are primarily banking on data, internet, broadband for growth because voice services penetration as well as revenues has already peaked out.
Dmitry Shukov: Yes that is correct, but voice is equally important for us. As per our strategy, we will harvest voice. Voice segment has been stable our strategy is to stay focused on data.
Voice & Data: You have often said that ‘We will keep on harvesting on voice’. Can you please elaborate?
Dmitry Shukov: As you would know, compared to GSM subscribers, we have a very loyal customer base because our (CDMA) voice quality is very good, very stable. What we are focusing on is ensuring stable voice, and a lot of other applications and features. We have three spectrum carriers. One we exclusively devote to Voice, hence the quality is superior. One is for data, and one will be for services. That is how we will be able to harvest our voice users, by giving them superior quality voice experience, and giving them services beyond voice.
Voice & Data: So how is your business structured now ?
Dmitry Shukov: In fact we have three principle revenue lines now. First is the voice business, then the second is the dongle or the data business and thirdly our Smartphone business line. Our penetration into Smartphone caters to both GSM and CDMA. We have recently rolled out Smartphones in the price range of Rs. 6000 to Rs. 8000. In fact in Russia, MTS is amongst the top three players in Smartphone market, including tablets and feature phones. We also have tie-ups with Indian smartphones vendors like Micromax.
Voice & Data: It was once said that India will be the big market for CDMA technology. Reliance came, followed by the Tatas. Initially the CDMA experience for Indian customers was good, but with time there was no difference between CDMA and GSM. And gradually, CDMA started losing its charm. So what different will MTS do with CDMA to rekindle its presence back?
Dmitry Shukov: Speaking about CDMA, what you are saying was true in the past. But the current scenario is very different and in my point of view, data on CDMA is an extremely amazing experience. If we could somehow take in 800 Mhz spectrum
for data, I believe it would give a better penetration especially in congested areas. I feel that having a separate carrier for voice and data would ensure a flawless experience. My point of view is that data services on CDMA are the best in the market today.
By the way, China Mobile has come up as a big CDMA operator and that has given a huge boost to the overall CDMA ecosystem and players like MTS are also leveraging that. Going forward, LTE will be the future. We already have a Unified License, and we can launch the service if we have the enough spectrum. We are interested in additional spectrum as it is critical for out future development.
Voice & Data: In 2014 what are those key areas on which MTS would be working?
Dmitry Shukov: Our number one target is to break-even by Q1 2015. The second target to continue our growth in data and smartphone business lines. The third target for me is to continue to harvest voice business. Apart from these, we have high hopes from the spectrum auction of 800MHz. At present we have 3.75 MHz and we have put it on record that we need a minimum of 5MHz for an efficient operations and new applications. Also, tomorrow if we want to migrate to LTE, we need to have adequate spectrum. Everything will fall into place only if the spectrum auction is decided soon. Then we can look at things like harmonization of spectrum, spectrum sharing etc.
“Our financial health is very good and we are under no funding pressure. I am not in a position to comment but we are open to discussions.”
Voice & Data: Already 35% of your revenue comes from data services, which is much more that most other traditional telecom operators ? How critical would it be building the ecosystem for taking the data services up?
Dmitry Shukov: I agree that ecosystem will play a critical role in how data market grows and revenues increase. Development of ecosystem for data services depends on development of operators, and vice versa, because consumption is absolutely dependent on operational activities. For instance, if an operator brings increases capacity, increases coverage, launches new services, there is an immediate reaction, and customers want new devices with features, applications to use those new services. I think this is not a big area of concern and operators and partners are working very closely.
Voice & Data: Within data and besides voice what are the areas in which there are a lot of opportunities and growth that MTS is considering?
Dmitry Shukov: Yes, we are looking at getting into newer segments. For example we are looking to get into home surveillance and security markets. Such solutions have the potential to become one of the biggest growth drivers of the data market, and we would like to align our businesses with such opportunities.
Voice & Data: Talking about quality of service what has been your experience in the MNP ?
Dmitry Shukov: To be honest it has been a trade-off for us. We have lost customers but at the same time have gained too. And the interesting part is that we have gained from both the GSM and CDMA. What is also very important to note is that most of our gains from the GSM side were heavy users of data. This goes to prove that data users find CDMA better.
Voice & Data: Is there any possibility of MTS also being open to M&As. You are a data company, and the growth journey has just begun.
Dmitry Shukov: MTS is part of a very large conglomerate. Our financial health is very good and we are under no funding pressure. But I am not in a position to comment if we are negotiating or not. But we are open to discussions for the right opportunity.
Voice & Data: What is your assessment of the telecom leadership in India at the policy making level, at the regulatory level ? Do you think they are people with a vision, or are they just somehow doing things on a piece meal basis, without a long term goal.
Dmitry Shukov: In my view, India is a great country for the telecom industry. However I also do believe that India needs to remove some of the roadblocks when one takes a long term view specific to regulatory policies. Once, some of the regulatory and policy issues are sorted out, it will be the end customers who will benefit the most. For example, services like M-commerce, M-health, Meducation, etc, can do wonders in terms of adding to the quality of life in India.
Voice & Data: You have come to India only recently. How has your experience been so far working in India?
Dmitry Shukov: Brilliant. For an operational manager like myself I would say India is one of the best places to develop oneself. In India, one sees and works with top notch talent. As a team, it is also very exciting to look at multiple solutions to the same operational problem. In-addition, there are lots of opportunities, new ideas and huge competition which is good for enhancing operational efficiency. In my point of view, after India you can work and manage anywhere.