Bell bottoms, long hair and telecom
— Arun Seth
Having been engaged in telecoms since the mid 80’s with opening of telephones and EPABX’s to the 90’s of mobile cellular telephony starting with 1g of MOTOROLA in 1993, when there were just 500 connections in Delhi (and I had access to one) to today’s 4/5g and true convergence. I can’t help but compare this industry with those bell bottoms and long hair of the crazy 70’s when we were students—what goes up goes down and whoops it’s back again!
I recall the trepidation at BT HQ in 1995 when we bought into Airtel (it was just a simple one city license with less than 100k or so customers btw) and we eventually acquired 45% of the company. That was soon after saying a no bid (thankfully) to the crazy bidding in ‘95 for fixed and circle licenses that led to the first of many crisis of making ourselves unviable with fixed fee license fees in the thousands of crore. I recall swearing on our hearts that we in BT India would not venture outside the three metros—in fact called it the Golden Triangle in the investment paper!
Exactly 20 years ago the industry had pronounced itself dead in the waters like most of it is pronouncing today. Licenses to 34 circles were given to an overenthusiastic industry with their mandated foreign partners over bidding to the extent of lakhs of crores of license fees— one company had bid even Rs 85,000 crore. Revenues never materialized to the extent planned and the industry was looking at an abyss of death and gloom. Even in
Airtel where BT had a stake the license fee was some Rs 6,000 per annum per subscriber—an unbelievingly large sum even in those days.
BT itself forgot the wisdom of its decision of not over bidding in India with its disastrous 3G license Bids in UK and Europe leading to its near death, but has managed to survive today, albeit in a weaker form of what it was but the key is its surviving! I recall BT was close to increasing its stake in Airtel in 2001 by consolidating into the holding co that was finally taken to IPO finally, but we did a 180 degree turn around with a looming bankruptcy and became a seller for cash from a buyer and lost a golden opportunity to create value - that stake went to Singtel!
Fast forward to the decision of the NDA govt of Atal Behari Vajpayee that time in 1999 to move to a revenue share formula with its NTP 99 that enabled the industry to survive and grow to what it is today. There was no RTI or CAG or pervasive internet and social media to raise a hue and cry about how the govt was “writing off” a bid that was voluntarily given by the Industry for a share of future unknown revenues! I would leave it to the reader to imagine that scenario in their own fertile mind if it were to happen today.
In the intervening 20 years mobile penetration has grown from a tele-density of just three in 1999 to a staggering 95 in 2019, with prices dropping exponentially making
India the lowest cost telecoms globally. So the vision of 99 did deliver what it promised in number of users and the fundamental premise of 1% investment in telecoms leads to 1.5 to 2% increase in GDP as you can see the situation where today the E-commerce giants get majority sales from tier 2 and 3 towns. This could not have happened without ubiquitous telecom.
But in the intervening period, like the drain pipe trousers of the 1960s going to bell bottoms, the govt also added a good number of additional players leading to the Supreme Court decisions to cancel licenses allotted and thankfully the number of players reduced, but with a lot of pain all around with bankers getting singed with bad debts for example and international players exiting and the pain to the people in telecoms being laid off. The multiplicity of licenses led to highly inefficient use of scarce spectrum as all operators had sub-optimal quantity of spectrum that meant higher opex costs.
A collateral damage was possibly to the environment as a small spectrum allotment per telco meant a large no of towers to serve the same number of users and a degradation of service. A wise veteran was led to say the telecom industry spreads pain democratically, with not even the PM being spared and with no regard to caste and creed of income. but the only certainty is that the legal fraternity will get a huge revenue boost.
What started as a self-goal by the industry before 1999 with high prices bids leading to an unviable industry to very high growth to a massive consolidation through extreme competition and legal decisions will hopefully play out to an Industry with higher tariffs as has happened just weeks ago but with far better service quality with a larger spectrum allotment and just three players. The Indian consumer deserves this as great telecoms will spur GDP growth in the smaller towns and enable India to compete globally. I only hope that something similar can happen to the woeful situation in air quality and water availability too.
India is unique that it’s the only country where the original incumbent BSNL has been reduced to a bystander. That’s a major opportunity lost—at one time BSNL was valued over a 100k crore. It’s still not too late in my opinion to revive it especially with the long awaited VRS being closed. We at BT want trough a similar situation but pragmatic policies allowed it to flourish including reducing form 250k people to sub 100k and inducting professional management and flexibility to compete. They have the opportunity to leapfrog to the latest tech which customers want and more important a network in rural areas that is needed but needs open wholesale policies and thinking of its competition as customers for its wholesale business.