end of ultra-competition gives telcos room to test higher voice prices 
but data could pose a new war turf

Before we set out to see what 2013 holds in store for the telecom industry, let us first look at the some of the defining events in 2012, which in turn would also significantly determine the course of the tech trends in the ensuing year.

As far as India is concerned, CY2012 can best be described as a roller coaster year for the telecom industry, which was first massively hit by cancellation of 122 licenses across eight operators, to be later followed by exits-led consolidation in the industry. Players like Etisalat and STel, who had invested in licenses but not so much in network rollouts, considered it better to wind up their operations post the apex-court ruling. Those like Uninor and Sistema that had made significant investments in subscriber acquisitions too, wanted to stay put. That the cancellations led to fallout between the two Uninor partners—Unitech and Telenor—is also another matter.

However, when it came to participating in a re-auction of 2G airwaves, MTS (Sistema) declined citing that the 3G-linked pricing of 2G bands was too high. Telewings, the rechristened Uninor, participated but in select circles. Other operators too participated selectively, with none bidding for the ‘prized’ circles of Mumbai and Delhi. The 2G auction turned out to be a damp squib.

Ironic though it may seem, the failed 2G auction would ultimately prove to be a positive turning point for the industry—one where possibly a few golden gooses were killed but it also got clear that there would be no golden eggs for ever if any more gooses were killed.

Hopefully, the industry has also realized that it fell too badly for the 3G hype and overbid excessively for acquiring spectrum during the 2010 3G auctions—an act that had the operators reeling under the burden of debt in a world economy debilitated by the economic crisis of 2008.

The folly was much of a surprise, given that India had a ready precedence to learn from Europe, where the telecom industry had suffered in a similar way after the players made high bids for 3G airwaves in 2000, though other economic conditions also contributed to the situation so well known as the “telecom crash” of 2001.

Are telcos done with paying most of the price of that folly? Perhaps not, as far as the actual debt is concerned. However, the days of bloodbath may be mostly over for the industry and the surviving players could breathe easier in 2013.

The days of valuations based on subscriber additions have been over for some time now, and telcos would benefit from systematically shedding the inactive subscription flab that they have carried for years.

While we did see that started to happen towards the later part of 2012, even by the bigger telcos, much more would need to be done in the direction. According to an earlier BusinessandMarket estimate, up to 180 million inactive subscriptions would be available for deletion, particularly after the free-roaming regime kicks in. Even without the free-roaming led redundancy in subscriptions, an estimated 100 million subscriptions were available for scrubbing around October 2012.

As the focus shifts from achieving mere voice tele-density to broadband density, with substantial expectations from the 3G and 3.75G networks, 2013 will be a year that would give telcos the opportunity to improve their average revenues per user (ARPUs).

The ARPU improvements would be coming in two ways: one, thanks to the lessened pressure on increasing subscription numbers, operators would be able to safely scrub the inactive subscriptions. Such deletions would reflect in instant increase in the calculated ARPUs.

Another opportunity for improving ARPU would come by way of making periodic incremental increases in voice tariffs. In fact, some of that has already been done by a few operators and we will see more of that happen over the year and beyond. Operators will be able to effect this measure now because the industry is past the phase of ultra-competition when subscribers could easily be lured away by lower tariffs around.

There will be heightened activities in the LTE segment, with at least three significant players already in sight—Reliance Infotel, Bharti Airtel and Aircel—and those like Videocon expressing their intents. The actual rollouts, however, are unlikely to match up with the buzz, which will be more of a marketing-led buildup.

There, however, is a risk of the LTE segment getting somewhat crowded as a liberalized-spectrum regime sets in. Videocon has already announced its intent to use the 1,800-MHz frequencies it won in the November 2012 bid to offer LTE services. It may not be surprising to see more such announcements, and if so, that could diminish the attractiveness of the segment to an extent.

(The article was first published in Light Reading India http://www.lightreading.in/document.asp?doc_id=228292&site=lrindia&)
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