Needed, more of those revolutions
SUNIL BHARTI MITTAL
India’s telecom growth, marked by a subscriber growth from 14.8 million in 1997 to over 225 million now, represents more than a ‘connectivity revolution’
Any reference to India’s telecommunications revolution does take our minds back to the 1980s when we had to wait for years for a fixed-line phone. One had to tap all his networking skills in the bureaucratic and political circles to secure one out of turn. Today, as more than seven million telecom subscribers enter the networks every month, a long wait for a phone connection appears to be a distant memory. Mobile phones have almost become ubiquitous. To me, this expl
osive growth in connectivity also symbolises India’s transformation from an inward-looking, hesitant nation to a confident, resurgent global economic power.
Under the socialistic pattern of development that the country adopted after Independence, the state had assumed an all-encompassing role. It not only decided who should run what business but itself entered into all conceivable areas of business. The telecom services, in particular, remained a government monopoly till 1995, when private players made their first entry into the sector. Even an area like telephone handset manufacturing was opened to private players only as late as the 1980s. Incidentally, this early tilt towards liberalisation also provided me my first opportunity to enter telecom in 1986 with India’s first electronic push-button telephone.
Under government monopoly, telecom growth was hampered by an elitist bias. The telephone was considered to be a luxury and obviously was treated as the preserve of the rich. Tariffs remained exorbitantly high. No wonder that the subscriber base, which stood at 80,000 in 1948, had painstakingly trudged to a mere five million by 1991. Since the sector was entirely driven by government allocation, it invariably suffered from constraints of capital, which affected expansion in coverage.
The phenomenal change that we witness today ideally needs to be seen as a part of the wider process of change that was initiated in the early 1990s, when many areas were opened to private entrepreneurs. In telecom, mobile telephony was the first to taste the entry of private players. Legal wrangles and play of vested interests did slow down the rollout in the early phase. Finally, in 1995, the nation saw the launch of mobile telephony. But nobody had anticipated this new technology to prove to be such a powerful trigger for something as substantial as today’s revolution.
Looking back, I must admit, the early days were really difficult for mobile telephony. Operators were clearly struggling with high tariffs and slow subscriber growth. The sluggishness could be gauged from the fact that it took three years for India’s mobile subscriber base to cross the million mark in 1998. The early phase saw a number of private players entering the fray. But in the intense competition that followed, many lost out. Out of the 25 early operators, only three survive today. Most of them sold out, a few of them even collapsed, and some of them got merged to form bigger players in the marketplace.
Competition ensured that operators dropped rates progressively. They dropped from a level of about $2 a minute on long distance to less than 20 cents a minute, and from 20 cents a minute on the mobile to less than 2 cents a minute. Today Indian telecom has by far the lowest tariffs that have ever been witnessed anywhere in the world. Operators too started to innovate with their tariff plans. Payment plans like Life Time Prepaid have managed to rope in the not-so-well-off consumers into the network. The prices of handsets too have fallen significantly, thereby bringing down the entry cost for customers every passing day. This is clearly a study in contrast to the pre-liberalisation days, when not only tariffs were higher but the entry cost for a fixed-line phone was exorbitant.
It is not just low tariffs that have led to explosive growth in the sector. Mobile phones today have assumed a much-diversified role in our lives. A service like SMS has added a new dimension to the mobile phone. Value Added Services like ring back tones and music downloads have virtually made the mobile an entertainment device. It has turned out to be a much more attractive gadget as compared to the fixed-line, voice-only phones of the earlier days.
— PHOTO: PARTH SANYAL
INCREASING CONNECTIVITY: The C-DOT experiment was highly successful in connecting the corners of India with one another. The revolution in wireless telephony followed.
Low tariff is invariably a double-edged sword. While it expands markets exponentially, it also presents a challenge of survival for the marketers. Clearly, it is a tribute to the industry that operators have managed to remain profitable in this low-tariff regime by being innovative with their business models.
Here is an example how we at Bharti Airtel innovated a business model to sustain this low tariff. For the first time in the history of the telecom industry, Bharti did some major outsourcing deals. The company put out its entire IT piece in the hands of IBM. Right from the desktop or laptop on the CEO’s desk to the most complex piece of IT, it was given out to IBM in one swoop. It was a $750-million contract for a period of eight years. Bharti gave its networks too, which were built by Ericsson and Nokia, back to them to manage. More important, the company told them it would not be paying for the hardware. Rather it would pay for the traffic that comes out of these networks. It was a unique and unusual model, laden with risk but with the potential to open up new frontiers in network management.
Progressive liberalisation of the Foreign Direct Investment regime has played an important role in the rapid expansion of the sector. This has effectively meant that the operators have managed to raise capital to fund their expansion plans. This was in sharp contrast to the situation when the government was the exclusive operator and the government kitty was the only source of long-term capital.
Over the last few years, mobile operators have achieved a phenomenal expansion of their networks. Larger geographic coverage has meant that more people have entered the networks, enjoying lower tariffs. This has happened because of aggressive investments by operators in telecom infrastructure. The new government policy on infrastructure- sharing too is lending a helping hand in this. As we move into the future, infrastructure- sharing is progressively going to bring down expansion costs for the operators.
India’s phenomenal telecom growth represents more than a mere ‘connectivity revolution.’ It points to a few things on the larger canvas. Contrary to a rather widespread perception, economic liberalisation does benefit the common man. How else can you explain a subscriber growth from 14.8 million in 1997 to over 225 million now? Two, given the opportunity Indian businesses can develop their own business models that suit the country’s unique market reality. They can not only set global benchmarks but achieve global scale as well. Three, a large part of India’s consuming power has remained untapped till date and it is only a matter of time before other sectors too find ways to benefit from this consuming power. As the country celebrates the 60th anniversary of Independence, I expect Indian entrepreneurs to usher in more revolutions like telecom to make life better for the common man.
Sunil Bharti Mittal is the chairman and managing director of the Bharti Group of Industries.
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