Yes, I have been away for quite sometime now. But, for the first time in years, I am finally feeling positive about the telecom sector. Over the next few months, the sector should be back in the reckoning. There are multiple reasons to be positive about the sector.
After almost 18 months of chaos post the cancellation of 122 licences by the Supreme Court in February 2012, the industry is in a position to grow once again. That is because many hard decisions were taken by operators. First operators, be it big or small; new or incumbents have gone about slashing costs to the bone. That has started showing results.
Second, following the directive of the Department of Telecommunications (DoT), operators have disconnected subscribers who did use their connections for 60 days at a stretch. As a result, the mobile subscriber base has fallen by 33 million in the last 16 months to 870 million. This has resulted in an upswing in average revenues per user for almost all operators.
Third, three operators pulled the plug on their Indian operations. Then three others who got spectrum decided to bid only for a select few circles during the 2011/2012 spectrum auctions. That allowed the remaining operators to first go ahead a reduce many of the free offers. Then some of the bigger operators boldly went ahead and hiked tariffs--something that was inconceivable till a few months ago. That improved the bottomline of operators.
Four, as operators reduced their presence across circles they went ahead and cut down on jobs, many of which are unlikely to be replaced.
Five, as operators started to see voice revenues stagnate, the rush is on to get a slice of the data market, through 3G and broadband wireless access services. While the incumbent operators are still trying to get their data act in place, Sistema Shyam TeleServices today gets 35% of its revenues from data.
While all this looks hunky dory there are yet many issues that need to be sorted out. I'll tackle that in the next post.
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