“Ours is a tough industry”

B&E: You’re celebrating 100 million subscribers. What’s the status quo?

SM: We’re currently in the 15th year of operation and although Airtel has managed to be profitable, we’re yet to be cash flow positive. We recently announced the maiden dividend of the company after 15 years. Our stakeholders were actually looking at waiting for another year for us to turn cash flow positive. However, due to the de-merger of our private company, we had the headroom this year and hence were able to announce a dividend. One has to remember that Airtel has invested Rs.700 billion in setting up hard infrastructure. Infrastructure alone takes Rs.200 billion per year. It should always be remembered that this is a tough industry and one needs to keep on investing. This way, profitability is always measured along with investments.

B&E: What then would be the future growth drivers for Airtel?

SM: Well, we’re hoping that 3G would be available soon, which will lead to better data services. Music-based services are already quite popular and we hope that their popularity will continue to increase in future.

B&E: Are you in the favour of auctioning of the spectrum, or should it be allocated on the basis of subscribers?

SM: Spectrum is an issue that concerns all mobile operators in the country. We’re absolutely aligned to the government process even if it is the auctioning of licenses. All we want is a stable regime with a single process. The practice of allocating licenses on the basis of number of subscribers is not followed anywhere else in the world. We already have the lowest spectrum than anyone else in the world and packing more and more customers is becoming increasingly difficult. We have two of the largest telecom companies of the world in India and they too would endorse this point that as we go further, it would be essential to have more spectrum.

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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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4G Calling: Are we Ready?

Operators in India are still fixing the loose ends in their 3G networks but 4G technologies are already knocking on their doors.

The rollout of Fourth Generation, or 4G, services is the next big thing for India’s telecom sector. Operators like Reliance Industries, which has broadband wireless access (BWA) spectrum in all 22 telecom circles in India, are already chalking out plans. According to industry buzz, RIL is finalising vendors who would supply broadband equipment based on LTE technology for rolling out wireless broadband services by the end of this year. The other operators with BWA spectrum are also conducting trials to test 4G-based technologies. Qualcomm, Bharti Airtel, Aircel, Tikona and Reliance Infotel are some of the major players who own spectrum in the 2.3 Ghz band and are planning to launch 4G-based broadband services. The largest private telco, Bharti Airtel (which got BWA licence in just 4 circles), says that its 4G strategy depends on future allocations in 700Mhz and FDD 2.5Ghz bands and on its technology trials for BWA launch.

Fourth Generation telecom services are the next generation to the 3G and 2G families of cellular wireless standards and 4G is already the buzzword in many parts of the world. It is the next step in the evolution of mobile data transfer. The services are currently on offer globally by 64 telecom service providers in 31 countries. In the US, Sprint and T-Mobile have already launched 4G-based LTE networks. But in truth, 4G services as we know them today are more like 3.75G, or late stage 3G because “true 4G” networks are still in the works. The important thing, however, is that these networks are ready to be upgraded to full 4G once it arrives, which is expected between 2011 and mid-2012. Also, the underlying technology for providing 4G services is not the same. Sprint and T-Mobile, for example, use WiMax technology for their 4G network, while another player Verizon Wireless uses LTE. But irrespective of the choice of technology, 4G wireless is designed to deliver up to 100 Mbps of download speed and 50 Mbps of upload speed. On an average, 4G wireless today is anywhere from four to ten times faster than the existing 3G networks.

In India, full-fledged 4G services could be some years away as telecom operators continue to grapple with issues related to 3G infrastructure. So far, even the response to 3G rollout has not exactly been encouraging. Analysts estimate that India currently has 10 million 3G subscribers, or approximately 1.25% of the country’s total wireless subscriber base. While the number of 3G subscribers may be small, it is still significant considering that till date, there are only 11 million wireline broadband customers. Despite the poor quality of service to customers, the numbers are clearly on a rise and are expected to reach 142 million in 2015. Wireless networks have already started offering third generation capabilities, which provide benefits of increased data transfer speed and easier access to applications and Internet from mobile devices. The migration to 4G technologies (WiMax and LTE), which offer even better wireless connectivity speeds between 100 Mbps and 1 Gbps, is only to be expected. Predictably, more action on 4G is almost a certainty over the next couple of years as the demand for even more efficient data-centric services keeps growing. The trend is already visible in the increasing hordes of users accessing richer and more customised content, and asking for greater, faster and more efficient forms of delivery. Analysts project that by 2015, mobile internet traffic will increase to 23 Exabytes, which will be equivalent to 6.3 billion people downloading a digital book every day, 50% on laptops and the other 50% on small devices like mobile phones. As a result, the demand on laptop capacity would go up by 1000% and on small devices by 10,000%.

Read more.....

Source : IIPM Editorial, 2012.

An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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