‘Telecom sector may face tough time’

NEW DELHI: The CII-Mckinsey presentation that was held recently at the CEO's

policy forum on communications dealt with some of the most hotly debated issues

regarding the telecom sector. According to the Mckinsey, the Indian telecom

market is likely to go through rough times, over the next three to five years

during which operators may find it difficult to expand their business.

The forum pointed out some of the factors such as limited and price sensitive

customer base, wherein small and untapped market that are likely to hinder

growth and hinder sales growth. In the present circumstances, the services need

to be priced below the existing level to make it more affordable for the masses.

Secondly, it is a highly competitive operator market. The regulatory regime

encourages and fosters competition as evident from the intense activity in

certain sectors. But the incumbent's i.e., MTNL, VSNL and BSNL will continue to

dominate the market and would do so in the future.

Thirdly, the funds will be hard to come by, since infrastructure rollout and

network build-up is unlikely to be met from internal accruals. In the present

scenario of global meltdown and stock market crash external fund raising will

also be a difficult task.

Fourthly, Indian telecom regulatory policy has tended to be inconsistent.

Several areas still lack clear regulation and forthcoming regulation in these

areas is bound to have an impact on existing players, that could leave potential

investors wary of entering this field.

In other deregulated markets, according to the presentation, incumbents have

been able to maintain their hold on wireline services, while new entrants have

succeeded to foray into new services like wireless and data. The winning

strategy for new entrants would be to have ready access to capital and

infrastructure of international standards.

It would also mean strategic acquisition/partnerships with incumbents.

Thirdly, leadership with strong track record and organization geared up for

performance. Fourthly, clear exit strategies for value maximization.

Though Mckinsey called on the need to have clear definition in regulating the

telecom sector, the forum said the deregulation had succeeded in bring certain

advantages for instance in ISPs, where the regulations have minimized the

regulator's role.

In order to have a highly competitive regime the regulator should define

clear-cut objectives that should be the basis for framing policies. The policies

should revolve on increasing tele-density and this could be achieved by lowering

the cost of service, the forum stated.