Breaking compromises in the Indian telecom industry growing Reliance infocomm

Abstract

Indian telecom markets have been one of the most scintillating success stories of the privatization era. From an abysmal telecom market with endless waiting time for a phone connection, today we have come to phone on demand with a tele density of 16 per 100 and a growth rate of 5% per month. The major driver for this growth has been policy initiative, which has driven down the cost of telecom services for the common man and has paved the way for breaking the compromise on mobility. The policy has not been free from flaws though and has led to multitude of infrastructures for the individual players. Another important driver for growth has been the competitive force in the market with 6 clear national level players emerging after several rounds of acquisitions. The following are still acquisition target; IDEA, Spice and Aircel. A new entrant may find it useful to acquire IDEA and then look at the other players as the M&A rules will allow these players to merge. The growth of the telecom industry has been characterized by the identification and then subsequent breaking of compromises. These have either been policy-led or competition-led. The compromises currently being forced upon the consumers include prohibitively high costs for the low-income citizens and limited network coverage with 80% of the population outside the reach of the network. Policy can encourage rapid network expansion by providing incentives to share infrastructure and lease capacity from Railtel. Support from the USO fund may be provided for this purpose. Reliance, as an operator, can break these compromises for its subscribers in three different spheres: (a) Better marketing and value-added services to hold on to and increase its higher value subscribers, (b) Introducing a new paradigm of “receive-only” phones so that lower-end consumers can join the network, and (c) Expanding the network in rural areas by a revolutionary scheme where there is retail participation by entrepreneurs as partners.