Gold rush is on for Indian
telecoms By Indrajit Basu
KOLKATA - What happens when a country with
a billion-plus people - of whom just 20 out of
every 100 own a telephone - invites new players to
offer all types of telecom services? A mad rush
follows.
By Monday, the last day for
submitting applications for Unified Access
Services Licenses (UASL), a new form of license
that will allow any company to offer any type of
telecom services regardless of the technology, the
Department of Telecom (DoT)
had
received about 600 applications.
This came
as a surprise to the industry, not to mention
analysts, dealmakers and even the DoT. The
applicants included global telecom companies such
as AT&T and British Telecom, which were in the
Indian telecom market before but exited recently.
The frenzy to grab a chunk of the world's
fastest-growing telecom market also attracted a
diverse range of players, starting from real
estate companies to white-goods makers, to even
metal companies like Sterlite Industries and Ispat
International.
"There's a mad rush out
there," said one analyst. "But while this
unprecedented response for universal access
service licenses only reinforces the potential of
India's telecom market as the most attractive in
the world, the moot question is, even if about 60
new players manage the get the licenses, does the
market have space for that many players?"
Moreover, except for a few, most
privately-owned telecom companies are struggling
to come out of the red.
There do not seem
to be any nagging doubts among the new applicants,
though. "India is too exciting a market to
ignore," said V S Gopinath, vice president,
AT&T Asia-Pacific. "It is one of the fastest
growing and most exciting telecom markets in the
world, where our key multinational customers have
told us they need to be, and we want to be a part
of it."
With over 200 million subscribers
- projected to cross 600 million in the next five
years - there is no doubt that India is the market
to be in. With a teledensity of only about 20% and
a rural density of a mere 5% to 6%, there exists a
large untapped population.
However,
according to experts, the real reason for the rush
lies elsewhere - in the DoT's policy of allocating
spectrum-radio frequencies. This embraces the
entire spectrum of electromagnetic frequencies
used for communications, including frequencies
used for radio, radar and television.
UASLs are thus highly sought after as they
allow license holders to provide any kind of
communication services. The DoT has not indicated
how many applications are expected to be
successful.
"This [the last-moment
application of AT&T through an Indian joint
venture partner and its repeat interest in India]
is an important step towards participating in
India's upcoming spectrum-allocation proceedings,"
an AT&T statement said.
AT&T has
joined with Mahindra Telecommunications Pvt Ltd, a
Mahindra Group company, to bid for licenses.
Foreign direct investment of up to 74% is allowed
in the telecommunications sector.
"The ...
spectrum policy worked very well for the industry
in the last five years by ensuring dispensation of
a scarce resource only on the basis of usage, need
and justification, thus efficiently supporting the
explosive growth of mobiles in India," said T V
Ramchandran, director general Cellular Operators
Association of India.
However, to increase
telephone density and extend the gamut of telecom
services, the DoT decided to offer new licenses
under the UASL regime for an entry fee of US$400
million. This, according to the industry, is a
bonanza considering the money that is there to be
made.
The true value of spectrum in India,
say sources, can be gauged by the valuations that
existing telecom companies command. For instance,
Vodafone, the European telecom major, paid $11.2
billion recently to buy out Hutch. And even BPL
Mobile - a telecom company that operates cell
services only in Mumbai - is reportedly
negotiating a valuation of $1 billion.
With the response for new licenses far
bigger than anybody had imagined, the DoT has
bitten off more than it can chew and this may
cause trouble in the sector as well as for the DoT
as unlucky applicants could take their cases to
court after the DoT starts granting licenses in
the next three to four weeks.
Indrajit Basu is a Kolkata-based
journalist.
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