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New ROI-driven era for Indian Telecom companies


Sibal says Sensationalism of media killed the telecom auctions. That's half-true.


There are many reasons why telecom auctions failed. Lowering the reserve price will not benefit anybody much.


  1. Telecom sectors growth rates have been stagnating over past quarters. 
  2. Several companies are rationalizing their existing subscriber numbers - looking for higher ARPU, efficiency and because high subscriber base is not necessary in new scheme of things. 
  3. What matters is efficiency and higher ROIs. For this companies like Reliance and BSNL all have much higher bandwidth than necessary. They wouldn't even bother to bid for new spectrum.
  4. Telecom sector as we know is in perhaps the last few years, may be a decade. 
  5. The incremental profits and marginal revenues are hard to come by due to high competition and high roll-out costs of traditional infrastructure. [This basically means, telecom providers will not care if they fulfill their social obligations or not.]
  6. Shifts to 3G and 4G will happen faster than expected. Look out for triggers going off in next few quarters, which will push the present revenues into 3G space



CAG did not kill the sector, what really killed it was the arrogance of government, plus Radia tape leaks. Nevertheless, it is preposterous for government to blame watch dog for its weakness of creating a suitable business and growth climate

There is no doubt low entry fees actually translated into lower costs for customers. It wasn't because the telecom companies were generous, it was because Government handed out 1.76 Lakh-Crore in hidden subsidy to the sector. Now that the companies themselves have to bear the costs, they have to sit back and calculate the ROIs, which isn't fun in a technology disruptive, highly competitive sector.


Lets also make one point very clear:

The biggest threat and fear for the telecom companies is not from other telecom companies, it is from other easily accessible technologies that will totally and utterly disrupt the telecom provider service and infrastructure as it exists.


There is no reason VOIP should have so highly regulated in 'telecom' starved country like India. But it was tightly reined in for the benefit of incumbent companies. Unfortunately for these companies, the technology is leap frogging a faster pace than they can regulate and stifle  There is no differentiation between voice and data anymore - EVERYTHING is data. Almost all the voice at some point in time, very near future, will shift entirely onto the data networks (read internet) completely bypassing the useless infrastructure they are creating now.

One company that will really set the pace, or more precisely can really revolutionize India is Reliance Industries. Mukesh Ambani has pan-India licences of the broadband networks, which if he can utilize can revolutionize the last-mile connectivity. As always, Mukesh is in right place at right time and with right resources. Let us just hope for God sakes that he will do a lot more from society's perspective than just ROIs.

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