India aims to rebalance mobile sector

Shiv Putcha and Stefano Nicoletti/Ovum
02 Nov 2011

The Indian government last month published a draft of its proposed New Telecom Policy.

Although the proposed policy has been in the works since last year’s scandal over 2G license deals, it remains long on ambition but short on detail. Nonetheless, after feedback and analysis, the draft policy should become law by the end of the year.

There are many aspects to the draft policy, and in this opinion we focus on the major proposals affecting the mobile sector. For a discussion of the policy prescriptions for the fixed sector, see India‘s new Telecom Policy falls short on fixed broadband access (OT00063-037).

Broadly speaking, the proposed NTP-2011 is intended to create “an investor friendly environment for attracting additional investments in the sector apart from generating manifold employment opportunities in various segments of the sector” (Ministry of Communications & Information Technology).

Since the New Telecom Policy of 1999, the number of mobile subscribers in India has skyrocketed from 3 million in 2000 to over 850 million. For much of the past decade, the mobile sector was considered India’s telecoms success story, with mobile tariffs being among the lowest in the world, even after accounting for differences in purchasing power.

However, the Government’s drive to offer affordable mobile telephony has resulted in an intensely competitive and fragmented market with nearly 15 mobile operators, a structure that is unsustainable in the long term.

While the pace of connection growth has continued unabated, there has been much focus recently on the negative impact of sustained competitive intensity on the mobile sector, and the need for consolidation. Great emphasis is placed on the proposed measures to unify licenses and simplify retail charges by removing retail fees attached to roaming, under the emphatic heading “One License and One Nation – No Roaming Fee”. This leads us to believe that the new policy is intended to accelerate consolidation in the sector, thereby creating “national champions” that will drive further investment and build infrastructure across the country. This shift is necessary, as the market structure might have to evolve to a point where there are fewer players, each with stronger resources.

Related content

No Comments Yet! Be the first to share what you think!