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"I just enjoy what I am doing" - An exclusive interview with T.V. Ramachandran, COAI, Director General [20.05.07]

Andrey Gidaspov:  The Indian telecom sector is showing some fantastic growth, and mobile business accounts for a major portion of this growth.  Mr. Ramachandran, could you please update me on the latest statistics? Do you agree with predictions that India is going to be ahead of the US mobile market by 2008 with 250 million subscribers?

T.V. Ramachandran: Right now we have 115 million subscribers on GSM alone. Then there are around 47 million CDMA subscribers.  GSM holds about 70% of the mobile market, and CDMA, the remaining 30%.

Given the present growth trends, we are very confident  that by December 2007 we will cross 250 million subscribers  of which 200 million will be mobile subscribers. And we are also fairly certain that we will be able to reach 500 million subscribers by 2010!

AG: And yet China will still be ahead in terms of subscribers…

TVR: Well, it’s very difficult to match the Chinese mobile operators in terms of total subscriber numbers as they have a significant lead over India. But in terms of growth rate, we have already surpassed them.  In 2006, we in India have been growing at the rate of 6-7 million new  subscribers every month, of which around 5 million subscribers have been on GSM. This is a faster growth rate than China which has been adding around 5-6 million subscribers every month.

In fact, in the last two months we are consistently adding more subscribers per month than China.  However, in terms of the total number of subscribers, indeed China is too far ahead and I don’t think that we could catch up with them any time soon. 

Let’s see others.  In terms of number of subscribers we have already surpassed Russia in 2006 and we will be crossing the US by 2008.

AG: That’s simply amazing! What do you think is the main reason for such an outstanding growth? I was recently talking to some colleagues from the Indian mobile industry, and they told me that there are people in India who live on 2 dollars a day, but still own mobile phones. So how is it possible?

TVR: Well, one of the main reasons is the affordability of service. Our tariffs are the lowest in the world.  Overall there are a few reasons why we have achieved such outstanding growth.  

1) First, as mentioned, our tariffs are the lowest in the world and they are continuing to fall at the rate of 3-4% every quarter, i.e. 10-12% annually;

2) Further, while the monthly bills and ARPUs are falling, the GDP per capita is doubling.  This further enhances the affordability of services.

3) Then there is the fact of huge untapped potential for growth. Even though around 6-8 million people are getting added every month, still, our telecom penetration is very low;  150 million mobile subscribers for a population of over 1 billion, comes to less than 15% penetration only.

So what happens is that people are actually waiting and anticipating for this service to be made available to them. The issue now is of availability of service and not its affordability. Because of low tariffs, the service is affordable to almost everyone…

Here is one more personal bet I am going to make here.  This year we will see the subscriber additions grow to 8-9 million new mobile subscribers every month.  That is going to happen, I think, and you know why? Because more operators are going to push into the rural areas due to the very innovative policy of the Indian Government provide USO subsidy support for shared wireless infrastructure in rural areas. The Government policy hits at the root of the problem.  Because why is there a lack of coverage in the rural areas? Simply put, it is very expensive to build towers there, to deploy infrastructure, and operators will not be able to get the payback /returns that they are assured in urban areas.  Hence the idea of sharing the towers in rural areas, which will be partially reimbursed by the Indian Government, is excellent and very popular with mobile operators. By allowing three operators to share a tower and by providing subsidy support from the USO Fund, the Government has in one stroke ensured speedy, cost effective rollout of network for the operator as also competition and choice for the consumer.

AG: In Russia the universal service fund just reached USD 300 million, and the government will reimburse operators who are deploying universal services in remote areas.  The operators are chosen by tender process.  How does the Indian universal obligation fund system work?

TVR:  In India too, there is a tendering process, both for the passive as well as the active infrastructure. Both operators as well as independent service providers can bid for passive structures, i.e. Part A, but for Part B, which is the electronic equipment, only operators are allowed to bid.  Winners are chosen among those companies that are quoting the lowest amount for reimbursement/subsidy.  So the lowest bidder wins.

The winner is subject to one pre-condition.  And that condition is that the Government will provide partial reimbursement from the fund, provided that you share the tower with other operators.

The first tender for deployment networks in rural areas was completed just recently this month.  And the response was amazing. While earlier, everyone fancied urban and metro areas, nowadays all major telcos are looking into deployment of infrastructure in rural areas at rates nearly 50% lower than the subsidy being provided by the Indian Government!  I’ll give you an example, the Department of Telecommunications (DOT) set a maximum amount of Rs 400,000 (USD 9,000) per tower per year in Andhra Pradesh East Godavari district, and according to the media, several telecom service providers like Reliance Infrastructure and GTL Infrastructure bid as low as Rs 200,000 (USD 4,500).  So you see the hype? See the interest?

AG: Yes, it is incredible.  And which operators bid?

TVR: All the operators did.  The Government had a very good response for this tender.  About twenty one companies bid for passive infrastructure.  Eighteen companies bid for mobile. 

At a recent meeting of the industry with DOT, the roadmap for faster rural development was set out and a target of 50 million was set for rural connections.

AG: I understand that India must be very close to issuance of 3G licenses to operators.  Can you comment on the 3G potential in India?

TVR:  Well, indeed we are working towards the resolution of this issue.  As you know, TRAI has submitted a proposal to the Government for 3G licenses.  There will be a standard IMT-2000 core band, which can be used by WCDMA, EVDO.  As you know, Korea and Japan are doing the same.

AG:  What are GSM operators going to do about it?

TVR: Let me get back to history.  In 1994 I was in charge of one of the first Indian mobile companies and we set up one of the first two GSM network in Delhi.  Those days the cost of civil works and construction accounted for 70% of the costs.  Large costs were on the electronics and telecommunication equipment side, due to high import tariffs and customs.  Today 70% of costs goes just for services, and 30% is spent on electronics, etc.  So it is a very different issue right now.  Throughout the world, prices for the infrastructure are falling and that‘s what helping us to save on infrastructure building in India as well.

This being said, GSM operators will surely invest in upgrade of the infrastructure.  And I am positive that 3G network deployment process will be up and running by the end of this year.  Of course, it will not be all over India, but in Metros the first networks could be deployed. 

I think that the 3G policy will be announced within a month or so, and there will be a tender among operators.

AG: Who among operators are leading in GSM and CDMA?

TVR:  Well, let’s talk about the numbers among the Indian operators. And I will base this on my February figures.

In GSM:

1. Bharti Airtel – 35.4 million or 30.7% (nation-wide)

2. BSNL (“Cell One”) – 25.44 million or 22% (nation-wide)

3. Hutch – 25.3 million or 22% (nation-wide)

4. Idea Cell -- 13.6 million or 11.8% (operate in 13 circles, expected to get a nation-wide license)

5. AirCel (Maxis, Malaysia) – 5.09 million or 4.2% (operate in 9-10 circles)

6. Reliance Telecom – 4.9 million or 3.6%

All these operators are going to work on the national scale.

In CDMA:

1. Reliance Communications – 28.8 million

2. Tata Indicom – 16 million

So overall, Bharti Airtel is leading with over 35 million subscribers, while Reliance is the Number Two operator in combined CDMA and GSM with over 33 million subscribers.

AG: Every Indian mobile operator is supported by an influential industry conglomerate, and their strategies are based their owners’ long term goals.  Could you please comment on “who’s who” in the Indian mobile world?

TVR:  Well, you are correct.  Let’s begin with BSNL.  It is a 100% government operator.  MTNL is partially divested, and working in Mumbai and Delhi metros only.

Tatas and Birlas are two major Indian conglomerates, which historically supported the Indian independence, they are enlightened and established businesses in India.  So, for example, Tata owns Tata Indicom which is providing CDMA services.  Idea Cellular is owned by Birlas Group which is headquarted in Mumbai.  Their core businesses include cement, textile, and others. Reliance Group was launched by Mr. Ambani, who has built a great empire from scratch.  These companies have huge influence in India.  And of course, among the newer players, Bharti Group (Bharti Airtel) led by Mr. Sunil Mittal is a great example of keen business acumen.  Bharti’s capitalization has surpassed USD 30 billion.

AG: What strikes me in this list is that a state-owned operator, BSNL, is in second place. How did this operator surpass other private operators in a very competitive mobile business?

TVR: BSNL started its mobile odyssey in October 2002.  No one placed a bet on them.  But BSNL came with a bang and shook up the market.  And I’ll tell you why.

Before the entry of BSNL, the mobile services were limited to the urban and metropolitan areas.  The rural consumer was neglected. The general philosophy was that there was no market for cell phones in rural areas?

But BSNL turned this philosophy on its head and said, we’re going to do things differently.  Now BSNL is the incumbent fixed operator with ubiquitous nation-wide fixed line network.  For them, it was easier and more cost effective just to add mobile towers on top of their existing infrastructure, and deploy mobile networks.  However, in addition to that, I must acknowledge that they had the vision and the strategy to tap the potential that existed in the smaller cities and town and even in the rural areas.  They said, we are going there and will offer people the lowest tariffs, and we know that people want mobile phones there.  So they banked on these services and won.  People rushed to become BSNL subscribers.  You see, even today their tariffs are slightly lower than tariffs of other private operators. Further BSNL is perhaps the only operator which actually has a waiting list for mobile connections.

BSNL also has a good team of professionals.  And yet they have their own constraints For example, being a government entity, they have to follow some strict rules for the tender on procurement and etc. which sometimes delays their business advantages in the market. 

AG:  Can you comment on the Vodafone – Hutch deal?

TVR:  I would prefer not to comment on this.

AG: What do you think about the potential of VAS in India? Who is the most innovative among mobile operators in India?

TVR:  VAS has tremendous potential in India and it is also an important source of revenues to shore up the falling ARPUs.  Currently Indian operators’ ARPU average at USD 8.  And so VAS becomes very important in maintaining the edge.  Music, ring tones, Bollywood, video – these services are gradually appearing in the networks.  And that’s where we need to grow – especially anticipating 3G services. 

AG:  One of the questions that is often raised by Russian telecom analysts, is why Russian telecom holdings so far have been unsuccessful in bidding for Indian telecom licenses?

TVR: I can’t really comment on that. 

AG: My final question is what is the secret of success?

TVR: I just enjoy what I am doing. Actually I am not a telecom person. I did my Masters’ in radio-electronics and wireless.  I actually worked for some time in the tire industry, for Dunlop.  Then I joined the wireless industry, and since then am having fun in what I do every day.

AG: Thank you very much for the interview!

March 2007, New Delhi