[times of india] Telecom was supposed to be the new boom sector and, initially, the government had rolled out the red carpet for new entrants. While pumping big money into telecom, all big players were hedging their bets on one statistic –– India would have over 50 crore subscribers and a teledensity of 36% by 2010. It was a growth story that was impossible to ignore. And then, the rug was suddenly pulled from under their feet.
Regulatory uncertainty, low spectrum issues, high licence fees, security concerns over Chinese telecom equipment, and the restrictions on mergers and acquisitions (M&A), "with the government keen to control each and every consolidation", have put paid to most of the dreams of telecom majors.
While Etisalat (Emirates Telecommunications Corp) is yet to launch operations, newbies like Sistema Shyam Teleservices (SSTL), Datacom Solutions (Videocon), S-Tel and Uninor (earlier Telenor Unitech) are finding the going tough.
"It is not that these new operators had not factored in the negatives. They were aware of the many hurdles even when they were jostling for licence," said Paul Budder, telecommunication analyst at Berg Insights, a research analysis firm. "Though several policy decisions continue to cause grief to the new telcos, most of them have entered the arena with deep pockets," he added.
For example, Uninor has planned a capex outlay of Rs 12,000 crore over three years for pan-India operations, and Videocon's Datacom Solutions plans to spend Rs 14,000 crore over three years for the same purpose.
Uninor has factored in an EBITDA breakeven of approximately three years after launch and an operating cash flow breakeven of approximately five years after launch. Videocon, which bagged a licence for 22 circles, is targeting a subscriber base of 100 million and aims to break even in two years, according to an official of the company, who spoke to TOI on condition of anonymity.
Uninor has already launched in eight circles and is gearing up to launch in additional circles in its second phase. However, the delay is hurting the company. "In some circles, we are missing spectrum, which has been the main reason for the delay in the rollout," confirmed a Uninor spokesperson. He added: Uninor "doesn't have spectrum in Rajasthan and hence can't launch in Jaipur. It doesn't have spectrum in North East, so can't rollout services in Shillong."
"We are prioritising certain key districts and will launch in all circles. We will fulfil the minimum roll-out obligation as advised by the telecom authorities," the spokesperson added.
As new telcos face teething problems with low spectrum, a full commercial rollout becomes a major hurdle. Three others telecom majors are also awaiting "full spectrum and the pending report and regulation to come in from the Telecom Regulatory Authority of India (Trai)" before launching their services across pan-India.
New telcos face rough ride
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