J.S. Sharma | Telecom will emerge from turbulence

J.S. Sharma | Telecom will emerge from turbulence

Telecom Regulatory Authority of India (Trai) chairman J.S. Sarma has been seeking to rein in nuisance calls and messages on mobile phones. One of the latest proposals is a limit on SMSes to 100 a day. He spoke in an interview about the state of the industry and the prospect of consolidation, among other issues. Edited excerpts:

You are a regulator for telecom and the broadcast industry. How happy are you with the efficiency and competition in the telecom sector today?

I would say we have enough competition, some would say more than necessary. The competition is quite acute in mobile...in terms of efficiency, it depends on how you define efficiency. Going by financial parameters, the results of late have not been as encouraging as they used to be, but I believe it’s a passing phase and things would improve in the course of the next few quarters. Currently, in terms of quality of services, by and large, it’s OK. We are trying to tighten the quality of service parameters and also test the reports we are getting. By and large, it’s a good sector which is passing through a turbulent phase, but it will come out of it.

Do you think consumers have been empowered enough, thanks to the competition?

Yes, particularly after the introduction of MNP (mobile number portability). We have now roughly about 20 million who have opted for porting out, of this about 15 million have already ported out, some have not been because of various reasons and about 1-1.2 million people are in the process of being ported. Competition has also made a difference. But the effect of this competition has also been waning of late, over the last 15 months or so. There has been a certain amount of drop in prices, but the effect of this is waning.

Why is it waning?

Telecom is, by and large, an area where the new operators find it that much more difficult to bring in (customers) for various reasons. Firstly, people are already with a network and they don’t want to change the network. Secondly, the people who are now going in for new connections are from the lower strata or from the rural area, or people who are going for second or third connections, and the cost of acquisition is more for the new players than incumbents.

So the effect is that the tariffs, which were on a decline, are again on the rise?

The decline has stopped. Whether there will be a further reduction at a later point of time or an attempt to further increase the prices will have to be seen. There does lie a regulatory challenge in case prices begin to increase, in which case we have to look at the increase part and whether it is justified and whether we need to intervene, etc.

So that’s a sort of conundrum in a sense, whether to allow market forces to operate or whether to ensure that companies don’t act in concert.

True. I think that’s the challenge before the regulator. All these years, it has been easy because the prices were already going down. But if the prices show a firm trend towards going up, then we do need to exercise our mind as to whether or not we need to intervene and if we need to intervene, when to intervene.

In your view, what is a justifiable pass-through of costs to the consumer and what is not?

This has to be examined. A priori, I will not be able to say that this is justifiable and this is not. Obviously, inflation needs to be factored in. We also need to see what consumers can afford and what they cannot afford because we have a large number of people who are in the prepaid segment.

If the average Arpu (average revenue per user) of GSM is around 100, obviously any substantial increase is going to hurt the common man, but at the same time we need to look at the growth of the industry too.

After all, their Ebitda (earnings before interest, tax, depreciation and amortization) margins need to be healthy. This is an issue on which a decision has to be taken from time to time.

But if any service operator is trying to load other costs on to this, then obviously you need to see whether you need to intervene. Frankly, in the next few years, when value-added services will come in a big way, I think the pressure on the need to increase tariff may not be there. So, we need to ensure that the other sources of revenue also are realized by the operator.

You have been fairly progressive and proactive in terms of ensuring that needless charges for consumers are reduced—for example, there is a discussion that roaming needs to be looked at. How do you see it going forward?

We are in the process of discussing interconnection usage charges and other issues. We have been raising questions about the international call termination charges.

There is a feeling that SMS charges are quite high and needlessly high as compared to the cost. We are looking at the entire issue as part of the IUC (interconnect usage charges), an exercise that we will be completing before the end of next month. Then we would be able to look at what is the actual cost and what is it that they are realizing, and what is it that they need to realize. All these things are currently a part of an ongoing process.

You’ve taken a lead on unwanted calls and unwanted messages. Where do things stand today?

We are bringing into force all the provisions. Some provisions of the regulation are already in force; the telemarketer’s registration is already into force, the service agreements have been entered into and nearly 1,600 telemarketers have registered themselves, so the scene is set. All the other regulations we are bringing into force from 27 September; from 27 September we expect there would be no more what you call pesky calls and pesky SMSes.

There’s been debate over the proposed limit on the number of SMSes that can be sent? What is your view?

The problem is we’ve been asked repeatedly—what you do with the unregistered tele-marketers? There is no entity called unregistered telemarketers—registered telemarketers would get telecom resources and an unregistered one does not get any resources, so he has to use his own phone.

So, what we have said is because they are used in a bulk manner through use of computers, we’ve said only 100 SMS per SIM. I’ve been looking at various reports in media—young people who are supposed to be affected, quite a few of them have said we have other means of staying in touch.

Do you expect consolidation because competition has increased at certain level?

I think once the telecom policy is defined, the consolidation should definitely be a reality.

I expect the consolidation process to actively start in 2012 and hopefully before the year is out, even by the middle of the year, I think we should see a very definite trend of consolidation.

As far as Trai is concerned, we did mention the need for consolidation last year itself, but at the same time our effort and our concern is to ensure that this consolidation does not result in a monopoly situation.

There has to be a bottom line, beyond which consolidation will not be encouraged.

Yes, if the resulting entity is having more than 30%, according to our recommendation, and as long as there are a minimum six players, that is if the number of players is reduced to below six, I think that would be a bit harmful for the industry as a whole.