For telecom industry, 2013 was a year of new policies and quick approvals from the Government peppered with numerous heated negotiations between mobile operators, Government departments and telecom regulator Trai. The sector also saw significant rise in global sentiment towards country's telecom market as global players kept the authorities busy with their investment proposals all through the year.
After being haunted by controversies since the last two years, 2013 turned out to be good for the telecom sector. There were signs of recovery and stablaisation among the telecom operators, which was supported by reforms and measures from the Government.
One of the biggest decisions came as the Government announced raising of foreign direct investment (FDI) limit to 100 per cent from 74 per cent. Along with that, the Government also implemented the Unified licences regime and is now all set to announce the new merger & acquisitions (M&A) guidelines in January 2014.
Content with the performance in 2013, Telecom Secretary MF Farooqui said, "We want to put mergers and acquisition guidelines in place before spectrum auction takes place. The year 2013 was basically a year which prepared this sector for huge growth in coming years, a foundation year. Sector in 2014 is poised for a very positive growth riding on very good sentiments."
For Farooqui, the most important steps that the Government took in 2013 for the telecom sector were de-linking spectrum from telecom licences, introduction of Unified licences and hiking foreign direct investment limit. Farooqui added that by increasing FDI limit, the sentiment among global investors has hugely improved towards country's telecom market.
The year, though, began with the Government struggling to meet the target of about Rs 58,000 crore provisioned in the budget for fiscal 2012-13 from spectrum. While back in 2012, foreign investments slid sharply by 96 per cent but during 2013, this figure improved as an initial investment of over Rs 11,000 crore has already been received. Also, the latest clearance given to Vodafone's proposal of Rs 10,141 crore buy out of minority shareholders, is just another step by the Government to help the sector bounce back. Norwegian firm Telenor brought in investment of Rs 1,000 crore in December to increase its stake in Telewings Communications to 74 per cent from 49 per cent earlier.
The Government in August approved 100 per cent FDI in the telecom sector, meeting a key demand of the fund-starved industry. Earlier, the FDI cap in the sector was at 74 per cent. FDI during April-September 2013 period was only at Rs 197 crore. The month of March, 2013, saw poor performance of spectrum auction with only one company, Sistema Shyam Teleservices, bidding for CDMA spectrum worth Rs 3,639 crore.
"There is progress in the regulatory environment. There are reasonable expectations on the sector which I think is positive, so it's sending a positive message about the country and about the desire to really push forward," Vodafone Group's Chief Executive Vittorio Colao said.
With fewer telecom operators in the country after the Supreme Court cancelled 122 2G licences in February 2012, mobile phone service providers were able to increase tariffs. The trend continued in 2013 with all operators, except Videocon, MTS and Uninor, which bought spectrum afresh after their licences were cancelled, increasing call rates and mobile charges.
Call rates of old telecom players almost doubled this year from 2012. New operators kept rates at a lower level to attract customers and build their base. Bharti Enterprise's Deputy Group CEO and Managing Director, Akhil Gupta said, "Telecom industry saw promising signs in 2013 with rationalisation of realised rates, sharp growth of data revenue, control on acquisition costs and churn and finally some clarity on regulatory front with auctions being announced."
Calling 2013 a very challenging year, Arvind bali, CEO of Videocon Telecommunications said, "Videocon Telecom passed through a very bad phase when our pan India licence was cancelled abruptly in February 2012 with no fault of ours. The setback resulted in approx $2 billion getting sunk in business and we lost 6.9 million subscribers. So once you have seen the worse, everything after than looks positive."
Commenting on the just passed, 2013, Bali added, "Year 2013 was a new beginning to our new 20 year journey into the business. We made a strategic comeback in Telecom industry by successfully bidding for 6 telecom circles, and with existing Punjab circle. So 2013 has been an eventful year for us, a good beginning, and I would say a solid foundation for the years to come."
The year also witnessed the longest stand- off between the Department of Telecommunications (DoT) and Telecom Regulatory Authority of India (Trai). The DoT had approached Trai four times in the past six months for suggestions on a minimum price for CDMA spectrum. It was only on December 30, Trai finally floated the consultation papers for the valuation of CDMA auction valuation.
Apart from that, there was a constant tussle between the DoT and mobile operators over the issue of spectrum usage changes (SUC). Trai had recommended a uniform SUC of 3 to 5 per cent across the industry instead of the prevailing rate of 3 to 8 per cent.
But, DoT estimated a loss of Rs 3,738 crores over 20 years just on the renewal of six licences belonging to Airtel, Vodafone and loop Mobile, which are due to expire in 2014, if Trai recommendations are implemented. While the uniform SUC recommendation would bring relief to existing mobile service providers, it would burden holders of wireless broadband spectrum such as Mukesh Ambani-led Reliance Jio Infocomm, which are required to pay 1 per cent SUC.
The sector also witnessed rival business interests bridging their differences. Mukesh Ambani's Reliance Jio and his younger brother Anil Ambani's Reliance Communications agreed to share telecom infrastructure, the first deal since they split the Reliance group in 2005.
Reliance Jio also signed a similar accord with Sunil Bharti Mittal's Bharti Airtel. The arrangements between these companies will bear fruit when the government implements M&A guidelines and spectrum sharing. With Government taking a keen interest towards reviving the controversy ridden sector and another round of spectrum auction to be held in February 2014, telecom industry might be able to carry forward the positive momentum from 2013, in the 2014.