Is this a Telecom 'Dip' or Telecom 'Quit' moment?

I have often pondered over this topic for quite some time now. The topics like these don’t come up in your mind often. But at the end, like everyone in telecom fraternity, I’m optimistic about telecom market inIndia.

Recent story published in a leading business daily depicts real picture behind the telecom growth story. As mentioned in article, even CEOs of leading operators are feeling heat of bad state of Industry. Who do you held responsible for the mess?

This discussion might span numerous stats, various article references & even multiple discussions over current state of telecom Industry. To take review of everything isn’t what I would be interested in doing here. I’m here to write about it without making it complex.

Telecom Market & Industry (Remind you to note difference) has grown up significantly in last decade. In fact, this growth has surpassed our expectations & even shadowed IT/BPO boom to some extent. It all started when every business conglomerate inIndiawas thinking on same lines; to enter in telecom market inIndia. Telecom was thought to be golden goose. There’s one simple reason to that thinking: entry barriers were purposefully kept low.

I’m not talking about hardcore telecom focus businesses like Bharti Group. Bharti was just the right company at right time to enter telecom market. Soon to follow suit were BATATA (Idea) & HFCL. What you have to do is pay spectrum fees & buy license. Both were interlinked. The spectrum was bought at meager price & not at market price. Nor it was auctioned. Once you got the license to operate or trade frequencies, you can outsource network rollouts/billing machines/IT Infrastructure to specialized entities like Nokia/TeleCordia/IBM to manage your business. That’s high time for telecom managed services. All incoming calls on mobiles were charged heavily, outgoing were too expensive. Telecom players were happy. They were just looking at Cash flows & P&Ls.

Soon others saw the cash flows & profit margins in business. They applied to enter in the market. DoT agreed. Few new players entered with new perspective- bargain on low calling rates to gain attention and foothold. It was year 2000. Call rates dropped. People started purchasing mobiles. Companies started getting subscribers.

This process continued.  Anyone was little bothered about something of differentiation. Even likes of Airtel, Idea & Vodafone failed to impress with their offerings. ‘Call Rates’ was game changer. Companies simply loved the game. Growth was significant.

Lack of differentiation, low entry barrier, threat of substitute, Supplier overcrowding, over competition & market fragmentation all started turning negative for market. Even backend backbone was started appearing same.  Market started appearing dismal & over fragmented. Golden goose started losing shine.

Amid chaos, policy makers & officials in department played black game of spectrum trading inside. Policy makers appeared too powerful to stop. Spectrum was sold amid disputes; little was known about consequences.  It’s too much exploitation for golden goose to bear.

Nasty blow came when telecom operators reached rock bottom level of call tariffs. Cash flow which looked rosy some years back now became thorn in neck. Profits plundered. Growth diluted. Cash shrunk. Competition was too much to handle. Joy of running business was robbed off.

And now when realization came that telecom has become bad choice of investment, it was too late to cry foul. At first it might appear- all is well, but inside stories are hard to suppress. What is happening to companies like GTL, Reliance, BSNL & MTNL can be evident from daily results. Cash strapped companies started crying for help. Balance sheet was showing only losses.

Is this a ‘Dip’ or ‘Quit’ moment for market? Personally, I don’t know. Industry is really going through bad state. No one is actually happy here. You go out & ask employees of telecom companies and you will get answers. Outlook of the industry appears poor & at present there’s little hope of immediate improvement. Friends & foes are hoping to see things changing, but that’s not going to be easy.

Many companies who are doing business in Indian telecom market have invested significant of money into businesses. Long term assets are created. Many friends of mine have started their career in telecom long back & for them it appears to be dead end now. No growth, no appraisals, no bonuses, no parties, no enjoyment & there’s no way out too. Everyone started feeling trapped & sorry for making bad choices.

Perhaps the saddest part is buyer’s/operator’s purchasing power, which has fallen significantly over past couple of years. And that’s what hampering entire market. Operators who are the nerve point of entire telecom ecosystem are in real trouble over cash forecasts & inflows. Moreover the subscriber growth, which was key driver of industry, started slowing down in past couple of months. What’s hope?

I feel still there’s lot to come. If you look at popular ‘Dip’ curve by Seth Godin, I firmly believe that entire industry is in bad but common phenomenon called ‘Dip’. This is certainly not quitting point. Those who survive will thrive. But yes, there’s no forecast of how long this ‘Dip’ is going to last. It might span few months or may be few years as well. Longer the period, tougher the time to come. We have perhaps reached center of ‘Dip’, though in my opinion ‘Broadband’ rollouts by BWA players might pull market back on track. But that’s just a prediction.

Telecom is what people like me breath, eat & sleep. We never chose something blindly but there’s little we could do for this now. Hope lies on two choices to make. Better know where you stand or keep options open.



Tags : Indian Telecom StoryTelecom DipTelecom market in India