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<p>Neeraj Thakur Biography</p>
In the short term, apps like Ola, Uber and Taxi-for-sure will only give volumes to the auto car makers, says Neeraj Thakur Sonali Jha travels between Gurgaon and Delhi everyday using Ola cabs, and does not feel the need to own a car. While Ola service sometimes suffers due to crackdowns by the Delhi government on taxi app services, yet, Sonali somehow manages and does not think of buying a car anytime soon. There is an ever increasing population of young people in the metro cities of India who are not emotional about owning a car, even if they can afford it. “People today are looking for convenience. Nobody wants to deal with the rush hour traffic. I do not mind spending Rs 700-800 on cab service every day,” says Sonali . While Sonali’s per day budget is on the higher end because of the distance she travels, there are people who use the app based taxi services for as little as Rs 200 per ride. People like Sonali are giving industrialists like Anand Mahindra shivers down their spine. Mahindra, the chairman of the Mahindra and Mahindra group, in a press conference has flagged off the issue of Taxi hailing apps like Ola and Uber eating into the business of passenger car makers. Buying a small car in India needs an upfront investment of Rs 1 lakh to Rs 1.5 lakh (rest in EMIs), beyond which a person spends the same amount of money per year on fuel, maintenance and insurance. What's more, the cost of the car depreciates at the rate of 15-20 per cent every year. According to Abdul Majeed, an automobile expert at PWC, “The cost of the travelling by Uber or Ola is 40 per cent less than the cost of owning a car. This makes it possible for people not to consider investing in a vehicle". However, Majeed also feels that the situation will not change overnight and in the short term apps like Ola, Uber and Taxi-for-sure will only give volumes to the auto car makers. “In the first 4-5 years, these companies will have to add more cars into their fleet so that they make sure that everybody gets a taxi within 15 minutes of booking. Once they reach there, only then people will comfortably look to rely on the app based tax services,” emphasises Majeed. Who Will Win The Fight?The situation is likely to become tight for automakers in the urban areas, as the urban markets are already saturated due to scarcity of parking space and traffic jams. “In cities and among the younger population, there is a shift in the mindset where people look at mobility more than they look at the product. Earlier people used to look at the product first. This will lead to shrinkage in demand in the urban areas,” says Rakesh Batra, automotive sector expert, EY. However, there is a huge rural market available to the automobile companies where the market is still under-penetrated. According to data available at How India Lives, there are just 37,85,355 four wheelers in the rural India as compared to 76,88,232 units in the urban areas. Moreover, the rural consumers have no parking issues and have to travel longer distances compared to urban areas. A company like Maruti makes 31 per cent of its sales in the rural market. In the urban market as well, Majeed feels the connected car can help automakers score over the taxi-hailing apps. “A connected car is a completely different experience where you can do much more than just travel. This is something one cannot get in a taxi” However, Uber and Ola are challenging the idea of connected cars as well. According to Techcrunch.com, Uber and Ola are planning to offer free 4G services to their customers. If this happens, this would add a new dimension to the fight between the auto car makers and the app based taxi providers. However, Batra feels that OEMs can deal with the rising threat of app-based taxi providers by acquiring them.” It has happened in other parts of the world in the past. Companies like Ford and General Motors also owned car renting companies in the US. So these OEMs may go for acquiring these companies” says Batra.
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Indian finance ministers have always enjoyed the times when crude oil price hovered around less than $50 per barrel in the global market. Lower crude oil prices augur well for an economy that imports 75 per cent of its domestic requirement. However, the same falling price will also ensure that India remains an oil importing nation in the long run as the Indian upstream companies are forced to lower their capital expenditure on exploration business. Cairn India Ltd, a unit of London listed Vedanta resources Plc, has already reduced its capital expenditure for FY16 by about 60 per cent to $500 million from $1.2 billion. While ONGC has claimed that it will spend Rs 36,000 crore as capital expenditure in FY16 as against Rs 32,309 crore spent as capex in FY15, it would be difficult for other Indian companies to do the same as they try to cover their margins. The benchmark Brent crude on 24 August fell below $45 a barrel for the first time since March 2009. The stocks of ONGC, Oil India (OIL) and Cairn India have touched 52-week low this year. Lower crude prices bring a double whammy for companies that operate the Pre-Nelp blocks as they are paying a fixed amount of Rs 4,500 per tonne of oil produced from their fields. According to industry sources, the companies have been lobbying hard with the government to get rid of this cess. Apart from this, ONGC has 165 marginal fields (86 onshore and 79 offshore). These fields become financially unviable for production at the current price of crude oil. The government wanted to put 69 of these blocks for auctions, as it was felt that the private sector would be able to extract crude oil or gas from such blocks, but given the falling realisations for the upstream companies, it is unlikely that the private sector would like to put money into these fields. Some experts also feel that none of the international players would be interested in exploration business in India if the price of crude oil remains below $50 per barrel. The hydrocarbon fields in India are difficult and require higher investments compared to African countries. A silver lining for the upstream sector in such a scenario is the reduction in the price of rigs and other assets required for exploration business. It would be interesting to see, how the Indian companies negotiate their contracts for rigs to safeguard their margins. Deepak Mahurkar, , Leader Oil & Gas PwC says, "While crude oil prices sustaining around $40 in mid and long term is hard to think of, but the producers clearly are getting ready to be fit at $50. Marginal fields' developments around the world have to wait in these circumstances. In general, companies which adeptly take up efficiencies induction will do well. Unbelievable success has been achieved on cost reduction and technology deployment in the US including in the shale play. Service providers as much as operators have understood the sensitivities of costs."
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To clip the wings of the private sector, it is important to have companies compete with each other, writes Neeraj ThakurThe Comptroller and Auditor General of India (CAG) audit report of the electricity distribution companies or discoms has upheld the allegations of Delhi chief minister Arvind Kejriwal that these companies have overcharged the Delhi consumers for over a decade. While the report vindicates Kejriwal and his party’s stand against Sheila Dixit led Congress and the BJP who mocked the current CM for questioning the accounts of the discoms, it would be important to see how the Kejriwal government punishes the guilty companies. Kejriwal in the past has said that if he comes to power he will take away the contracts from the companies that are found guilty, but, such an action is not practical because claims of a CAG report can be challenged in the court. However, If Kejriwal really wants to solve the problem of the electricity distribution sector for once and for all, then he must use the system to weed out corrupt practices rather than expecting the discoms to be honest. In a monopoly, the government sector becomes inefficient and lethargic while the private sector unleashes its profiteering tendencies. So, when the electricity distribution sector of Delhi was handed over from the government run DESU or Delhi Electricity Supply Undertaking to the private sector players like Reliance Infra owned BRPL and BYPL and Tata Power owned TPDDL, these companies used all the means to make profits. The CAG audit report on power discoms says, “RA (Regulatory Assets) of three discoms which stood approved as on March 31, 2013, were Rs 13,657.87 crore. However, audit findings contained in various chapters of this report indicate that the RA of the three discoms were inflated by at least Rs 7956.91 crore”. To clip the wings of the private sector, it is important to have companies compete with each other. This keeps the price of services delivered by them down. In this regard, a path-breaking idea is buried in the files of the union power ministry that seeks to segregate the business of providing electricity wires from the business of supplying electricity to consumers. In such a scenario, there could be more than two companies that would compete to install their meters at the customers’ home to supply electricity. This would force them to be competitive in sourcing electricity from power producers. Currently, the same company is responsible for providing electricity as well as wires that carry the electricity to the doors of a consumer. While this idea was proposed ahead of the Delhi state assembly elections in 2015 by the BJP-led front, Kejriwal should not shy away from implementing it in his state if he wants to bring the price of power down through competition, because that is the only full proof way to achieve that end. Kejriwal has been pressurising the discoms to re-negotiate their power purchase agreements with the power producers, but he wields no real power to actually force the private companies. But as the head of the state he can introduces the segregation of the wire and the electricity supply business by inviting bids for both the segments. While the CAG report can lead to punishment of the power discoms, but the only way to bell the private sector cat is by creating cut throat competition so that only the most efficient and competitive survives.
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The idea of Indian Railways acquiring distressed power plants would sound stupid to anybody who understands the power business, says Neeraj ThakurNeeraj ThakurNTPC should get into the business of flying airplanes. Why? Because a lot of its employees need to travel by airplanes and owning an aviation company will help company save costs. If this idea sounds absurd, then, the idea of Indian Railways acquiring distressed power plants would sound stupid to anybody who understands the power business. According to a media report, a panel headed by a former bureaucrat, Ajay Shankar is mulling over Railways buying the distressed power plants and running them to reduce the organisation's operating costs. In a report on the power sector, credit ratings agency Crisil, estimated that 46,000 Mw of generation capacity in the country is facing viability issues due to lack of long-term buyers for electricity, inadequate fuel supply and aggressive bidding to win projects and coal blocks. In 2014, NTPC chairman Arup Roy Choudhury said that his company was in the process of due diligence to buy a few of these projects to expand their portfolio. Interestingly, NTPC with over 45,000 MW of generation capacity has failed to lay its hand on any of these cheaply available power plants for the risk of buying dud assets that may prove to be a drag on the company’s balance sheet. However, if Railways, with electricity component of just 7 per cent at Rs 11,000 crore on the revenue of Rs 1,57,880 crore, wants to buy power plants, then NTPC may as well shut shop and hand over its power business to the Railways. In the past one year, barring a few deals nothing much has happened in the power sector despite big power companies like the Tatas, Adani, and Reliance trying desperately to increase their power portfolio through cheap deals. The biggest problems with these power plants is that they either do not have sufficient fuel supply or there is not enough demand for expensive power that comes out of these plants. In the past one year, the Railways minister Suresh Prabhu has talked about the need to reduce the electricity bill for the Railways. However to buy cheap input material one does not go out buying the companies that produce those commodities Railways can do better by re-negotiating its power purchase contracts with companies and increasing its quotas from the open market as many times the price of power at the exchanges trades at below the long term power purchasing contract prices. In the past one year, the Railways has unveiled plans to set up 1,000 MW of solar power generation capacity. But the Railways minister should understand the difference between a solar and a thermal power plant. While solar power plants need only initial investment and some catchment area to function, running a thermal power plant is a different ballgame altogether. Many infrastructure companies have burnt their fingers in the past by entering this business. This is the reason why there are so many distressed power plants waiting to be bought by someone in the market. That someone can be government owned NTPC; certainly not the Indian Railways.
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Telecom operators say they are ready to invest more but government help in installing mobile sites necessary. Neeraj Thakur reportsUnder pressure from the government to fix the issue of call drops, the telecom operators on Monday (11 August) were forced to come out of their offices and put across their side of the story. The decision to address a press conference came after the government was said to be in the last leg of finalising penalties for errant telecom operators over dissemination of services. “We have invested more than China in creating telecom infrastructure in the past few years. We are ready to invest more but the government should help us in the installation of mobile sites where they are needed,” said Himanshu Kapania, MD, Idea Cellular, Ltd. The gravity of the situation was visible from the fact that the every major telecom operator had sent its India head to address the media. Later in the day, the same representatives are supposed to present their views to Telecom Minister Ravi Shankar Prasad. Also read: Nailing Call Drop Lies The telecom operators have faced public as well as government ire in the past few months for not being able to improve their services. To make things worse, the telecom minister, Ravi Shankar Prasad has taken a tough stand on the issue and has publicly threatened the companies of strict action if they failed to resolve the issue. Seeing the antagonism of the telecom minister, the telecom operators avoided blaming the government for not providing enough spectrum to the telecom operators. In the past, telecom operators had played the blame game with the government for creating spectrum scarcity to earn more revenue in the auction, due to which services of the telecom companies suffered. “We are not discussing the issue of spectrum scarcity, here. We are discussing the problems we face in the installing mobile sites,” added Kaparia. PricewaterhouseCooper data shows the consumer base of mobile services grew from 57.4 crore in 2010 to 97 crore in 2015, an increase of 66 per cent. But the growth in mobile towers was only 33 per cent from 3.29 lakh in 2010 to 4.4 lakh in 2015. According to Kaparia, as many as 7000-10,000 mobile sites were shut in the past few years by the local authorities. “ We need a national tower policy that declares telecom services& infrastructure to be essential services”. Kaparia levied charges against the municipalities for charging as high as Rs 2 lakh per mobile site for a period of five years.
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Neeraj Thakur says the government needs to understand that any policy that seeks to control pollution should be direct and without any kind of subsidy, especially involving car manufacturersShould the government give a subsidy to people to surrender their old-vehicles? While we all know that to tackle increasing pollution in the country, we need to retire older vehicles, the idea of government subsidising the scheme is nonsense. Subsidies are supposed to be given to the poor and not to the rich. If the government gives subsidy to a private car owner for retiring his car -- which he anyway is supposed to -- if it does not meet the environment norms, it would be a sheer waste of government money. The Society of Indian Automobile Manufacturers itself has said that there is no data in the country that can certify the number of old vehicles plying on the road. The exercise to identify such vehicles itself would be time consuming and arbitrary. While the media reports quoted transport minister Nitin Gadkari incentivising people to surrender their old vehicles, the plan revealed by him looks more in favour of the auto car manufacturers who are supposed to get tax benefits from the government which are to be passed on to the customers who buy new cars from them. The government needs to understand that any policy that seeks to control pollution should be direct and without any kind of subsidy, especially involving car manufacturers. The policy of having a pollution control certificate for all vehicles in the country has not delivered desired results, whereas, if implemented with rigour, it could have freed the country from poisonous emissions from vehicles to a great extent. Moreover, the best way to retire such vehicles would be to introduce standard pollution norms wherbey all the polluting old vehicles could be retired in a window of 2-5 years without any kind of government subsidy. And in case, the government is looking at increasing the index for industrial production by way of such scheme, it should rather provide interest subvention to the car makers directly. Asking people to leave their LPG cylinders to reduce government’s subsidy budget and then paying that money to vehicle owners is a proposal devoid of logic in the context of the Indian economy.
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Till a year ago, Adani faced similar problems in developing the Mundra Port and SEZ in the Kutch region of Gujarat, points out Neeraj ThakurAfter a federal court in Australia revoked environment clearance for Gautam Adani's coal mining project in Australia, many Indian newspapers and websites headlined "Snake, lizard stall Adani's Australia project". The headlines had a tinge of sarcasm towards the Australian court's concern for some reptiles at the cost of the project. The ruling, however, did not perturb the mining company which stated that the decision of the court was a result of "technical legal error" which would be sorted by the government. Despite opposition from the environmentalists, Gautam Adani has always been confident of the future of his Australian coal mine project. The latest ruling by the court citing danger to vulnerable species, the Yakka Skink and the ornamental snake, in the region did not dwindle the faith of the Indian businessman. Adani has already invested about $3 billion in the project and plans to take the investment up to $16 billion. But what is it that makes the Indian mining giant so sure about a project that saw eleven of the world’s biggest private investment banks, including Citigroup, Morgan Stanley, Goldman Sachs, and JPMorgan Chase, refuse to provide financing, citing environmental concerns over the reef and fossil fuel development? Adani is sure because he knows that the executive is far more powerful than the judiciary, be it in India or down under in Australia. Till a year ago, Adani faced similar problems in developing the Mundra Port and SEZ in the Kutch region of Gujarat. At one point of time, his company faced charges of destroying the mangroves, blocking of creeks and non-compliance of other clearance conditions. Based on the findings of a committee headed by Sunita Narain, the High Court of Gujarat had even ordered the closure of the 12 operational units in the industrial enclave run by Adani ports and Special Economic Zone Ltd (APSEZ). The 12 units, according to the high court, were operating despite a May 2012 high court order that all units in the zone be shut down due to lack of environment clearances. Despite all the hue and cry of environmentalists in India, the APSEZ is functional today with the clearance of the government. Interestingly, the government of India, desperate to achieve growth bypassing environmental laws, allowed Adani group to procure belated environmental clearances. Business tycoons like Adani flourish because the government is desperate to achieve GDP-numbers-based growth over environment. In India, the National Democratic Alliance (NDA) government in its attempt to give a push to the infrastructure projects has diluted many of the existing environmental laws by either introducing new guidelines to the existing laws or by weakening the statutory institutions. According to Greenpeace, “the government approved close to 120 projects without even forming a standing committee of the national board of wildlife. When the Supreme Court intervened on the issue, the government asked the Supreme Court to stay away from intervening in matters pertaining to approvals within sanctuaries and national parks because that accounts to delay of projects. Down under, the tone of the Australian Prime Minister Tony Abott is similar to the one heard from the policy makers of the Indian government. Abott strongly condemned the ruling of the Australian court and said “if we get to the stage where the rules are such that projects like this (Adani’s coal mine) can be endlessly frustrated, that's dangerous for our country and it's tragic for the wider world”. Abott further harped on the argument of economic development and said “the country must, in principle, favour projects like this because it was vitally important for Queensland’s economic development and the human welfare of literally tens of millions of people in India”. Australian government, too, is trying to change the laws of the land to bypass the rights of the local communities in giving approval to a mining project. The changes are set out in the Minerals and Energy (Common Provisions) Bill 2014 introduced to Queensland Parliament on 5 June 2014. Under the bill, the Queensland Government proposes to reduce public rights to object to the grant of a mining lease, so that only ‘affected persons’ would be entitled to object. According to Independent Australia, “This new term includes only those landowners whose land would be subject to the proposed mining lease or whose land would be necessary for access to the land subject to the proposed lease or the relevant local government". Adani-owned Carmichael coal mine in Queensland’s Galilee Basin, would be the biggest-ever in Australia. It would include six open cut pits and five underground mines, spread over 28,000 hectares. To explain in numbers, the mine would be seven times the area of Sydney Harbour. According to the Green Institute of Australia, the lifetime carbon dioxide emissions of the coal mined in the Galilee Basin would be around 24.7 billion tonnes. This would be five per cent of the carbon budget available for the whole world between 2010 and 2050, if the world has to restrict global temperature increase to within 2 degree Celsius. However for Australia, which is dependent for exports of its natural resources to import other things, weak price of commodities like, coal, bauxite and iron ore have taken away many jobs and the country is staring at its first economic recession in 20 years. The unemployment rate in Australia touched 6.4 per cent in February 2015, highest in 12 years. Adani had promised creation of 10,000 jobs per year and royalty worth $22 billion from its Carmichael coal mine, a claim that ran into controversy after Adani’s expert witness, Dr Jerome Fahrer, said that the mine would create an average of 1464 full-time-equivalent jobs a year and royalty upto $4.8 billion.While the claim of job creation and royalty amount is being contested, the export from coal mine gives Australian government hope of generating revenue through royalties, taxes and economic activity around the mining area. If the Indian government can overlook the rights of fishermen and villagers who were affected by the Mundra project of Adani, can the life of some snakes and lizards keep the Australian government from going ahead with the giant mining project in Queensland?
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In its annual general meeting of 2014, Reliance Industries chairman Mukesh Ambani had talked about people centric policies in the company. The statement was important in the backdrop of the country’s second largest private sector company (largest private sector company in 2014) taking a plunge into the telecom sector, known for cut-throat competition. People who have worked with the Reliance Group of Industries since the Dhirubhai Ambani days say that the company is run in silos by the kith and kin of the Ambani family. This is perhaps the reason why the position of the chief human resources officer was vacant between 2009 and 2013 and then was filled with HR wizard, Prabir Jha, who came from the country’s most respectable conglomerate, Tata group of companies. The sudden exit of Jha and his position being taken over by one of the family members Hital Meswani raises questions over RIL’s top management’s ability to trust and work with professionals who are not a part of the family. Meswani, is the son of Dhirubhai Ambani’s cousin Rasiklal Meswani and was responsible for building some of Reliance Industries' biggest projects including the Hazira petrochemical plant and the Jamnagar refinery. Hital and his brother Nikhil have been the executive directors on board RIL, since the 1990s. The brothers, many say are close confidantes of Mukesh Ambani. Neeraj ThakurRIL inherited the culture of a traditional Indian business house, running through hierarchies and institutional clout of the family members to run the show rather than nourishing a talent pool of professionals. But the failure of RIL to take off in the retail sector was largely attributed to the company lacking a pool of decision making people at the middle and the bottom of the pyramid. To Change this, RIL had also roped in its partner company British Petroleum (BP) PLC, to bring in some of the best practices. The HR teams of RIL and BP worked together for a new performance and reward system, talent management practices, resourcing systems, and learning and leadership frameworks in various phases. BP's HR head David Oxley and Jha were jointly trying to change the work culture of a group that was used to implementing the ideas of top few executives of the company. Jha brought with him the employee friendly culture of the Tatas. Among his important decisions were announcements of a five-day week, increased leave entitlements and modernising performance appraisal processes to make it transparent. He also bought 58,000 film tickets of Bollywood hit “PK” for RIL employees and their families in Mumbai, which received wide media coverage and became the talk of the town. People who have worked with either of the Ambani brothers say that in the Ambani companies, “the right hand does not know what the left hand is doing.” Many times, more than four people are working on the same project with none of them knowing about the other. In the end the top management takes the decision on whose work is to be accepted. Appraisals are well guarded secrets and many complain that they are also arbitrary, at times. While this culture bodes well with a company in the business of mining and petrochemical, with no interface with the retail customers, it can be a roadblock for a company that is dealing with disruptive ideas and technologies every day. The fact that RIL has spent over $14 billion to set up its telecom infrastructure even before the launch of its 4G services- an amount that Airtel, the largest telecom player, has spent in over a decade, puts the company at greater financial risk if the new venture meets the fate of its Retail sector stint.
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Airtel wants to sell its operations in four African countries - Burkina Faso, Chad, Congo and Sierra Leone — with a revenue base of $730 million, representing 16 per cent of overall Africa revenueSunil Bharti Mittal has always been adamant about his African dream. When a merger deal with South Africa-based telecom company MTN failed in 2009, he went on to acquire the loss-making operations of the Kuwait-based Zain group. The company shelled out $10.7 billion (of which $8.5 billion was debt) to get hold of a customer base of 42 million in 15 countries. Airtel took the pain of negotiating the deal with regulators in all 15 countries where the company acquired Zain’s operations. Now that Airtel wants to sell its operations in four African countries - Burkina Faso, Chad, Congo and Sierra Leone — with a revenue base of $730 million, representing 16 per cent of overall Africa revenue, the question is, will it exit the Africa operations gradually? The management, as always, is hopeful about its prospects in the remaining Africa operations. But in hindsight, it was this obsession about African market that made Airtel overlook some inherent risks in the African business deal. While every analyst agreed that Airtel’s decision to diversify its revenue base was good, there were questions raised over the price that it paid for the deal. However, Sunil Bharti Mittal was ecstatic about the fact that the company will not have any problem in getting the resources in place for the deal. After all the company had tied up resources for a two times larger deal with MTN that eventually fell through. Zain’s African operations were losing money in 2009 and this is the reason why the company was ready to let go of its operation in 15 countries. In the nine months to September 2009, Zain’s African operations reported a net loss of $112 million against a profit of $169 million in the corresponding period the previous year. Seven of the 15 countries reported losses. The highest revenue earner, Nigeria, lost $88 million. The Zain group had not invested enough in creating the infrastructure in the country through which it could tap the vast growth in the telecom sector. Airtel spent over $5 billion to reorganise the networks and sales and distribution infrastructure in the continent. Even that was not enough to win the tariff war with MTN. The strategy to have the lowest tariffs to win over the subscribers did not yield good results. The company’s average revenue per user or ARPU did not grow despite an increase in the customer base. The ARPU in the year ended March 2013 came down to $5.9 from $6.8 in March 2012. It further came down to $5.52 in March 2014 and within an year fell 20% to $4.4. Revenue per site also fell by 27% from $24,522 in March 2012 to $17,781 in March 2015. All this while, Manoj Kohli, the head of Africa operations for Airtel, asked investors to look into the bright future instead of staring at the dark present for companies increasing losses. The minute factory model of the company had failed in the African continent. Bharti had paid Zain US$252 per subscriber for the deal at a time when Africa had average minutes of use per subscriber/month at just 100. In India, the numbers was between 350 to 400. Even as the Airtel management says that it is not going to exit the African market completely, its decision to monetize its tower assets for $1.3 billion by divesting its tower assets in five African countries suggests that now, business sense is prevailing over the obsession of becoming world’s largest telecom operator for the management of Bharti. The company’s net debt at the end of fiscal 2015 stood at more than Rs 66,000 crore, most of which had been taken for the Africa operations. Airtel needs to reduce its debt and save its resources for the upcoming 4 G war back in India that is set to begin with the coming launch of Pan India services by Reliance Jio.
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The government has promised to get tough with telcos. But will the consumers get a better deal in the blame game scenario?By Neeraj ThakurTelecom companies in India have so far had one mandate — improving their profitability. Or so it would seem from the sheer decline in quality of service. So noticeable has this been that the central government has had to step in and try to salvage a situation that has become so bad that even the privileged class is not immune to it. Any mobile user will vouch for how impossible it is to go through a complete conversation without the network hanging up on you, especially in peak business hours. Clearly, in the interest of growing a customer base and increasing average revenue per user, telcos have dropped the ball on calls.Finally the government, with its own digital initiatives dependent on connectivity, put its foot down and announced a special audit, results of which will be used to penalise the laggards. Today, there is actually no operator in the country that can truthfully claim to be better than the others in terms of service. Consumers change providers only to find they still cannot hold a call.The Telecom Regulatory Authority of India (TRAI) conducts quarterly audits of telecom operators to rate quality of services. In the recent past, operators have not met the minimum standards set by the regulator. Some networks fail to control the call drop rate which is as high as 8 per cent compared with the minimum acceptable of less than 3 per cent in the worst affected cells. Others fail with connecting calls in the first place.The telcos’ defence is that poor services are a direct result of the government’s policies. A shortfall in spectrum and restrictions in installing mobile towers is bound to have a fallout.A Telecom TussleThe telecom minister, Ravi Shankar Prasad has categorically said that his government has provided enough spectrum. In the last round of spectrum auction, the government gave away as much as 470MHz of airwaves. Prasad feels it is now the turn of the telcos to ramp up their infrastructure, failing which, a penalty is in the offing.Telecom operators, counter the ultimatum with some international data. “There is not enough spectrum with the Indian telecom operators, says Rajan Mathews, director general, Cellular Operators Association of India (COAI): “In India, the average amount of spectrum per operator is between 12-15 MHz, whereas internationally it is 45-50 Mhz. How can you have better services with more subscribers and less spectrum?”asks Mathews.Indeed, another reason for the poor quality of calls is the mismatch between the growth in subscribers and the growth of mobile infrastructure like base transceiver stations or mobile sites.Price Waterhouse Cooper data shows the consumer base of mobile services grew from 57.4 crore in 2010 to 97 crore in 2015, an increase of 66 per cent. But the growth in mobile towers was only 33 per cent from 3.29 lakh in 2010 to 4.4 lakh in 2015. Hazards AheadJust when the Indian mobile sector was riding at formula 1 velocity, it hit a speed-breaker in the form of health activists. In the past three years, telcos have faced difficulties in installing mobile towers in residential areas. Even existing towers have been pulled down under pressure from Residents Welfare Associations. COAI data shows in the past three years around 186 mobile sites were pulled down in Delhi due to agitation by local residents. In Mumbai, the number of de-installed mobile sites was 120.Gopal Vittal, MD and CEO of Airtel recently said in a media interaction, “We need both spectrum and more sites for mobile towers. In Delhi’s Lutyens area alone we need 217 sites, but we have only 117 sites.”Prasad sides with the operators on this issue and quotes studies by the Department of Telecommunication (DoT) and World Health Organization (WHO) to support the installations of mobile towers in residential areas. While the DoT report categorically denied there was any proof that radiation from towers was a health hazard, WHO’s report has been inconclusive and has warranted more studies on the subject. While Prakash Munhsi, who is spearheading the campaign disclaiming health hazards from towers, says that they are not against installation of towers, there is a need for a third party to assess radiation norms. “The mobile companies want to save the cost by installing fewer towers with more radiation. We have been telling the government to force the companies to use less powerful mobile towers to control the radiation levels. But the mobile companies use higher level of radiation to keep their infrastructure operational costs down,” claims Munshi.It’s ComplicatedSome experts believe that the Indian telecom companies have overspent on buying spectrum and do not have enough funds to upgrade the tower infrastructure.The spectrum auction of 2010 was fiercely fought between the Indian telecos. They shelled out around Rs 70,000 crore to the government for spectrum in the hope that the 3G services will help them recover the cost. In 2010, Bharti, the biggest telecom operator by market size as well as revenue, won 3G spectrum in 13 circles, bidding Rs 12,300 crore. This resulted in a debt pile up of Rs 10,233.10 crore on the company’s balance sheet in March 2011, an increase of 103 per cent from a debt of Rs 5,038 crore in March 2010. A part of this was also taken to buy business in Africa. But clearly, the company has been paying a higher interest outgo since then.Mahesh Uppal, director at Com First, a telecommunication consultancy, says, “The government needs to provide more spectrum to the operators for the latter to be able to improve quality of services. At present, the government seems more keen to maximise revenues from spectrum auction by exploiting its scarcity. The two sides are simply not on the same page.”Spectrum auctions in 2014 and 2015 have further dented the financials of the telecom companies, restraining their ability to create new infrastructure. In 2014-15, the telecom operators paid over Rs one lakh crore to retain spectrum that was up for renewal.Global credit ratings agency Moody’s says: “These payments will cause debt levels to rise significantly for most operators, including Bharti Airtel (Baa3 stable) and Reliance Communications (RCom, Ba3 stable), and will limit their ability to make additional investments over the next 12-24 months, possibly slowing the rollout of 3G/4G networks in India.”Ashish Sharma, partner, Telecom, PwC India, believes having a large number of players in the sector has made the business unviable for companies. “Clearly, the companies have not invested enough money in creating infrastructure. But the companies do not have money to invest. Due to cut-throat competition and large number of players, there is neither enough spectrum nor enough earning for the companies to be financially viable,” says Sharma.India has as many as 12 players in the telecom market, which not only increases the price of the bid during spectrum auctions but reduces the share of spectrum availability per operator. Technical TroublesTelcos use multiple technologies to provide services. No operator has the same wavelength in all circles. This leads to hand-off issues. So if a consumer has subscribed to 2G services from the operator and he travels to an area where his operator’s 2G network is congested, the operator cannot transfer the call to the 3G network. If operators were to use a single technology there would have been better network utilisation.Mathews points out that countries like Korea, Japan and Sweden do not use 2G technology at all. The US is also gradually moving away from the 2G technology. In India, however, it would not be possible for operators to discard 2G because this runs on 900 Mhz frequency suited for voice services. “In India, 79 per cent of telecom revenue comes from voice and only 15 per cent from data,” says Mathews. Also, the operators have invested about Rs 5.62 lakh crore in current infrastructure. They would not want to write-off this investment so early.”Glimmer Of HopeIf the government gets tough, telcos will have to improve their services, even if it means more debt on the balance sheet. Uninor gives a minute of free talk time in a 24-hour period for disconnections during a call. But, because Uninor is not a big player, compensating consumers does not force other companies to do the same. A government policy can do the trick for consumers.Also, companies like Airtel are looking at new technologies to make up for lack of spectrum in different pockets of their circles. Recently, Airtel bought a minority stake in OneWeb which aims to build a communications network with an initial constellation of 648 Low Earth Orbit satellites. According to Sunil Mittal, founder and chairman, Bharti Enterprises, this will help improve the network in pockets that suffer from lack of spectrum or other technological glitches. Other companies will also have to invest more in their infrastructure to improve their services.However, everything comes at a cost. Given the leveraged balance sheets of the companies, the only way out to improve services will be to increase the voice tariffs. But Indian consumers have been averse to tariff increase in the past. Even the government wants to keep tariffs low to increase cellular penetration. The choice then is between lower tariffs and better services. RAVI SHANKAR PRASADUnion Telecom Minister‘SPECTRUM IS ADEQUATE’Q: What is the stand of the government on the call drops issue?A: While I appreciate the expansion of India’s mobile telephony in which both the government and private operators have done a great job, it is equally important that the services for the consumers are effective. I am all for the growth of the telecom sector. But to judge that growth, consumer satisfaction is my benchmark.Q: How is the government tackling this issue with the operators?A: The telecom secretary has spoken with the operators. We are taking some policy initiatives. For example, in-building solutions would be provided in all the government-owned buildings for which the government and the operators need to work together so that a lot of pressure on spectrum is relieved. I have also asked the telecom secretary to be in touch with the urban development secretary to see how BTS towers can be installed on government buildings on a sharing basis.Q: Operators say that they face problems in installing towers due to campaign against radiation by health activists?A: I have said publicly that the World Health Organization has done a lot of studies. Over 30,000 samples were taken world over. In their last report of 2014, they said that there was no medical evidence of the adverse health effects due to mobile towers.Q: Another argument from operators is that the average per operator spectrum in India is just 12-15 MHz as against the international trend of 45-50 MHz...A: I do not appreciate uncalled for alibis. Sorry! If they need to upgrade their infrastructure, they must do it. Therefore they (telecom operators) should not blame spectrum always. In our view, presently adequate spectrum is available.Q: Some experts say that Indian telecom operators have overspent their resources in buying the spectrum and now they do not have money to invest in the infrastructure...A: I do not want to go into it because whenever their quarterly results come, they show a very happy situation.neeraj@businessworld.in, @neerajthakur2(This story was published in BW | Businessworld Issue Dated 10-08-2015)
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