Telecom: The success story of reforms

Updated: Jan 17 2002, 05:30am hrs
You guys are forever complaining... dont you have some success stories to tell This was the remark I heard from an overseas friend who was here on a business trip. So, I looked around to see if there was anything tangible to write home about apart from the fact that we had not had a single major communal riot over the last two years. It struck me that telecom was one story which can be touted as a clear success of the much touted reform of the economy.

In the early nineties, we started reform of many sectors where the government held commanding heights. In the power sector, that has been so far quite a disaster. The shortage of power has gone up and we are forever debating the payment security mechanism. In the financial sector, we have had a mixed bag. True there are a lot more players and more choice to the consumer, but, it has left many of the players either limp or dead. Most of the government owned banks and financial institutions are in a deep mire and the problems of Unit Trust of India are known even to school children. But strangely amongst this rubble, the telecom sector stands out.

After the telecom sector was opened up in 1994, we have had massive growth. There are 47 lakh cellular phone subscribers in the country and the industry is doubling every year. After a slow start, basic phones are also on the move and should be growing at more than 10 per cent every year. The number of Indians owning phones will exceed five crore in the next three to four years. International dialing is all set to take off when the sector is opened up for private investment in April. And the internet revolution has been so phenomenal that there are more internet users than telephone connections in the country. To copy a line from ESPN, It is all happening right here now.

It is not just the growth numbers that make the story so good to tell it is the fact that the consumer is the biggest beneficiary in the process. Tariffs have come hurtling down as competitors fight it out in the market place. In no sector of the economy have prices come down so fast than in the telecom sector. People are delighted for this. However, it is not only price reduction that is keeping people happy but the value additions that are improving the quality of Indian lives. Grandmas are sending e-mails to their grandchildren in Dallas on their birthdays and the younger generation is creating a new language through the short messaging service.

A few other aspects of the telecom revolution are worth analysing. We messed it up to start with when we came out with the National Telecom Policy of 1994. It was too restrictive showing the reluctance of the babus to let go of their hold. So, all that we saw was acrimony and court cases. Just as one had given up as one more sector ruined by flat footed decision making we had the good sense to overhaul the policy and put in a new one in 1999.

We recognised that there are huge risks involved in terms of market development and initial project investments and changed the pricing structure to one of revenue sharing. True, this did mean a hit for the government coffers, but experience has shown that this has been more than made up by the surge in volumes. In short, as a government we were prepared to realise our mistakes and change. We also did not succumb to the blackmail of the powerful government entities which had created a stranglehold on the industry and were most reluctant to lose their monopoly. Department of Telecommunications (now called Bharat Sanchar Nigam Limited), Videsh Sanchar Nigam Limited and Mahanagar Telephone Nigam Limited were strong monopolies which used every argument to stop reforms but we had the good sense to rap them on the knuckles and tell them to fall in line.

More importantly, the telecom deregulation has been achieved without handing over the industry on a platter to the foreigners and for this we should compliment Indian entrepreneurs. Unlike in the consumer goods sector where the LGs and Samsungs have taken over and the food sector where it is Pepsi, Coke or Hindustan Lever, in telecom we have Indian groups in the forefront. Leading the pack is Bharti, which now appears to be so far ahead that it is setting the pace even in key areas like Subscriber Trunk Dialling. Its aggressive acquisition strategy has given it a footprint all over India. Also in the fray are companies such those owned by the Tata, Birla and AT&T combine and of course the redoubtable Reliance. However, old traditional groups like the Modis, RPG have found the going too hot and lost out.

There is also the Chinese group Hutchison that has managed to come in, piggy backing on local groups with ownership structures which are difficult to comprehend. There are many lessons for us in this story. Government has been pragmatic. Private entrepreneurs like Bharti have taken the risks as they are supposed to be doing. And it is the public that have gained the most in terms of lower user charges and more services. This is really what we need in other sectors like power, highways, ports etc: pragmatism on the part of the government and entrepreneurship on the part of Indian groups is bound to make reforms a success.

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