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March 08, 2008

Telecom war rages on

Businessworld has a cover story on the unending corporate war in Indian mobile telecom.
(Anil Sardana), the bespectacled, professorial general fighting Tatas’ telecom battle and Tatas’ regulatory advisors in New Delhi are being uncharacteristically aggressive for the group. Sardana is indignant about how his competitors have manipulated regulations in New Delhi, and publicly accuses many of them of hijacking India’s telecom policy. The man who has foxed Tatas, as well as a host of other telecom wannabes, including initially even the Ambanis, is Sunil Mittal. He, along with Vodafone Essar (earlier Hutch Essar, when it was owned by the Ruias), was an early entrant into the industry and took advantage of the government’s ignorance of the sector to secure an unassailable position for himself. Mittal’s game was simple and he’s still playing it. The mobile phone industry is dependent on the spectrum (or airwaves) that carry mobile phone signals at various frequencies.

Mittal, along with Hutch/ Vodafone, made sure he cornered as much of this scarce and limited resource as he could at the cheapest rate. While spectrum cost the earth in most countries, Mittal and the Ruias of Hutch/Vodafone made sure they got their spectrum at just Rs 1,651 crore for 4.4 Mhz, roughly 10 per cent of the price for the equivalent spectrum in the US (see ‘Charge!’, BW, 10 December 2007). When Tata pointed this out and offered to pay more, Mittal mocked him by saying those with excess money should donate it to the Prime Minister’s Relief Fund. Such dominance over regulations has irked Tata the most, mostly because his values prevent him from playing the same game.

...The new policy successes of Tatas and Reliance can be best seen in the advent of number portability, which comes into effect from 1 April. As late entrants, Tatas and Reliance could only really try to win first-time cellphone users. But with number portability, which allows consumers to switch between mobile service providers without changing their number, they will also be able to attack the existing consumers of companies such as Bharti Airtel and Vodafone Essar. Since these operators have many more users than Tatas or Reliance, their networks are clogged. The new operators will be able to attract disgruntled users. “The biggest casualty has been customer services,” says Sardana. “The only thing that differentiates the operators and sustains them is the service quality. The quality of survey (QoS) of the biggest player (Airtel) is the worst.”

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.