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In the early 90s, the promoters of Essar Cellphone decided to build a mobile network in Delhi for 100,000 subscribers. The decision took competitors by surprise, as they were building networks a quarter of that size. At Rs 17 a minute for both outgoing and incoming calls, mobile was meant for the well-heeled alone.
Cut to 2014. India has about 900 million subscribers. With penetration of 74.5 per cent, the number of mobile subscribers is more than the number of those with television or those enjoying Coke or Pepsi. At 60 paise a minute, the rate is the cheapest globally.
The history of mobile telephony in India has seen many highs and lows. In 1994, the government opened cellular services to private operators, offering two licences in each of the four metros. A year later, the sector faced its first crisis when, buoyed by ambitious projections, operators forked out Rs 27,000 crore for licences in 19 circles. A study by ICICI showed at least eight operators were making huge losses and almost were clocking revenues lower than the annual licence fee they had to pay.
In 1999, the government came out with a solution. Under a new settlement, drafted by then attorney general Soli Sorabjee, operators migrated from an annual licence fee to a revenue-share model. The new policy also did away with the duopoly model (two private players in each circle) and allowed state-owned operators to offer mobile services. (CALL LOG: A look at the rise in subscribers and fall in tariff in the sector, and its milestones)
In 1999-2000, the interconnect regime was introduced, ensuring a level field.
Reliance's attempt to stir a data revolution was ahead of its time. Its Monsoon Hungama offer, through which it gave mobile phones bundled with data and talk-time for only Rs 501, was lapped up by customers. But the rates weren't sustainable; Reliance was forced to write off Rs 4,500 crore from its books as losses.
In 2003, the government made incoming calls free, cutting customer costs by half. This led to a huge increase in the mobile subscriber base - from 10 million in 2002 to 47 million in 2004.
Subsequently, then telecom minister Dayanidhi Maran pushed operators to cut roaming charges up to 56 per cent and introduce one-year validity cards. Two more operators were allowed in every circle and the foreign direct investment (FDI) cap in the sector raised from 49 per cent to 74 per cent. Between 2004-05 and 2005-06, FDI inflow jumped from Rs 541 crore to Rs 2,751 crore.
At that time, mobile companies were making good money and it seemed the sector was about to take off.
In 2007, two key decisions by then minister A Raja brought the sector to its knees. First, he successfully conducted a 3G auction but limited the spectrum to five MHz an operator (against 20 MHz globally), leading to fierce competition. Operators forked out a staggering Rs 67,000 crore for limited 3G spectrum. Even the most aggressive of bidders, such as Bharti Airtel and Vodafone, did not have the cash to acquire pan-India 3G spectrum. This resulted in slower investment in service roll-out. Also, operators were unable to offer 3G at affordable rates, which blocked a data revolution.
Raja's second decision took a greater toll. Allegedly, he changed the rules on giving new licences on a first-come-first-served basis, to help those close to him. The decision, which brought four-five new licensees and doubled the number of operators in each circle, came under scrutiny. What ensured was cut-throat competition - rates fell to levels seen in 2005.
The crisis, however, paved way for a new structure. With five-six operators out of action, the sector did away with cut-throat competition and financial strain on operators' balance sheets. Companies consolidated and, for the first time, increased rates and realisations per minute without losing customers.
Slowly, operators cleaned up non-paying subscribers, which helped increase average revenue per user, amid the Centre deciding additional spectrum wouldn't be linked to the number of subscribers. Also, the government decided to take the auction route for all spectrum allocations. And, with the pushing off of the unified access service licence regime, spectrum was de-linked from services, giving operators the opportunity to launch 2G, 3G or 4G on any spectrum band.
Following operators refusing to participate in auction of the cancelled spectrum licences due to high prices, the government cut the base price about 25 per cent.
Now, operators are increasingly realising data is the next big draw. About 180 million consumers use internet on their mobile phones and Morgan Stanley has projected the number to exceed 500 million by 2018.
Reliance Jio Infocomm is investing about Rs 70,000 crore for 4G services, to be rolled out next year. Bharti Airtel has already rolled out 4G services in select circles. Others, including Vodafone and Idea Cellular, are readying themselves for the 4G war.
The future will, undoubtedly, be fuelled by data.
