Let us visit some eventualities that I foresee as a result of the per-second billing:

 1. The interconnect charges will drop, and not to the 10paisa per minute that our Honourable Minister recently recommended but, to a per-second rate. In fact 0.1 paisa per second is where I see it coming down to shortly.
 2.  The franchisee or the MVNO model will die. With retail sales at 1p/sec what can wholesale prices come down to? Moreover it is just not a question of retail Vs wholesale but the fact that while revenues & profits tumble the OPEX remains almost the same. So Network Owners will not be able to give wholesale prices to MVNOs. However India will witness franchising in the next two years. I feel that with limited slots for 3G there will be some franchisee/ MVNO model created by the players who will lose out on the auction. While for WiMAX we will definitely have franchising sooner, starting with the BSNL tender for the remaining circles (3 have been awarded to SOMA networks).
 3.  The rates will further drop for intra-operator calls. MTS has already launched a 0.25paisa/ second call for MTS to MTS subscribers. This would be an imperative action by the incumbents as a first-step retention strategy. Right now not many are talking about MTS and the main reason is their being a CDMA operator. Though they have launched an extremely competitive tariff the entry cost of handset is a barrier for new subscribers.
 4.  The taxes will reduce. We already have a very high telecom tax structure compared to China & other Asian markets. The tax structure of Revenue share on Licence Fee, Spectrum & Service Tax all adds up to the price to the customer and for some circles it touches 30%. There are two strong arguments in favour – the first being the business case viability for operators and the second, which is stronger, being the fact that the ‘poor rural customer’ who buys micro-prepaid credit has to bear the brunt of these taxes.
 5.  SMS rates will drop drastically as they will start forming a bigger percentage of the ARPU. Maybe the next 4-5 operators will introduce a Free SMS Plan for life as they definitely cannot go below the 1paisa/ second voice billing. However Value Added Services will gain a lot in importance as a service differentiator and this is another space where we should watch out for DoCoMo. VAS in Japan is almost at a Sci-Fi movie level and porting and customising those services for India will be easier for DoCoMo than for others. The place that Operators should focus on is VVAS (Vernacular VAS) – Services for people who cannot read or write English.
 6.  The tower companies’ valuation will increase in the near future and some of the PE players will cash out. Recent months have seen that incumbents can be put under tremendous pressure and that it is never late to launch services if the entry strategy is thought out well. Now others who have long signed contracts with vendors but not mobilised deliveries will speed up their launches. This will lead to several Tower rental agreements being signed – the current sharing ratio of 1.5 will rise to 2.5. Tower companies valued at 50Lacs per tower will start demanding 1Crore. This might however not last. The reason is that OPEX reduction pressure will make the Operator owned tower companies to reduce rental rates. The non-operator-owned Tower companies will have to follow suit. The tower valuation will again come back to normal – giving about a 20% IRR to investors. But some people like I said will make money during this rise & fall.

By and large every time we feel that the Indian Telecom market has become predictable something happens to make it exciting. Sometimes it’s a government regulation and sometimes pure competitive forces. There is a lot to expect from the coming years also. We will see 3G & WiMAX launches, WiMAX Franchising norms will allow more players, USO fund utilization schemes will be there, another mega BSNL tender, consolidation of operators & tower companies.

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