The Indian Telecom sector grew leaps and bounds, thanks to some proactive and positive decisions from the Government and overall cooperation from the public and private operators. The measures taken include investment boom and falling tariffs, among others.

During the year 2005, the Indian telecom sector registered growth on every possible account. It was, in fact, a key factor in the overall economic upheaval in the country. The sector has been growing by 20 to 40 per cent over the last three years. Guided by the Government, both public and private players came together to fuel such phenomenal growth in the sector.

During 2005, mobile phones (at 72.685 million) outnumbered the fixed line ones (at 47.988 million). The number of telephones went up from 77.94 million in May 2004 to over 120.67 million in November 2005, registering a growth rate of 54.82 per cent. Tele-density, which was at 7.15 per cent till May 2004, reached 10.87 per cent. Government policies helped the share of private operators touch a level of 53.54 per cent as on 30th November 2005. Till May 2004, the private operators had a 40.21 per cent share of the market. Till now, they have provided about 33.26 million phones (77.84 per cent) of the total of 42.73 million phones given out to subscribers.

Rural telephony has been an area where a lot of ground has been covered. Under the Universal Service Obligation Fund, the entire budgetary allocation of Rs 18.1458 billion for the financial years 2002-03 and 2004-05 has been utilised. Under the fund, about Rs 102.88 billion have been collected between 2002-03 and 2005-06. As on September 2005, Village Public Telephones (VPT) had already connected more than 5,33,000 villages. The remaining 53,800 villages are scheduled to be brought under the network in a phased manner over the next three years. The rural areas now have more than 0.2 million public call offices (PCO). In all, the rural areas now have more than 13.9 million phones.

The Government has, to a good extent, liberalised the foreign direct investment regime for the telecom sector. The FDI ceiling has been raised from 49 per cent to 74 per cent. The 74 per cent FDI ceiling includes direct and indirect foreign holding in the licencee companies. Owing to these measures, the total FDI approved for the telecom sector reached about Rs 114.82 billion during the period between August 1991 and September 2005.

A rising demand for mobile telecommunication equipments has attracted domestic and foreign investors in the manufacturing sector. Companies like Ericsson, Alcatel, Elcoteq, LG have already set up their manufacturing facilities in India. Nokia is coming up with one near Chennai with an investment of $150 million. Flextronic Siemens, Motorola, Foxcon, Aspcomomp, etc. also have similar investment plans. Given all these, the telecom equipment manufacturing sector is estimated to attract about $855 million in next couple of years.

A number of electronics and telecommunication equipment firms are keen on setting up R&D centres in India. The C-DoT-Alcatel Global Research Centre, a joint venture of Alcatel of France and C-DoT came up at Chennai. The centre will be developing WiMAX products in India. Ericsson is also planning to set up R&D base in Chennai. Cisco is coming up with an NGN lab for IT and Telecom, with an investment of $10 million. They are also making an additional investment of $1.1 billion in IT and Telecom Sectors.

The year 2005 witnessed some major policy initiatives on the part of the Government. The union budget 2005-06 waived the customs duty on components and raw materials, making telecom equipments cheaper by 13 per cent. The peak custom duty was also brought down from 15 per cent to 10 per cent. A reduction of three per cent in the corporate tax rate and removal of mobile phones from `One-in-Six Criteria’ for the purpose of income tax strengthened mobile telephony.

BSNL reduced international call charges for all the countries by 33 per cent. It, along with MTNL, launched nation wide broadband service, covering more than 200 towns. The northern, western and southern regions of the country received an additional capacity of four million GSM cellular phones. The process of spectrum allotment was expedited with the commencement of the automatic spectrum management system.

Indian Telephone Industries (ITI) tied up with Alcatel for transfer of technology for GSM equipment manufacturing. Under the revival action plan of ITI, facilities for manufacturing of GSM equipments was set up at Mankapur and Rae Bareli in Uttar Pradesh.

Now, calls between Chennai and the rest of Tamil Nadu, Mumbai and the rest of Maharashtra, Kolkata and the rest of West Bengal and Andaman & Nicobar, and eastern and western UP service areas are being treated as intra-service-area calls.

Broadband connectivity has grown fast, with both outdoor and indoor usage of low power Wi-fi and WiMax systems in 2.4 Ghz to 2.4835 GHz band being delicenced. Besides, the use of low power indoor systems in 5.15 to 5.35 GHz & 5.725 to 5.875 GHz has also been delicenced.

With the dawn of the year 2006, annual licence fee for national long distance (NLD) as well as international long distance (ILD) licences are going to be slashed to 6 per cent of adjusted gross revenue (AGR). The entry fee for NLD licences is likely to be reduced to Rs 25 million from Rs one billion. The same for ILD may be reduced to Rs 25 million from Rs 250 million. NLD service providers shall be permitted to carry intra-circle traffic on mutual agreement with the originating service provider. The requirement of agreement with terminating service provider has been done away with. Both existing and prospective NLD licencees will no more be subject to mandatory roll out obligations. The ILD services licencees also enjoy the reprieve, except for having at least one switch in India.

Now, the NLD as well ILD service licence applicants need to have a net worth and paid up capital of Rs 25 million only. Besides, while counting the net worth, that of promoters shall not be taken into account. The NLD service providers can now access the subscribers directly for provision of leased circuits and closed user groups and can provide last mile connectivity. The ILD service providers can access the subscriber directly only for provision of leased circuits and closed user groups.

The access service providers are allowed to provide Internet telephony, Internet services and broadband services. They can even use the network of NLD and ILD service licencees. The IP-II and IP VPN licences have been done away with. From the first day of 2006, Internet service providers (ISP) with restricted Internet telephony are to be charged a licence fee at 6 per cent of AGR.

The annual licence fee in respect of VSAT commercial is to be charged at 6 per cent of AGR.

( www.efytimes.com)