Calling for money

India's large business houses have historically played a fundamental role in industries that are critical to national development. That the...

India8217;s large business houses have historically played a fundamental role in industries that are critical to national development. That the telecommunications industry in India received infrastructure status only in 1997 8211; 98 budget, reflects the low priority it has been accorded.

Without strategic positioning, national consensus and political will, India will not achieve a mere tele-density of 2.2 compared to China8217;s 9 by the year 2 000. Only 22 million fixed and 4 million cellular phones will be installed in India compared to 116 million fixed and 8 million cellular phones in China.

The Indian private sector is desperately seeking funds in a competitive global marketplace where the current annual shortfall of funds for developing countries to provide only 8220; plain old telephone8221; amounts to approximately US10 billion 8211; US8 billion by various estimates. At present, the Indian private sector is hamstrung by the weight of huge licence payments to the government even before it has begun commercial production US1 billion in licence fees for 1997-98.

Both the private sector and the government must share the blame for this state of affairs. Operating in a competitive market place and without a clear assessment of the economics of providing telecommunications services in India, the private sector willingly promised an exorbitant entry price to obtain a piece of the cake. When the private sector slowly began to comprehend the implications and sought the government8217;s understanding to re-examine unrealistic NPV calculations, it faced inertia and/or resistance at various levels in the system.

There may have been fear of losing monopoly control over what some perceived to be a finite or shrinking telecommunications pie rather than an expanding market with room for many players.Fortunately, both government and industry are climbing the learning curve. There has been a heartening attitudinal shift at the helm of India8217;s decision-making apparatus. This sea change is most evident in the pragmatic and leadership role and the strategic initiatives adopted by the Telecom Commission8217;s Chairperson, by the Finance Ministry and the country8217;s financial institutions. Government and industry are now seeking long-term joint-maximization outcomes to create a viable and healthy telecommunications industry.There is a growing realisation that tax payments to the government must be rationalised. Licence fees could be replaced by an escalating tax rate pegged to an expanding subscriber base and/ or enhanced per subscriber revenues or by revenue-sharing arrangements when industry achieves positive cash-flows. The global oil industry has many good models that could be adapted to suit the Indian telecommunications industry and the government8217;s revenue requirements. A healthy industry will have the capacity to pay handsome revenues to the government in the medium -and long -term, it will provide affordable and efficient telecommunications services to the largest number of consumers. But national consensus is required if India is to achieve the status of a significant telecom player. Eliminating inter-bureaucratic rivalry, a blue-print for multi-media convergence and a scheme for financing the industry and installing networks are essential and urgent ingredients. It also requires backward and forward integration and linkages among service -providers, IT software and hardware manufacturers, TV producers and content providers.