2012 – The “Lost Year” for Indian Telecom _ Forbes India Blog - Copy

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Vsevolod Rozanov, the President and CEO of MTS India,is in surprisingly good humour when I meet him at the

MTS headquarters in Udyog Vihar, Gurgaon. Themorning air is already starting to fill with dust from theendless traffic and construction. Every possible inch of space, including kerbs and sidewalks, for a kilometerlong radius from his office has been parked with cars.

He jokes about changing his headquarters to another Indian city, maybe Mumbai, then tells me a couple of funny, wry and ironic Russian folk tales of which heseems to have an endless supply of.

I ask him how 2012 turned out for his company and theoverall telecom sector.

Vsevolod Rozanov: 2012 was a lost year because we arenot closer to any of our goals. The industry itself is in a very grey and gloomy mood.There is a complete lack of desire from operators to invest in their business. Capex isdecreasing because more and more monies are now required for various levies. Thereis no joy in the industry. So as a business, this year was gone.

We didnt make much progress on smartphones, because newer partners (distributorsand retailers) dont want to trust you in this kind of an environment. On the cloudcomputing front too we didnt proceed further beyond discussions, because it wouldhave been irresponsible to engage anyone till our own future is clear.

The lights go off in the conference room, pitching us into darkness and silence fornearly a minute. Rozanov, by now a three year veteran of Indian telecom battles,doesnt seem bothered by piffling matters like that any longer.

There were some achievements too we launched MTS branded retail stores; our

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leadership team comprising the top 35 people was stable, with no one leaving.

Thankfully, we were in hibernation, not in degradation.

R.D.: Are things in telecom so bad in India?

V.R.: In almost every emerging market Telecom is the biggest shining star. Because itsits between heavy infrastructure and branded consumer services, it is an extremely rare

breed. Thats the source of joy and happiness. In Russia, the telecom brands are the

really top brands. In India too, while Tata Salt may be a great brand, its telecomcompanies that have the potential to affect the lives of so many people.

Instead people are flocking from the industry, not just from specific operators, forsectors like FMCG and financial services.

Meanwhile the biggest tragedy is operators are shutting down networks. Have you everheard of a country where operators shut down live networks?

In Kerala three serious operators Aircel, Telenor and Videocon just shut down theirnetworks. This is a problem for the country. Its like building bridges, then blowing themup later.

Nearly 95 percent of the people managing these networks are being given pink slips, while the equipment either sits in warehouses or is resold at 5-10 percent of their

original value.

R.D.: So can we take it that India is not all that different from other global marketswhen it comes to the number of competitors?

V.R.: Given that this is a licensed and regulated sector, and there was an invitation tocome and invest, didnt the government make a wrong decision?

What its policies did was to slice the required capital investment too thinly across toomany operators. Newer operators created massive excess capacity and then had to dropprices. They figured when youre starting with zero network utilization, volume mattersthan pricing. But once they reached a certain scale then they had to figure out how toraise prices.

Unfortunately in Telecom the concept of increasing prices is almost unheard of.

R.D.: Will stronger brands make it out in better shape from this mess?

V.R.: I would argue that in telecom you are selling a commodity, so the brand mattersmore during market pickup where it plays a huge role to attract new customers.

But look at mature markets like the US or Germany. Sure, the brand is important there, but much less so. They just need to be seen as stable and respectable.

The more a market matures the less the importance of the brand, in my opinion. Instead what ought to become more important are things like customer segmentation, productofferings tailored for the needs of customers, and customer care.

R.D.: How do you correct this mistake then?

V.R: Globally the way to cure this mistake, of too many operators, is allow hurdle-lessM&A (mergers and acquisitions). That provides an honourable exit to those who wantout. Consolidation is how governments internationally manage a situation of too many players. But we dont see that in India.

R.D.: Will 2013 be any different than 2012?

V.R.: By end of March I hope were through with all the auctions and one time charges,

leaving no new surprises. Because nobody will launch any new services till theyre fully stable.

Consolidation and price rationalization are two things all operators will want to see.

But the requirement of one-time payment for merged spectrum may only lead to more

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shubham December 17, 2012 at 11:57 am

Thanks for the article!! really insightful.... Would love to read more on the Telecom sectorand IP telephony..

network closures instead of consolidation. Maybe in Q2 2013 we might see some new M&A guidelines, but even then the minimum time it will take for actual consolidation totake place 12-18 months after any announcements are made.

Also, the M&As have to happen among the leading 7 incumbents, not newer operators,for any meaningful results. The 7 should ideally become 4.

R.D.: What about 4G? Is 2013 likely to see some disruption from that front?

V.R.: Look, we have 2 million data customers in India, which is 22% of the total marketof nearly 10 million.

When it comes to LTE, there are no devices to browse on; LTE modems will beexpensive; and there is a severe lack of vernacular content. These are the problems.

Tags: 2G, 3G, 4G, Broadband , MTS, telecom , Vsevolod Rozanov

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April 20, 2013 14:50 pm by Curious case of Indiantelecom: From superstar to basket-case | ForbesIndia Blog

Commented on 2012 - The "Lost Year" forIndian Telecom

[...] the equipment either sits inwarehouses or is resold at 5-10 percent of their original value, said Vsevolod Rozanov,the CEO and President of MTS India to mein [...]

April 20, 2013 13:27 pm by Curious case of Indiantelecom: From global superstar to basketcase -Firstpost

Commented on 2012 - The "Lost Year" for

Indian Telecom

[...] the equipment either sits inwarehouses or is resold at 5-10 percent of their original value, said VsevolodRozanov, the CEO and President of MTSIndia to me in [...]

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December 17, 2012 11:57 am by shubham

Commented on 2012 - The "Lost Year" forIndian Telecom

Thanks for the article!! really insightful....Would love to read more on the Telecomsector and IP telephony..

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2012 – The “Lost Year” for Indian Telecom _ Forbes India Blog - Copy