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Business News/ Industry / Telecom/  Indian telcos’ missing focus on R&D is hurting them
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Indian telcos’ missing focus on R&D is hurting them

India's surviving telecom companies, incumbents and newcomers alike, will need to develop newer solutions to future-proof themselves

No tears were shed for Tata Teleservices as it threw in the towel last week, selling off its highly indebted business to Bharti Airtel, for a song. Photo: MintPremium
No tears were shed for Tata Teleservices as it threw in the towel last week, selling off its highly indebted business to Bharti Airtel, for a song. Photo: Mint

No tears were shed for Tata Teleservices as it threw in the towel last week, selling off its highly indebted business to Bharti Airtel, for a song. Over its 21-year journey it accumulated over 40 million customers but little else, creating no identifiable intellectual property.

It’s a charge that can be levelled against all the telcos in the country.

Over the last 10-15 years, the telecom business worldwide has been marked by advances like the advent of VoIP (voice on internet protocol) which ushered in the era of telecom and internet convergence, broadband, smart phones, 3G and 4G technologies to power networks as well as over-the-top services.

These years have also coincided with the surge of these services in India which is now the world’s second largest telecommunication market and has the third highest number of internet users in the world. In the last 10 years, India’s telephone subscriber base expanded at a compounded annual growth rate (CAGR) of 19.16%, while tele-density increased from 17.9 in FY07 to 92.59 in FY17, according to Telecom Regularity Authority of India (Trai) data. Those are staggering numbers, especially when you consider how far behind the country was till the early 1990s when access to a basic telephone was considered a privilege.

What’s more, in this period massive fortunes have been created for companies, shareholders and the government. Market leader Bharti Airtel, for instance, today has a market cap of nearly $24 billion. The company did not exist till 1995.

It is safe to say that just as information technology (IT) services were the success story of the 1990s, telecom services have been the defining story of Indian business in the first decade of the 21st century. Sadly, for all its growth and penetration, the sector has thrown up little by way of research and development. Not a single breakthrough technology in telecom has come out of India, which should have served as the perfect crucible for experimentation.

The numbers are appalling. In the list of 50 top applicants that filed under the World Intellectual Property Organisation’s Patent Cooperation Treaty (PCT), a list dominated by telecom companies like ZTE Corp., Huawei Technologies and Qualcomm Inc., there isn’t a single Indian name. (https://www.wipo.int/export/sites/www/pressroom/en/documents/pr_2017_804_annexes.pdf#annex2) Even worse, a report by Thomson Reuters last year named Samsung, Huawei, LG, State Grid Corp. of China, ZTE, Qualcomm, Ericsson, Sony, NTT and Fujitsu as the top 10 global innovators in the telecommunications industry for 2015. No mention again of an Indian telco.

All the ingredients that experts say are needed to fuel research and development in the sector have been present in India, a large and rapidly growing market, demanding customers, profits aplenty, a phalanx of financing options and intense competition that should logically have spurred innovation. What’s more, it was evident to anyone who cared to look that in a business driven so much by technology, the barriers to entry could collapse overnight as it happened when Reliance Jio made its moves a year ago. The bloodbath that has ensued hardly comes as a surprise.

By the time Jio hit the market with its slash and burn pricing, spreading shock and awe among the incumbents, there was very little to separate one service provider from another in the customer’s mind. The business had become a commodity and naturally the lowest-priced provider would grab the low-hanging fruit, leaving those most vulnerable to slide into imminent ruin. If the number of operators has shrunk from two dozen 10 years ago to half that number today, it isn’t the market, the regulator or even the high cost of spectrum that is solely to blame. It is the dogged refusal of India’s telecom providers to look for differentiators.

Being an operator is a hazardous job. Research by the World Economic Forum/Accenture shows that telecommunications operators account for a lower share of the overall industry profit pool than five years ago, and this share is forecast to go down further in the future with operators seeing pressure on both revenues and costs. India’s surviving telecom companies, incumbents and newcomers alike, will need to develop newer solutions to future-proof themselves.

Sundeep Khanna is a consulting editor at Mint and oversees the newsroom’s corporate coverage. The Corporate Outsider will look at current issues and trends in the corporate sector every week.

Click here to read more from The Corporate Outsider.

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Published: 17 Oct 2017, 01:13 PM IST
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