The high costs of rolling out services in remote and rural areas of the country, combined with relatively low revenue earning potential, have prevented private operators from venturing out to the Indian hinterland. Intense competition in urban areas has reduced the Average Revenue Per User of mobile operators to less than Rs 400 per month, one of the lowest in the world. Hence, mobile operators need to reduce the cost of their service offerings to survive in the market place.
In such a scenario of rapid growth and intensifying competition, although collaboration might seem counter-intuitive at first glance, yet it is bound to gradually become an integral part of each operators survival strategy. Can the operators create more value for themselves and for the consumers by coming together than they would have created individually?
Adam Bradenburger, professor of business administration at the Harvard Business School and Barry Nalebuff, a professor at the Yale School of Management in their book which became a Business Week and The New York Times best-seller wrote: “Some people see business entirely as competition. They think doing business is waging war and assume they can’t win unless somebody else loses. Other people see business entirely as cooperative teams and partnerships. But business is both cooperation and competition. It’s co-opetition.” In fact, the service providers should adopt co-opetition strategies where they collaborate, as well as compete.
One way to collaborate is through infrastructure sharing. Mobile networks can be shared with varying degrees. At the most basic level, a cell site containing premise/tower with power plant is shared. Setting up a cell site, also referred to as Base Transceiver Station (BTS), can cost as much as Rs 2 crore, depending on the location.
| • One way for telecom operators to cooperate is by sharing their infrastructure • For instance, the cell site, which can cost upto Rs 2 crore each, can be shared • Trai has suggested infrastructure sharing to increase rural teledensity |
The next level up is to share the antennae at the site. The base station equipment that manages the transmission of signals over the mobile network can also be shared. Finally, the operators can possibly share their core network itself. Hence, depending on how much of the network is shared, it is possible to save between 15 and 40% of the cost of building the network.
Examples of infrastructure sharing at different levels abound globally. For example, all the five Malaysian operators signed a memorandum of understanding on sharing of telecommunications infrastructure way back in 2001.
The objective was to optimise and consolidate their respective resources to provide quality services to their customers. In 2004, Australia’s four mobile operators have committed to third-generation Wideband Code Division Multi-ple Access infrastructures sharing on two radio access networks.
The regulator Trai, in its recent recommendations on growth of telecom services in rural India, prescribes infrastructure sharing as the solution for improving rural teledensity in our country even upto 15% by 2007.
Trai’s recommendations specify Universal Service Obligation Fund (USOF) support of upto Rs 36 lakh to mobile operators who share their BTS with others. Trai has also proposed USOF support of upto 40% of ceiling rates of leased lines to the incumbents for sharing their optic fibre bandwidth and providing leased lines between BTS and Base Station Controllers in the rural areas of the country.
The government should act quickly on Trai’s recommendations on infrastructure sharing, thus enabling co-opetition amongst the service providers, if the dream of the communications minister, of attaining 200 million mobile subscribers by 2007, is to be realised!
V Sridhar is a professor at the Management Development Institute, Gurgaon, and Prashant Saran is with the IBM Business Consulting Services. These are their personal views