So you think that's an extreme view? May be. But are there banks that actually do so? Not yet. Will they ever get there? Most certainly.

Now that I've grabbed your attention, let me tell you something. No, your bank will not become a telco on Monday morning. But it is beginning to look or think like one, for sure.

In the last week of March, ICICI Bank disclosed that it is considering ‘unlocking the value of its ATM (automated teller machine) assets' by hiving off the ATMs / POS (point of sale) terminals into a separate company. We heard this about 3 years ago from Bharti Airtel when it first took the opportunity of hiving off its tower assets into a separate business. And it did. And now everyone, including good old BSNL, wants to move the towers into a separate company. Vodafone made a similar announcement on March 21, launching Ortus, its tower affiliate.

When your bank begins to think like a Telco...
Telco business parameter Critical access enabler Mobile subscriber -service provider interface Ubiquitous Roof top / ground based Tremendously useful but ugly Usually located just about anywhere Requires external power Installation process - risky and dangerous Usage process - not so risky Always open for business	Retail banking equivalent Critical Access Interface / Enabler Retail banker to service provider interface Ubiquitous Thankfully ground based only Tremendously useful Usually located where people inhabit Requires external power Not so risky Can be risky and dangerous during / after use Depends on chowkidar

Historically, there have been comparisons made between the telco business and the airline industry:
Both are capital intensive
In both sectors the ‘footprint' is critical to the success of the operation [network footprint is similar to travel route coverage]
Seat capacity/loading is critical [network capacity utilisation for telcos determines tariff plans for time-of-day]
Excess capacity is auctioned off via third parties [this caused the birth of the Internet travel business, while in the telecom sector, excess bandwidth is resold via the carriers' carriers] and so on.

The telecom business in India is certainly much more than critical mass now and the similarities with the banking business have become menacingly close. Although hilarious in parts, this article attempts to take a serious look at the similarities and differences between this dissimilar pair of service providers.

For our overseas readers, chowkidar is the Indian term for a security guard who is responsible for physical security at an ATM or similar location.

The operating models of the telecom tower businesses now have some level of established processes/procedures and are quasi-regulated. I will not be too surprised if similar regulatory rules come into being for the emerging ATM companies once they are established. So we could then expect RBI [Reserve Bank of India, the equivalent of the US Fed] to start exchanging notes and experiential wisdom with TRAI (Telecom Regulatory Authority of India). Why, there could even be some cross-hiring from the TRAI offices at Sanchar Bhavan in New Delhi!

 

Operating Model
Shared across multiple service providers Operations via 3rd party managed services Owned by exclusive operator spin-offs or Joint venture corporations 3rd party Tower companies already large firms Foreign telcos have invested / will invest in Indian tower companies No global Intermediary in this space	Shared across multiple banks Operations still controlled by banks, some parts are now outsourced: for example, cash loading/ transport Owned by exclusive banks / shared ownership but this may change soon, for eg., The ICICI ATM spin-off This should happen over the next 2-3 years in India Could happen over the next 2-3 years in India Branded via global financial factors: Master card, VISA

The Indian telecom and banking sectors have both expanded unimaginably over the last few years. By consumer count, without doubt the telecom sector has outgrown pretty much everyother sector, by far. The result is that the unending hunger for cellular towers has outgrown the space available for them. There's a joke going around that many landlords in rural North/North East India have actually used their income from rooftop tower rentals to pay off their housing loans. But it doesn't look like such windfalls will be available in the ATM space - nope. Mostly, this is because ATMs carry some amount of real cash and are typically enclosed inside a common wall shared with a bank branch or some sort of a secure building, whereas the wireless tower could be perched in the middle of anywhere, including some ridiculous locations such as a zoo (not that it offers any of our endangered species a better chance to survive), mountain roads winding down jungles, under railway aqua ducts and across a river bed that divides two states fighting over their ‘rightful' share of water!

When Airtel and other leading mobile operators have been finding ways to enable mobile bill payments/m-commerce and fund transfer via cell phones, it did seem like they were getting on to commercial banking turf. But when ICICI announced the potential spin-off of its ATM assets into an independent operating company, it seems the wily bankers have thought ahead in the game.

So here is a quick look at how things might shape up over the next couple of years for each of these sectors. We ought to expect another big tower company from the BSNL/MTNL combine, and of course there will be a couple of IPOs looming once the market recovers.

Future developments likely
RF Tower infrastructure business Active component infrastructure may be reality Foreign telcos majority ownership in tower cos Tower companies will reverse merge or acquire licenses from secondary markets Tower companies merge / acquire / consolidate	Bank ATM business ATM assets to be hived off into independent companies Foreign banks majority ownership into ATM cos ATM companies raise capital and expand nation-wide ATM companies merge / acquire / consolidate Hugely successful ATM chain may acquire banks

In the meantime, who knows, a leading telco may find it best to cross invest in an ATM company. If nothing else, it will increase footfalls by adding a mobile customer service desk next to the ATM within the kiosk. At least, now you could draw cash from the ATM and pay your mobile bill at the same desk if your m-payment transaction fails, that is... I mean, the old fashioned way.

Tonse Telecom (www.tonsetelecom.com) is focused on research, analysis and consulting services for the Indian telecom sector. Tonse is focused exclusively on India and the telecom vertical in particular. It is our belief that to offer significant value to our clients, we need to bringunprecedented depth to our research. And unique insights can only come from relationships, street presence and local partnerships in every segment of the value chain. These include device makers, software developers, Value Added Services (VAS) companies, service providers, infrastructure vendors and regulatory authorities and policy makers.
To reach the author, drop a line to This e-mail address is being protected from spambots. You need JavaScript enabled to view it