Notable reforms in telecom but financial health down

The last four years in the telecom sector has been a mixed bag of success and hurdles for the government but on hindsight, it gives a sense of muted response by the department of telecom on many key issues. But, most importantly, the government felt there is a strong need for digital communications infrastructure which led to brisk pace of activity under the BharatNet project to bridge the digital divide.

A brand new telecom policy which is still in the making, dirt cheap data prices, laying a pan India optical fibre network under BharatNet, improve telecom services in the North East and Naxal-infiltrated areas, attempts to improve service quality by taking telcos to task to reduce call drops, allowing telcos to offer in-flight mobile and internet services, facilitating spectrum trading and sharing in case of consolidations and exits have been the pillars in the last four years of telecom minister Manoj Sinha’s tenure.

The sector’s financial health took a turn for the worse during the last two years since Reliance Jio’s entry in September 2016. The sector witnessed a massive drop in revenues and profits due to enhanced competition and brutal price wars due to RJio’s free pricing . Unable to bear further losses, many telcos sold out, some exited and some were dragged to National Company Law Tribunal for insolvency to clear dues. Meanwhile, the the telecom ministry made itself a non-revenue generation body. Sinha insists DoT should not be a revenue-maximisation centre, much to the discomfort of the finance ministry.

Experts say there are already set rules, telecom regulator is there and also Competition Commission of India. But there have been consistent complaints on part of the incumbents alleging unfavourable rules on subscribers base, spectrum acquisitions, market dominance rules, below cost tariffs which have led to revenue loss. During the last one year, the revenues from the sector have hit rock bottom. The sector revenue fell by 9 per cent last year. The license fee was down by 19 per cent while spectrum usage charge recorded a fall of 33 per cent. The gross telecom revenue for 2017 was down by 9 per cent to Rs 2.55 lakh crore compared to Rs 2.79 lakh crore in 2016.

Tanu Sharma Associate Director, Large Corporates, IndiaRatings said regulating competition is important. “In terms of competition regulations more initiatives to regulate the market should be taken to ensure that there is fair play so that the revenues of the sector don’t suffer.”

On the new telecom policy, she said the broad framework has been made but the specifics are not quantified like how the government will optimise the spectrum prices which are one of the highest in the world.

There are positives, according to the IndiaRating Director. “There have been improvements in the regulatory framework, easing of M&A guidelines for helping consolidations, digitisation of the economy like broadband and rural connectivity under the large BharatNet project which is running as per the schedule. There has been a rise in internet proliferation. The digital India programme is flourishing. India was late in 3G and 4G adoption, but now the government is making a preparatory framework so that we are in line with the global 5G status.”

Rajan Mathews, DG, Cellular Operators Association of India said there have been changes in the spectrum sharing, Trading and Harmonisation, increase in spectrum cap, and increase in supply of quantum of spectrum offered for auction.

Other notable steps were a focus on digital connectivity, Digital India and placing India in the forefront of technology innovation and adoption (5G, IoT, M2M, AI), Mathews said.

What needs to be achieved is a stable economic environment where, though the industry has taken steps to make data affordable, the government has done little to make it economically viable for the industry.

Meanwhile, the government liberalised 50 per cent spectrum circle-wise cap. Now, in another major reform, telcos are allowed to hold 35 per cent of the total spectrum assigned in a circle against the current cap of 25 per cent.

Somewhere the industry lost its golden moment in making data cheap. The government will have a role here and it would not be called an interference in market forces if it enforces fair play, said a former TRAI chairman.