Economic Survey 2017-18: Telecom going through stress, has hurt investors, lenders, vendors

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India’s telecom sector is going through a period of stress owing to growing losses and rising debt, amid heightened competition due to the disruptive entry of Reliance Jio, the Economic Survey said in its findings on Monday.

While highlighting reduced revenue and irrational spectrum costs, the survey also underlined that the ‘crisis’ being faced by telcos has also deeply impacted their investors, lenders, partners and vendors, even as it underscored government programs of Bharat Net and Digital India that were enabling India to become digitally connected.

“It is important to note that the telecom sector is going through a stress period with growing losses, debt pile, price war, reduced revenue and irrational spectrum costs,” the Survey said, adding that it had flagged the situation in the previous economic survey as well.

“A new entrant has disrupted the market with low-cost data services and the revenue of incumbent players has fallen. The crisis has also severely impacted investors, lenders, partners and vendors of these telecom companies,” it added.

The newest entrant in Indian telecom sector Reliance Jio started offering free data and voice calls from September 5, 2016 and since then has been able to garner a subscriber base of more than 160 million users as of December 2017. Jio’s plans lead to a tariff war between incumbent carriers including Bharti Airtel, Vodafone India and Idea Cellular, with Jio, which resulted in free voice calls for customers coupled with dollops of free data, but eroded revenue for the older carriers.

Besides the tough competition in the market, carriers have claimed that almost 30 paise of every rupee earned by them is paid as levy and taxes to the government, which is a major reason for the industry’s debt of Rs 7.7 lakh crore. They, therefore, want sharp reduction in levies and lower spectrum prices. The mobile industry in India is currently employing over 4 million people both directly and indirectly.

The survey added that the government was formulating a new telecom policy (NTP), where issues of regulatory and licensing frameworks impacting the sector, connectivity for all, quality of services, ease of doing business and absorption of new technologies including 5G and IoT will be addressed. The government plans to bring out the policy by April 2018, even as it takes into account views of all stakeholders including recommendations of Telecom Regulatory Authority of India (TRAI).

Telecom Minister Manoj Sinha told ET recently that the policy would also look at some fundamental issues related to stress in the sector, that have not been addressed by the inter-ministerial group (IMG) suggestions to give a one-time option to carriers to make annual payments for spectrum bought in auctions, over 16 years rather than 12 years at present. IMG had also suggested reduction in interest rate on penalties.

Trai has also recommended new policy on net neutrality which prohibits discriminatory tariffs for data services, where service providers are restricted from entering into any arrangement, agreement, or contract, with any person, natural or legal, that has the effect of discriminatory treatment based on content, sender or receiver, protocols or user equipment. The government is yet to take a final call on the policy, but the minister recently said that the government’s views were in tandem with those of the regulator.

Bharat Net, one of the leading projects of the government, is aimed at connecting 2.5 lakh gram panchayats of India through optical fibre network in two phases. Through this network, services such as e-health, e-education, e-governance and e-commerce will be offered in the future.

As on November, 2017, the fibre has reached 103,275 gram panchayats with the laying of 238,677 km. of optical fibre cable. The second phase of the program has an outlay of Rs 30,920 crore that will connect 1.5 lakh gram panchayats through high speed broadband, is likely to be completed by March 2019.

How number stacks up

As on September 2017:

Total subscriber base – 1.21 billion

Rural subscribers – 501.99 million

Urban subscribers – 705.05 million

Wireless telephony – 98.04%

Landline telephony – 1.96%

Overall tele-density – 93.42%

Rural tele-density – 56.78%

Urban tele-density – 172.86% economictimes