India is currently the world’s second-largest telecommunications market and has registered strong growth in the past decade and half. The liberal and reformist policies of the Government of India have been instrumental along with strong consumer demand in the rapid growth in the Indian telecom sector. The deregulation of FDI norms has made the sector one of the fastest growing and a top five employment opportunity generator in the country. The Supreme Court recently expressed its displeasure with the Department of Telecommunications (DoT) for its attempt to recalculate the adjusted gross revenue (AGR) dues of telecom companies.

Body:

Current challenges faced by Indian telecom sector:

•  Telecom sector is under immense financial stress, as admitted by all stakeholders.
• The troubles of today are rooted in the fast-paced growth of yesterday.
• The industry is burdened with debt of ?7 lakh crore.
• India is faced with the prospect of a telecom monopoly or duopoly.
• In addition to corporate taxes, the government’s telecom revenue includes GST spectrum auction, revenue share as license fees, amounting to about 30% of customer bill.
• Indian telecom operators, which offer the cheapest mobile data services in the world, pay more for airwaves than any of their global counterparts.
• In the quarter ending June 2019 Bharti Airtel reported a loss for the first time ever.
• Long-running dispute between the sector and the state on how to calculate the government’s share of revenue.
• The Supreme Court has now ordered the companies to pay the government not just the dues but a hefty penalty –as well interest on both.

Other challenges facing Indian telecom sector are:

• Financial Health of the Sector: Gross revenue has dropped by 15% to 20% for the year 2017-18 over the preceding year for the incumbents and overall sector revenue has dropped. Also, there is drop in voice and data revenue per user
• Limited Spectrum Availability: Available spectrum is less than 40% as compared to European nations and 50% as compared to China. Hence, it is imperative that spectrum auctioning at sustainable prices is the need of the hour. Also, government auction spectrum at an exorbitant cost which makes it difficult for mobile operators to provide services at reasonable speeds.
• High competition and tariff war: Competition heating up post entry of Reliance Jio. Other telecom players have to drop in tariff rates both for voice and data
• Lack of Telecom Infrastructure in Semi-rural and Rural areas: Service providers have to incur huge initial fixed cost to enter semi-rural and rural areas. Key reasons behind these costs are lack of basic infrastructure like power and roads, resulting in delays in rolling out the infrastructure.
• Poor fixed line penetration: India has very little penetration of fixed line in its network whereas, most of the developed countries have a very high penetration of fixed lines
• High Right-of-Way (ROW) cost: Sometimes, states governments charge a huge amount for permitting the laying of fibre etc.
• Lack of trained personnel to operate and maintain the cellular infrastructure.
• Delays in Roll Out of Innovative Products and Services: Substantial delays in roll out of data-based products and services are hampering the progress of telecom sectors. This is primarily due to the non-conducive environment resulting out of government policies and regulations.
• Low Broad Band Penetration: Low broadband penetration in the country is a matter of concern and the government needs to do a lot more work in the field to go up in the global ladder.
• Over the top services: Over the Top (OTT) applications such as WhatsApp, OLA, Viber and so on do not need permission or a pact with a telecommunications company. This hampers the revenue of telecommunication service provider.
• License fee: The license fee of eight per cent of the Adjusted Gross Revenue including five per cent as Universal Service Levy (USL) is one of the highest in the world.

Measures needed:

• Infrastructure Sharing: Since telecom business is heavy on capex and as much as 40%– 60% of the Capex is utilized for setting up and managing the Telecom infrastructure. By sharing infrastructure, operators can optimize their capex, and focus on providing new and innovative services to their subscribers.
• Availability of Affordable Smart Phones and Lower Tariff Rates: This would increase tele penetration in rural areas.
• Curb on predatory pricing: government should fix a minimum price to save the industry from price war
• Lower License fee: The license fee of eight per cent of the Adjusted Gross Revenue including five per cent as Universal Service Levy (USL) is one of the highest in the world.
• Reduce reserve price for spectrum auction: In the past, some of the operators participated recklessly in these auctions leading to exaggerated prices — much above their true valuations. Reasonable reserve prices for the market mechanisms induce “truthful bidding”, and not leading to “winners’ curse” as witnessed in some of the previous auctions.
• The government needs to act, just like it did in 1999. They could offer the operators payment of principal in instalments and waive off interest and penalties.
• The government should increase the network area through optical fibre instead of copper which is expensive. This is necessary to ensure last mile connectivity.
• The government needs to prepare a ground for easy right-of-way permissions and lower cost of right-of-ways
• The government should spend large on R&D and create an environment that makes India capable of manufacturing and even exporting hardware components like mobile handsets, CCTV Cameras, touch screen monitors etc.
• Prices for 5G spectrum need to be critically looked at.
• An equilibrium needs to be established between government revenue and overall growth.

Conclusion:

Telcos are the backbone of digital services and a crucial stakeholder for the country to unlock the $5 trillion GDP dream by 2024. Digital India Initiative of government including digital identification and authentication, e-KYC, digital finance depends heavily on the telecom and broadband infrastructure.  Economic survey 2017-18 added that it has also deeply impacted their investors, lenders, partners and vendors. A long term vision plan should be made accordingly. For the time being, the government needs to provide an easy and soothing environment for telecom operators.