With 1.20 billion subscribers, India is the world’s second-largest telecommunications market, and it has experienced rapid expansion over the last 15 years. In 2014, the mobile phone industry contributed US$ 400 billion to the country’s gross domestic product (GDP).  After income tax, telecommunications is the government’s second-highest revenue generator: the industry is predicted to account for up to 90% of the government’s non-tax earnings. The Digital India initiative is likewise nearly entirely reliant on the telecom sector. The government of India’s liberal and reformist policies, as well as strong consumer demand, have aided in the rapid growth of the Indian telecom sector. Foreign Direct Investment (FDI) norms have been deregulated, making the industry one of the fastest expanding and top five job creators in the country. According to a survey published by the Groupe Speciale Mobile Association (GSMA), app downloads in India have increased by 165 percent in the last two years as of 2020.According to GSMA estimates, this sector will add over 4 million employment.

Recent economic assistance

• The Union Cabinet approved a set of nine structural and procedural reforms to address the short-term liquidity needs as well as long-term issues of telecom companies.
• The government has insisted that since all the moratorium offerings are done with net present value protected, it will face some revenue loss in the next four financial years even if two of the three private players opt for it.
• Measures such as streamlining of the auction calendar and removal of the spectrum usage charges (SUC) from auctions, too, are likely to bring down the dues outgo, while helping telcos plan their auction purchase.
• It will provide short-term relief to debt-laden Vodafone Idea and Bharti Airtel, is a four-year moratorium on payment of dues arising due to the Supreme Court’s September 1, 2020 judgment on adjusted gross revenue (AGR). Another four-year moratorium on payment of spectrum purchased in past auctions, barring the 2021 auction, is also likely to provide relief.
• Although the government will charge interest if the companies opt for the moratorium, analysts feel it could provide the telecom sector a breather of roughly Rs 45,000 crore per year for the next four years.

Challenges

• Financial Health of the Sector: Gross income for incumbents fell 15% to 20% in 2017-18 compared to the previous year, while total sector revenue fell. There is also a decrease in voice and data revenue per user.
• Limited Spectrum Availability: When compared to European countries, available spectrum is less than 40% and 50% when compared to China. As a result, spectrum auctioning at sustainable rates is critical. Furthermore, the government sells spectrum at exorbitant prices, making it difficult for mobile providers to provide services at decent speeds.
• Delays in the Provision of Innovative Products and Services: The telecom sector’s success is being hampered by significant delays in the release of data-based products and services. This is primarily due to the hostile climate that government policies and laws have created.
• Low Broadband Penetration: The country’s low broadband penetration is a matter of concern, and if it wants to climb the global ladder, the government will need to put in a lot more work in this area.
• Delays in the Release of Innovative Products and Services: Significant delays in the release of data-based products and services are impeding the telecom sector’s progress. This is mostly because to the hostile environment created by government policies and laws.
• Low Broadband Penetration: The country’s low broadband penetration is a source of concern, and the government will need to do a lot more effort in this area if it wants to climb the global ladder.
• High competition and a pricing war have erupted as a result of Reliance Jio’s arrival.
• Lack of Telecom Infrastructure in Semi-rural and Rural Areas: To penetrate semi-rural and rural areas, service providers must spend a significant upfront fixed cost. The lack of essential infrastructure, such as power and roads, is a major factor in these expenses, resulting in delays in infrastructure deployment.
• Poor fixed line penetration: India has a very low fixed line penetration in its network, whereas most industrialised countries have a very high fixed line penetration.
• High Right-of-Way (ROW) fees: States can charge exorbitant fees for allowing fibre to be laid, for example.
• The cellular infrastructure does not have enough trained staff to operate and maintain it.
• For the current financial year, the government had estimated receipts of Rs 53,987 crore from spectrum usage charges, licence fee levies and other levies. The bulk of this, however, will have to be forgone for four financial years once the telcos opt for the moratorium.

• At the end of the moratorium period, the government will have provide an option to the telecom player to pay the interest arising out of the deferment of payment by way of equity, and at the option of the government, to convert the due into equity.

Measures

• Infrastructure Sharing: Because the telecom industry relies heavily on capital expenditures, as much as 40% to 60% of capital expenditures are spent on putting up and operating telecom infrastructure. Operators can reduce their expenditure and focus on providing new and innovative services to their users by sharing infrastructure.
• Reduce the reserve price for spectrum auctions: In the past, several operators acted rashly in these auctions, resulting in exaggerated prices that were far higher than their genuine values. Reasonable reserve prices for market mechanisms encourage “truthful bidding,” rather than the “winners’ curse” seen in prior auctions.
• Investigate the possibility of a revenue-sharing arrangement between Internet corporations and telecommunications firms.
• Network maintenance, IT operations, and customer service are examples of non-core tasks that can be outsourced.
• The separation of tower assets into separate firms would allow the company to reduce costs and focus on its core operations.
• Instead of using pricey copper, the government should use optical fibre to expand the network area. This is required for last-mile connection.
• Availability of low-cost smart phones and lower tariff rates: This will boost teledensity in rural areas.
• Predatory pricing should be curtailed: the government should establish a minimum price to protect the industry from price wars.
• The government must lay the groundwork for easy right-of-way clearances and cheaper right-of-way costs.
• Introduce new and efficient technologies like M2M (a technology that allows networked devices to communicate data and conduct tasks without the need for human intervention) and cloud computing.
• Benefits of industry status will be implemented in accordance with other infrastructure sectors in the country.
• The government should invest heavily in research and development and create an environment that allows India to manufacture and even export hardware components such as mobile handsets, CCTV cameras, touch screen monitors, and so on.
• Lower License Charge: The licence fee, which is 8% of Adjusted Gross Revenue plus 5% as Universal Service Levy (USL), is one of the highest in the world.

Government and regulatory agencies, various mobile handsets available from various companies bring a lot of issues and content partners, etc. The telecom sector in India has to deal with various challenges such as maintaining sufficient spectrum, faster adoption of new technologies to be able to use new features and techniques to serve customers with better and feature rich service, Government and regulatory agencies, various mobile handsets available from various companies bring a lot of issues and content partners, etc. Furthermore, it is clear from the current situation that voice alone will not be enough to create revenue, and hence the focus must be transferred to various data services.

Reference:

1. https://indianexpress.com/article/explained/telecom-reforms-vodafone-idea-mrket-dot-7516500/