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IMG for the telecom sector - a step in the right direction

Monday, August 07, 2017
By Rajan S. Mathews

Rajan S. Mathews
Director General, COAI

The Inter-Ministerial Group (IMG) formed by the government to look into the health of the telecom sector is a significant step forward by the government. It is an acknowledgment of the current crisis which the sector is undergoing by first taking stock of the situation, initiating immediate corrective measures and deliberate on future preventive actions which stabilize the sector and bring about regulatory and policy certainty. While, the process of consultation with the industry and the stakeholders has just begun, positive signs are already emerging in the form of a consensus among the government and bureaucracy about the issues being faced by the industry.

It will not be premature to say that the telecom industry is hopeful that the IMG will bring relief to it and show the way ahead for introducing systemic changes to make the industry financially viable, strong and resilient.

At this important juncture, we must take a look at the role played by the telecom sector, which brought in a fast-paced revolution in the country. The telecom sector contributes 6.5% to India’s Gross Domestic Product (GDP). Cumulative FDI inflows into the sector were to the tune of INR 1.11 lakh crores as of September, 2016. In terms of employment, the sector contributes directly to22 lakh and indirectly to another 18 Lakh jobs, making it one of the largest employers in the country.

But, even then the telecom sector is in a dire financial condition with a 1% return on investments and many operators even making negative returns.

The Industry for the first time ever, saw a revenue drop for the full financial year FY 2017. From the first quarter to the fourth quarter of FY17, the industry AGR witnessed a decline of 12%, from INR 472bn in 1QFY17 to INR 415bn in 4QFY17.

The highly taxed telecom industry, which has invested heavily in license fee, spectrum, telecom equipment and security apparatus, is now on an unequal footing with unregulated Over-the-Top-Operators (OTTs) that are offering voice services without incurring any regulatory costs, using technologies that are spectrum inefficient and without contributing to the exchequer in the form of license or spectrum charges; and that too when the existing TSPs have paid a high price for spectrum acquisition.

The high spectrum cost has contributed to the debt burden and this accompanied with high levies and taxes has resulted in immense financial pressure on the sector.

Considering the above, COAI and its members believe that it is the time telecom, both as a service and infrastructure, be considered as a resource of national importance. We envisage that data connectivity to India’s population with wide deployment of broadband will be at the core of the 'Digital India' program.

Thus, the immediate priority for the government is to ensure that the affordable mobile broadband services are adopted and utilized by a vast mass of unconnected and low net usage citizens. The roll-out of broadband and Internet services requires enormous investments to the tune of INR 200,000 crores over the next 3-5 years for spectrum, technology, equipment and fibre-optics backbone.

These are critical for bridging the digital divide and for connecting the unconnected for fructifying the Prime Minister’s vision of a fully connected and digitally empowered India. The key question therefore is the viability of the sector is to raise additional funds.

Finally the need of the hour is a stable, predictable, responsive policy and regulatory environment which facilitates innovation and investment comprehensively addressing the financial woes of the sector.

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