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Telcom industry: Government’s urgent intervention needed for digital push

By / September 28, 2017 / / 0 Comments

As the telecom industry’s first and largest marquee – India Mobile Congress (IMC) – commenced on Wednesday, leading operators Bharti Airtel and Idea Cellular said issues such as “lack of effective regulatory intervention”, high taxes and spectrum acquisition costs need to be addressed to realise the vision of a digitsed India. During a panel discussion on Vision 2020, Bharti’s managing director and CEO (India & South Asia) Gopal Vittal said the low return on capital is a “worrying” trend and this is at a time when “massive investments” are required for expansion of networks and adopting newer technologies. He pointed out that taxes are in the range of 29% to 32%, which are steep. Another issue is the high cost of acquiring spectrum, which is one of the highest in the world, while tariffs are one of the lowest, making it difficult for operators. This is coupled with industry’s debt burden of around Rs 4.5 lakh crore, while the return on capital is 1%, which needs to be acknowledged.

Vittal said there is a need to address such issues in order to realise the dream of Digital India. He also drew the attention of the government on the issue of ‘right of way’ (RoW), which has been hindering the work of laying optical fibre in the states and on mergers and acquisitions (M&As). Idea’s managing director Himanshu Kapania was more scathing in bringing out the woes faced by the telecom industry.

“Let’s talk about the big elephant in the room which nobody is talking about. No doubt, India has grown so much in the last few years and the telecom sector’s contribution is high in this. We have added a billion people in the last seven-eight years. But, the recent market developments have drastically altered industry dynamics and has led to financial and mental stress,” Kapania said. Referring to the new interconnect usage charge (IUC) and its impact on the industry, Kapania said these are issues that are hampering the industry’s growth, adding that “lack of regulatory intervention” is hurting the industry.

Kapania flagged the low IUC rate saying that it will further impact the industry and warned that “fault lines” are becoming visible as the industry is witnessing a “de-growth”. “No industry can survive such a drastic fall in voice and data tariffs that have plunged to below cost levels over the last one year,” Kapania said, adding that the decline in revenue could be in the range of 10-12% in the current fiscal and government revenues too will be hit.

“Tepid revenue growth and high non-performing assets will curtail the investment appetite,” Kapania said, adding that low IUC will impact mobile telephony in rural India. “The challenge for 2020 is whether the government will allow coexistence of 2G with 4G. Growth will rest on a single factor, which is health of the industry.”

Bharti, Jio keep rivalry aside

As top ministers, government officials and industry titans debated at the India Mobile Congress (IMC) on the future of business and technology, jokes on the rivalry between Bharti Airtel and Reliance Jio lightened the mood. The event saw arch rivals Mukesh Ambani and Sunil Bharti Mittal not only sharing the same platform, but both complementing each other over ideas on how to take the sector forward. Industry body COAI’s director general Rajan S Mathews said, “Sir (Mittal), as long as you and Mr Ambani call each other as friends, I think the industry is okay”.

– by: (Financial Express

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