Telecom sector under stress on disruption from new entrant: Economic Survey

The telecom sector in India is going through stress with growing losses, debt pile, price war, reduced revenue and irrational spectrum costs, the Economic Survey said on Monday.

Without naming Mukesh Ambani's Reliance Jio, the survey said 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 said. It also recommended a rationalisation of the cost of spectrum and other assets procured through auctions.

The mobile industry in India currently employs over 4 million people both directly and indirectly.

Reliance Jio entered the sector in September 2016 with offer of free voice and cheap data tariffs which shook the market and forced incumbents to follow suit to retain their subscribers. Though there has been an uptake in data consumption manifold since then, the financial health of the sector has nosedived. According to estimates, the cumulative debt of industry is around Rs 4.5 lakh crore.

The government is in the process of formulating the New Telecom Policy which is targeted to be released in 2018. The major themes that the policy shall try to address include 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 internet of things (IoT), it said.

As of September 2017-end, total subscribers stood at 1,207.04 million, of which 501.99 million connections were in the rural areas and 705.05 million in the urban areas, it said.

Over the last few years, the Indian telecom sector has shown remarkable growth as a result of key reforms through spectrum management, Bharat Net programme and umbrella schemes like Digital India in order to convert the country into a digital economy and a knowledge-based society.

Despite various bottlenecks, the government is committed to extending the reach of telecom network to the remote and rural villages and bridging the digital divide with support from all stakeholders. The government is implementing the flagship 'BharatNet' project in two phases to link each of the 2.5 lakh gram panchayats of India through optical fibre network.

FDI equity inflows (April-October) in top 10 sectors grew 15% as compared to 0.8% growth in total FDI equity inflows, mainly due to higher FDI in two sectors - telecom and computer software and hardware.

The survey recommended rationalisation of the cost of spectrum and other assets procured through auctions.

"The lesson is that policy design must minimise these costs wherever possible. More specifically, there should be: greater reliance on using incentives and carrots than on sticks," the survey said.

TOUGH CALLO

• Without naming Jio, the survey said a new entrant has disrupted the market and the revenue of incumbent players has fallen
   
• The survey recommends rationalisation of the cost of spectrum and other assets procured through auctions