COAI’s Rajan S. Mathews wonders how the new telecom policy can achieve $100-billion investment objective ‘if the industry is under financial stress’.

New Delhi: The Cellular Operators Association of India (COAI) is sceptical of the new telecom policy which aims to attract $100 billion of private investment and create 4 million jobs.

In the policy approved by the Union cabinet last week, the Department of Telecom said it aims to attract investment in the digital communications sector and increase its GDP contribution to 8 per cent by 2022 from around 6 per cent in 2017.

 

COAI director-general Rajan S. Mathews asked how the policy could achieve its investment objectives “if the industry is under financial stress”.

The National Digital Communications Policy, 2018, does not specify how it plans to attract the investment.

“I don’t see a whole lot of negatives in the policy, but we do hope the policy will be implemented as spelled out on paper. To quote from the policy document, it has underscored a need for ‘standardisation of costs and timelines’,” Mathews said in an interview to ThePrint.

He hoped that this means levies on the financially stressed industry will be lessened.

Policy goals can’t be achieved if the government won’t reduce fees and charges imposed on telecom operators, said Mathews.

Struggling sector

At present, a telecom operator has to pay 8 per cent of adjusted gross revenue (AGR) every quarter as spectrum license fee. The operator also has to pay 5 per cent of AGR as spectrum usage charge for the same duration. This is in addition to the cost of purchasing the spectrum.

Mathews said telecom regulator TRAI too suggested the two should come down to 3 per cent and 1 per cent, respectively.

“When the industry was in good financial health, this was fine — but now with (Reliance) Jio’s entry leading to the entire industry’s revenue shrinking, this is hard for telcos to keep up with,” said Mathews.

According to the COAI 2017-2018 annual report, the telecom sector reported revenues of Rs 1.2 trillion and debt of Rs 7.7 trillion.

The entry of Reliance Jio Infocomm Ltd in 2016 resulted in cheaper voice calls and data tariffs leading to shrinking revenue. Further, given the capital intensive nature of the industry, Jio forced the sector to consolidate with several mergers and acquisitions, including the Vodafone-Idea merger going through.

Crisil Research said the industry grew at 12-13 per cent year-on-year from fiscals 2014 to 2016 in the “pre-Reliance Jio era”. But, following a 17 per cent decline in fiscal 2018, it expected the industry’s AGR to decline further by 8-10 per cent in fiscal 2019.

It also expected the top three players – Airtel, Vodafone, Idea – to see a decline in gross revenues as the incumbents focus on retaining subscriber market share.

COAI was even at loggerheads with Reliance Jio over a slew of issues, including allegations of Trai favouring the new entrant.

‘Conservative figure’

Mathews said the industry needs an investment of at least $150 billion dollars.

“The $100 billion is a conservative figure. At present the industry spends $8-10 billion on regular infrastructure and networks every year — not counting spending on future projects such as 5G implementation,” he said.

To attain policy objectives like broadband for all, another 24 lakh cell towers and well over 35 million km of fibre are required, experts have estimated. Currently, there are 4.8 lakh towers and 1.5 million km of fibre laid out.

Mathews also does not foresee customers enjoying significant price reduction in services even if the industry gets back on sound financial ground.

“There may not be a whole lot of price reduction. Jio, for example, has said it will give calls free for lifetime to its customers,” he said. “Where it can benefit customers is with the type of services offered, and the quality of services.”

New technologies

The new policy encourages telecom operators to prepare to provide 5G cellular network services so that the hi-speed internet required for innovative technologies like Internet of Things (IoT) and machine-to-machine (M2M) are available to consumers.

These new technologies can create those 4 million new jobs such as customer care executives with specialist experience, network technicians, software engineers and software programmers, said Mathews.

 

“In the future with 5G connectivity, telcos could provide services for customers to connect with autonomous vehicles, to remotely monitor fire alarms at their home, or remotely deploy a drone to spray fertilizer across a field of crops. Currently, we are looking at where it could be used in India,” said Mathews.

“But even then, to set up the infrastructure and services, it will take significant investment the industry in its present state can’t bear.”

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