Telecommunication operators have played a key role in establishing connectivity and speedy adoption of digital services in the country over the last three decades. Rajan S Mathews, Director General, Cellular Operators Association of India (COAI) shares his views on the financial burden and policy paralysis afflicting the sector with N V Vijayakumar of DH. Edited excerpts:
What is the current status of telecom industry?
We should understand the fact that mobile connectivity and data services have played an important role in bridging the digital divide and moving India towards a truly equitable and democratic nation. Indian telecom industry is going through a consolidation phase and there is a lot of financial troubles lurking them. Now, we are looking for three bigger players: Idea-Voda; Rcomm-Aircel; Airtel; MTNL-BSNL; and Jio. So India is going towards a phase where there will be three to four players like in US and Europe. I think it will help customers. Telcos will have to invest in technology and without which they can’t provide modern facilities which the customers are looking for.
According to a recent data, the mobile subscribers base in India decreased by 6.41 million to 948.54 million in August. Bharti Airtel continues to hold the top position with 29.63% market share and followed by Vodafone India with 208.14 million connection.
How do you see technology changing?
The cost for providing service in this industry is growing and access to lots of capital is required. During the pre-auction period, telcos were paying as per use. As we moved towards more use of spectrum and SC made it mandatory that it should be bought by auction and the price of spectrum started increasing. Now you can see that technology obsolescence factor is increasing. It took 20 years to recover 2G investment and for 3G only three years and nobody is talking about it and all investment became obsolete. People are talking about 4G and now 5G is already in.
How do you view the entry of Reliance Jio in the telecom industry?
I admit that the entry of Reliance Jio created a tariff war in the Indian telecom industry and it reduced the earnings of old operators. They have approached the government seeking relief for the debt ridden industry. At present, Reliance Jio offers entire phone call service using the VoLTE technology and the incumbents are forced to bear the cost of carrying their legacy infrastructure. Technology migration sounds good, but we have to look at practical dimensions of what happens in terms of incumbents. Airtel has just started VoLTE-based calls and plans to expand it across India by the end of the current fiscal.
How is the financial health of telecom industry?
Currently, overhead cost is very high in the industry. For the operators 90% of network is being supplied by foreign companies. Globally average revenue per user (ARPU) is $75, while in India it is $3.
The financial health of this industry is in trouble because the return is less as the operators will have to pay for the spectrum usage charge, licence fee and now the GST also.
Nowhere in the world we have a government imposing service tax on the allocation of spectrum, that too 18%.
The industry for the first time registered a negative growth last fiscal. We asked the government to address the financial condition of telecom players and the government constituted the inter ministerial committee. That committee met and recommendations are sent to finance minister and a decision on this will be taken soon.
Its recommendations include reduction of the tenure of debt and reduce the licence cost by 5%.
What is your take on the reduction of mobile interconnect usage charge (IUC)?
The established players like Airtel, Vodafone and Idea have been demanding an increase in the IUC to about 30-36 paise from 14 paise per minute. It will help in their financial position. But the new entrant Jio has been demanding to do away with it altogether.
Now the Trai has decided to bring down the charges to 6 paise per minute from October 1 and nil from January 2020. For the first time, the TRAI has indicated that it is using a pure “Long-Run Average Incremental Cost” (LRIC) model, which is usually reserved for very mature networks in calculating costs. If it is implemented it will hit earnings of old mobile operators to the tune of Rs 5,000 crore in the current fiscal.
How do you view the policy initiatives?
We need urgent relief and policy intervention from the government to encourage regulatory stability, facilitate growth, innovation and investment.
Trai has started the consultation process for the next round of spectrum auction across nine bands which include 60% of the unsold radiowaves in the last auction and 275 MHz from the two new 5G bands. It had also sought fresh views on valuation methodology for the prized 700 MHz, a band that found no takers in the last auction given the reserve or base price of Rs 11,485 crore per MHz in 2016.
The Trai mandate is that all operators should move towards VoLTE technology which is not practical as it will hit services for 2G users who account for 70% of the total subscriber base in the country. VoLTE (Voice over Long-Term Evolution) is high-end and latest version of calls that are made on Internet-based networks.
Published 23 September 2017, 20:39 IST