Fresh policy, consolidation, 5G-glare in financially-stressed Indian telecom (2018 in Retrospect)

Monday, 31 December 2018, 03:44 Hrs
30
cmt right
40
Comment Right
56
cmt right
11
cmt right
Printer Print Email Email


Amid continued financial distress, the Indian telecom sector witnessed major developments in 2018, including the introduction of the National Digital Communications Policy (NDCP) and significant market consolidation.

Talks of the country moving towards 5G network by 2020, efforts of companies trying to monetise their assets to strengthen their balance sheets and fulfilling their debt obligations also made headlines during the year.

The Union Cabinet, in September, cleared the National Digital Communications Policy, which replaced the National Telecom Policy 2012 and aimed to provide broadband to all, ensure India's digital sovereignty and attract $100 billion worth of investments into the telecom sector.

"The proposed investment of $100 billion will not only make access to communication services easy, but will also provide much relief to the financially distressed telecom sector reeling under debilitating debts, falling revenue and squeezed margins," said Cellular Operators Association of India Director General Rajan Mathews.

"Overall, NDCP 2018 is pivoted around guaranteeing the sector's long-term sustainability and its readiness to invest in futuristic technologies," he added.

The policy also takes into account the concerns of telecom operators. According to COAI, the fact that Indian service providers pay more than 30 per cent of their revenue as taxes and levies compared to the 10 per cent in other countries, was also considered and rationalised in the new policy document.

Among the ambitious targets of the policy in its bid to provide broadband to all is the aim to provide 1 giga-bits per second (Gbps) connectivity to all gram panchayats by 2020 and 10 Gbps by 2022.

Consolidation in the sector was, by-and-large, complete in 2018 with the merger of two majors - Vodafone India and Idea Cellular - to create Vodafone Idea, India's largest telecom service provider in terms of revenue and subscriber base.

The merged entity became operational by the end of August with Kumar Mangalam Birla named the Chairman and Balesh Sharma the CEO of the new entity.

Sector experts observed that as a result of the consolidation the market structure is now healthier and more stable with three major private players -- Vodafone Idea, Bharti Airtel and Reliance Jio -- and the public sector BSNL.

As a majority of the telecom operators languished under debt and financial stress, the companies took to monetisation and transferred assets or businesses to subsidiaries.

Bharti Airtel, at its Board meeting on December 20, decided to sell 32 per cent stake in Bharti Infratel to its wholly-owned subsidiary, Nettle Infrastructure Investments, for potential monetisation of the stake in future.

With this, Bharti Airtel's share in Infratel would be 18.33 per cent, Nettle would have 35.18 per cent and the remaining 46.49 per cent stake would be held by the public and other shareholders.

In November, Vodafone Idea too decided to demerge its fibre infrastructure business by transferring the assets to Vodafone Towers Ltd. 

Reliance Jio in December announced that it would hive off its fibre and tower businesses and form two separate companies.

"The year 2018 was one of continued financial stress with a collective debt of Rs 8 lakh crore. This has accelerated further consolidation where companies were trying to monetise their assets to service debt obligations," Hemant Joshi, Partner for technology, media and telecommunications at Deloitte India, said.

Despite the gloomy financial condition, the word which came up in every conversation on telecom and data connectivity in 2018 was "5G" or the Fifth Generation network with some telecom and technology players already coming up with instances of use and demos.

Although, the Centre and some market players expect to commercially roll out the 5G network in 2020, sections in the industry feel the environment is not conducive for huge investments for moving on to next generation connectivity given the weak financial condition of majority of the market participants.

"It looks rather difficult considering the financial stress and multiple technologies which are at play. Secondly, we should take own time to roll out 5G, till used cases for addressing the challenges of the country are established," Joshi pointed out. 

A panel set-up by the Centre has recommended that the 5G programmes would require funding by the government and a "high-level budget committee" should be formed to ensure adequate availability of funds for the sector.

On December 17, Telecom Secretary Aruna Sundararajan said that procedures for the auction of 5G spectrum are likely to be completed by August 2019. She also said that the Department of Telecommunication (DoT) is working on the recommendations of both the Telecom Regulatory Authority of India (TRAI) and the 5G task force set up by the government.

"Everybody has already said that since the ecosystem is not ready, it will be (ready) somewhere only after July-August next year...We expect that we would have completed all the due procedures by then, so that you have the spectrum auction," she said.

A major development, which impacted operations in the sector, was the Supreme Court's Aadhaar verdict in September as it struck down Section 57 of the Aadhaar Act that allowed private companies to seek Aadhaar authentication. This in turn barred the mandatory linkage of mobile phone numbers to the Aadhaar number.

As a result, the industry had to work on an alternative e-KYC (Know Your Customer) process to verify and enroll subscribers.

"The industry worked with the government on an OTP-based digital verification solution. This was done to keep customer convenience in mind for an entirely paperless process," the COAI's Mathews said.

Progress on BharatNet has so far reached halfway with 301,154 km of optical fibre cable (OFC) laid connecting 121,652 Gram Panchayats of the targeted 250,000 to be covered by March 31, 2019, according to data provided by the government this month.

The OFC under BharatNet are service-ready in 116,411 gram panchayats so far.

Besides, service providers have installed WiFi hotspots in 39,359 gram panchayats under the WiFi Choupal initiative, as per government data.

Union Communications Minister Manoj Sinha in October announced that the Indian telecom industry will roll out one million WiFi hotspots in the country by December next year.

In a significant move for the broadband segment, Reliance Industries Chairman Mukesh Ambani in July announced that the company would come out with fibre-to-the-home broadband services, Jio GigaFiber. The roll out of its services is still awaited.

Experts and market players feel the entry of Jio into the broadband segment might destabilise the segment as it happened in the telecom sector.

On the outlook for the upcoming year, Mathews said the industry would advocate a stable and sustainable policy environment to promote innovation for a digitally empowered India through a "financially strong and viable industry".

Deloitte's Joshi noted that 2019 may continue to be a year of financial stress and to deal with thism, the sector needs to think out-of-the-box and reduce its debt burden.

"A model which the government uses for recapitalising the banks could be considered by the government for the telecom sector as well, especially with reference to spectrum pricing," he added.



Read More News:



21st century Technological Advancement of Soccer Prediction Industry



Code your way to success through Python Programming


Source: IANS
SPOTLIGHT
Career
Les Roches Global Hospitality Education, a multi-national hospitality management institute, a..
Gadgets
Yamaha Music India has launched its first Indian keyboard PSR I500 under the 'Make in India' initi..
Finance
India's tea exports increased by 11.5 per cent to 17.93 million kgs in April this year aga..
Enterprise IT
Taking on streaming giants like Netflix and Hulu, Walt Disney Co. has announced it will ..
Travel
Imagine life being a romantic Bollywood song of the 90's. All those exotic frames punched into one..
Entertainment
Actor Dhanush, whose last Hindi release was R. Balkis "Shamitabh", may be working in another H..
Business
Automobile major MG Motors India on Wednesday said that it plans to manufacture electric vehicle E..
Technology
To ensure uninterrupted functioning of the app in areas of low networks, Facebook-owned..
Startup City
With cities growing rapidly and infrastructure not keeping pace, the daunting work com..