By Rajan S Mathews
As the year 2017 draws to a close, we look back and find the year gone by to be one an exciting one. With many new beginnings, replete with announcements of mergers and acquisitions, this has also been a year of hope and a few disappointments.
It started with the explosive growth of mobile payments driven by the government’s demonetization drive leading to many opting for one mobile wallets and experiencing their first financial transaction. The explosive growth even led to the Reserve Bank of India (RBI) looking into interoperability of mobile wallets and other ways to drive the uptake of digital services.
For the industry, the year also started with some more compelling offers from the new service provider in the sector. The new player came in with lots of free offers, ultra-low data prices, and other extremely competitive offers for consumers. What followed is a phase of hyper-competition the sector has never seen before. All the major operators are significantly expanded their 4G services across the country, and began heavily diversifying their services beyond voice and data for providing high quality services on high speed broadband – creating a win-win situation for the consumer.
Driven by the low data tariffs, the number of wireless broadband users went up from 217.95 million last year to 306.85 million wireless broadband users at the end of September 2017. A 40% jump, or more than 90 million subscribers, in just 10 months, in line with Prime Minister Narendra Modi’s Digital India vision of a fully connected and empowered nation. Consulting firm McKinsey and Co estimates that for every 10% increase in broadband’s household penetration the country’s GDP gets a 0.1 – 1.4% boost. Increase in both mobile voice and data will therefore lead to overall prosperity of the country.
The Indian Telecom sector has some of the lowest tariffs across the world, and these tariffs have always gone in the opposite direction of inflation. It is this model that has helped the industry cross the billion connections mark and become the second largest communications market in such a short time. This has created the very backbone of a vibrant e-commerce, technology and digital services ecosystem.
The government is likely to come out with the next National Telecom Policy 2018, early next year. The NTP document has historically acted as a framework, giving direction to policy decisions and ensuring conducive regulatory environment for the future. There are high expectations of NTP2018, to take India into the next decade of technology – introducing services like IoT, M2M and enable 5G roll-out. Services like driverless cars, and refrigerators ordering produce directly from the farmer will also be possible in the near future, at the click of a button on your phone.
The year also witnessed the government introducing one of the biggest reforms since the liberalization of the 90s – the Goods and Service Tax (GST). A very welcome decision. It, however, meant an increase from 15% paid as tax before, to the 18% now, for the telecom sector, over and above the around 15% outgo in levies such as spectrum usage charges and license fees, that the telcos pay.
In light of the recent roll-backs across different sectors, the industry remains hopeful and continues to represent to the government that the GST rate must be revised downward to 12%, as telecom is an essential service, and is the first line of defence even during emergencies. Given the extreme financial distress which the industry is experiencing, we hope that this will be favourably considered.
The industry continues to struggle with a massive cumulative debt of almost INR five lakh crores, while revenues have fallen to around INR two lakh crore. The telecom companies are yet to recover from the past upheavals of the 2009 voice tariff war or the expensive spectrum auctions in the years that followed. The poor financial health of the sector has resulted in much needed consolidation, leaving the sector with little option.
Looking at the deep financial distress, the government also constituted an Inter-Ministerial Group to look into ways to ease the financial stress of the telecom industry. The IMG has submitted its recommendations to the Telecom Commission for a decision after hearing exhaustive representations from the entire telecom and the banking sector. We are optimistic that cogent relief is on its way and this move was welcomed by the sector and remains at the core if a successful implementation of the hon’ble PM’s Digital India mission,
As per the TRAI data, at the end of September 2017, there were 1183.04 million mobile subscribers, just 5% or 55.67 million mobile users more than the 1,127.37 million mobile users reported at the end of December 2016.
During the year, the telecom regulator reduced interconnection usage charges from 14 paise to 6 paise, further impacting the earnings of the sector. Consolidation has created a number of potential new entities including the Bharti Airtel – Tata Teleservices – Telenor combine; Idea Cellular – Vodafone combine, and the Reliance Communications – Aircel combine.
While the last one has been called off, 2018 is expected to see the rest come to fruition. With consolidation, the telcos could see overall cost of operations come down in the long run, leading to increased margins and even some pricing power coming back, improve/ng the sector’s longer term overall sustainability. Post consolidation, it looks like the Idea-Vodafone combined entity could hold as much as a 40% market share, closely followed by Airtel with around 38%.
The country is now seeing the Prime Minister’s Digital India plan taking shape with more and more districts getting connected. The BharatNet optical fibre network, estimated at INR 42,000 crore has now seen speedy progress over the last year under the able leadership of the hon’ble minister Shri Manoj Sinha. The INR 42,000 crore network, that aims to connect all 2.5 lakh Gram Panchayats by March 2019, saw the launch of the second phase in November 2017. Recent data indicated that broadband services have started in some 48,000 Gram Panchayats and another 75,000 Gram Panchayats are ready to start providing high speed broadband services. A number of private operators have also started using the network to provide Broadband services in the far corners of the country. The government’s commitment towards ease of doing business also showed fruition with India jumping 30 places to join the top 100, in the rankings. Welcome recommendations, aligned with the COAI submissions were issued by Trai for DoT’s consideration.
The increasing demand for better connectivity and quality content has led to the expectation that 2018 will be about 5G. While there will be some movement towards 5G in 2018, many experts still believe that, full blown 5G deployment is still around 2-3 years away.
With the Government’s ‘Digital India’ programme, the telecom sector is fast emerging as the critical nerve center for services including banking, e-commerce, education and health. The telcos on their part continue to focus on capitalising the increased data usage and consequent services, to generate more revenue, with a focus on shifting 2G users to 3G and 4G, and preparing their networks for 5G over the next couple of years.
This year also saw COAI hosting the India Mobile Congress 2017, the country’s largest and first ever iconic Mobile, Internet and Technology event showcasing India’s leadership in the sector, to the world. The event was supported by DoT, MeitY and Ministry of Skill Development and Entrepreneurship and took place under the unstinting support, guidance and leadership of Shri Manoj Sinha, Minister of Communication.
(The author is Director General, COAI