Approach:

Introduction: Describe what the telecom sector refers to and highlight the recent growth being witnessed by this sector.

Body: First mention the challenges faced by this sector and then highlight the steps taken by the Government to ease the vows of the Telecom sector.

Conclusion: Describe the way forward further for the development of the sector in the long run.

Answer:

The telecom sector refers to the industry that provides telecommunications services, such as voice and data communication, to consumers and businesses. The Indian telecom sector has witnessed a significant increase in subscriber base( 1.2 billion in 2020 from 900 million in 2014), revenues( 3.2 trillion rupees in 2020 from 2.5 trillion in 2014), network expansion, etc. in the last few years.

However, the telecom operators themselves face many challenges:

1. High debt as levels rose from 3.8 trillion rupees in 2014 to 7.7 trillion rupees in 2019 as per the CRISIL report. Such high debt can make it difficult to invest in new technologies for example in the 5g service rollout.
2. Issue of Predatory Pricing - Very few competitors are left in the market due to intense price competition post-JIO launch. Low tariffs put pressure on operators’ revenue and profitability leading to declining in Average revenue per user ( ARPU) as it fell from 123 Rupees in 2016 to around 80 Rupees in 2020.
3. High Spectrum Cost - Further challenges due to the rising costs of acquiring spectrum from around 66000 crore Rupees in 2010 to around 3.9 lakh crore Rupees in 2016 as per the Department of Telecom’s report. Recent 5g auctions also brought these issues to the fore.
4. Geographical & Infrastructural Constraints - Difficulty in network rollout to these operators in remote rural regions due to geographical and infrastructural constraints leading to rising operations costs and making it difficult to roll out new services.
5. Regulatory hurdles- As multiple government agencies oversee multiple aspects and on account of the lack of inter-ministerial and inter-departmental cooperation, there is regulatory uncertainty. which makes it difficult for the operators to plan and execute business strategies.
6. Issues in Government policies.

• Spectrum auction policies made it difficult to acquire spectrum at low costs on time.
• Uncertain Regulatory scenario
• Multiple license fees and service taxes put a financial burden on operators.

The government has taken multiple steps to ease constraints for telecom operators:

• Structural reforms -
  1. Rationalization of adjusted gross revenue(AGR) by excluding non-telecom revenue on a prospective basis from the definition of AGR.
  2. Rationalization in bank guarantees required against license fees and other levies, of interest rates for delayed payments of license fee/spectrum usage charges with the removal of penalties
  3. Tenure of the spectrum increased from 20 to 30 years. No spectrum usage charge(SUC) in the future for auctions with encouragement to spectrum sharing with SUC removed for sharing.
• Procedural reforms -
  1. Fixing of auction calendar with the promotion of ease of doing business such as by replacement of cumbersome license requirements under 1953 customs notification for wireless equipment by self-declaration.
  2. Paper customer acquisition forms are to be replaced by digital data storage.
  3. Permission of self Know your customer ( KYC) process through the application is given with easing of clearance even for telecom towers based on self-declaration basis on the portal.
• Addressing liquidity requirements of telecom service providers -
  1. Moratorium/Deferment of up to four years since 2021 in annual payments of dues arising out of the AGR judgement, however, by protecting the Net Present Value (NPV) of the due amounts being protected.
  2. Moratorium/Deferment on due payments of spectrum purchased in past auctions (excluding the auction of 2021) for up to four years since 2021.
  3. It is up to the government to decide whether to convert the due amount pertaining to the said deferred payment by way of equity at the end of the Moratorium/Deferment period or to make the service provider pay interest amount arising due to deferred payment by way of equity.

 To ensure the development of this sector the government needs to promote inter-ministerial and inter-departmental cooperation to address the regulatory hurdles, and it should promote investment in satellite communication technologies to address the infrastructural constraints. Lastly, for sustainable development of this sector, the government needs to curb this practice of predatory pricing so that multiple players can come up in this sector and could promote healthy competition in this sector.