The Telecom Sector will benefit from the leadership of Prime Minister Narendra Modi. India’s telecom sector was in the dire straits and clutching onto the straws for survival. Now some Major Reforms have been rolled out by the Modi Government. These will change the telecom sector’s health drastically, the competition will begin to thrive in the telecom sector once again and the sorrowful atmosphere is about to be eradicated.
India’s Telecom Sector has been struggling for years now. Its downfall began right from the time when the 2G Spectrum Scam of the UPA era was exposed. In 2016, the entry of Reliance Jio in the telecom market further exacerbated the woes of other service providers like Vodafone, Aircel, Bharti Airtel and Idea. Vodafone and Idea had to come together in 2018 to save each other from going bankrupt as well. That marginally prevented India from sliding into a telecom duopoly of Jio and Airtel as the merely two major service providers. Nearly all telecom providers owe large amounts of money to the government and have been unable to pay it for quite some time now. The telecom industry has been calling on Central Government to intervene and provide some relief to the sector. The government too has been keen on creating an atmosphere in which competition among providers thrives.
So, the Modi Government has now stepped in for some big bang telecom reforms and the same has been announced. Prime Minister Modi himself has made these decisions and they are said to provide much-needed oxygen for the telecom sector.
- The definition of Adjusted Gross Revenue also known as AGR has been rationalised. These are the usage and licensing fees that telecom operators are charged by the Department of Telecommunication. This was a big point of contention between telecom providers and the government.
- 100% FDI in the telecom sector through the automatic route has been approved to boost investments. Earlier FDI via automatic route was capped at 49%.
- Spectrum usage charges will now be rationalized and there will be an annual compounding of rates rather than a monthly one.
- Penalty on payment of license fees, spectrum usage charge and all kinds of charges would no longer apply.
- A four year moratorium period has been announced on payment of the statutory dues by the telecom sector. According to this, the government will improve cash flow within the sector which can be used in more productive areas.
- Other structural reforms announced by the government include the increase of tenure of holding the spectrum from 20 years to 30 years. Surrender of Airwaves after 10 years, in case of the changed business atmosphere.
- Apart from the structural reforms which will bring new life into the telecom sector, the Modi Government has also announced several procedural reforms. These include removal of the cumbersome requirement of the license of wireless equipment, allowing Self KYC, eKYC rate revision to only Re. 1/- and replacement of paper Customer Acquisition Forms by digital storage of India. The moratorium of four years of statutory dues will immensely help the telecom sector in benefiting from the reforms and building the ability to pay the government back in the next four years.
Union Minister for IT, Telecommunication & Railways Ashwini Vaishnav said the reforms package is adequate for the survival of existing players and will ensure robust competition. He said, with more reforms and more structural changes that are in the pipeline, more players should come.
So far, telecom service providers Vodafone, Idea and Airtel were struggling to find a way to pay the government all their dues. Bharti Airtel, Vodafone-Idea and Reliance communication owed nearly Rs. 92000 Crore to the Center as the license fee and Rs. 41000 Crore as the spectrum usage fee.
Further, an annual compounding of interest rates rather than a monthly one will provide tremendous legroom to telecom providers with the competition and customer choice. The reform will surely boost 4G proliferation infused liquidity and lure investment in upcoming 5G networks. By far, the most important reform which the Modi government has announced is the redefinition of the term Adjusted Gross Revenue. Until now, the telecom service providers were required to pay AGR dues to the government which included non-telecom revenue. For example, according to the previous definition, a telecom provider’s revenue used by the company’s staff was also included in the AGR, now AGR includes only telecom related revenues.
100% FDI in the telecom sector with all necessary checks and balances will provide an entirely new opening for telecom providers to expand and build upon their existing networks. Overall, customer experience is said to receive a boost with the flow of greater FDI into the telecom sector. Earlier this year, the Modi government cleared 12000 rupees to incentivize manufacturing of Core Transmission Equipments, 4G/5G/NextGen Radio Access Network and Wireless equipment, Internet of Things access devices and other wireless equipment, switches, routers etc.
In the next five years, the Modi government will give incentives to various companies for starting indigenous manufacturing of telecommunication equipment in the country. The Modi government is not only promoting the domestic manufacturing of telecommunication equipment but is also encouraging the Indian Information Technology behemoths to work towards the virtualization of telecom infrastructure. Soon enough, these reforms ushered in by the Modi government will form the bedrock of India’s Telecom Sector becoming one of the mightiest in the world.
