STRIDES IN TELECOM SECTOR
Raju, a bike rental service operator in Orchha town of Tikamgarh district in Madhya Pradesh, has been getting foreign customers since 2009, after someone listed him on the internet. He is one among many noticed during the digital drive conducted by a start-up firm Nowfloats to see tryst of people in the country with technology. Raju doesn't own a smart phone and he told the digital drive team that he is not even aware of who listed him on the internet. This is an example of the way telecommunication sector is transforming life of people even if they are unable to use its services.
Highlighting the importance of telecom services, Prime Minister Narendra Modi in one of his speeches said that earlier people settled around rivers but in coming days people will settle where broadband connectivity will reach.
The mobile phones have been driving telecom growth story in the country. At the end of February 2016, the mobile phone connections in the country reached 102.71 crore from 90.45 crore at the end of March 2014. India is only next to China in the world in terms of mobile subscriber base. There has been attempt to revive landline phones with free calling schemes from landline telecom operators. However, landline connections continue to decline. These have dropped to 2.52 crore at the end of February from 2.85 crore in March 2014. The mobile SIM has become a major tool to connect people to internet. The internet connections in India have crossed 40 crore mark at present from 25.1 crore in March 2014. Most of the people now use their phone to access service on internet. As per Telecom Regulatory Authority of India (TRAI) data, there were over 14 crore broadband users in the country at the end of February with 12.7 crore accessing the high speed internet service through their mobile devices like smartphone and dongles.
Under National Telecom Policy 2012, government has set a target to provide affordable and reliable broadband-on-demand by the year 2015 and to achieve 17.5 crore broadband connections by the year 2017 and 60 crore by the year 2020 at minimum 2 megabit per second (mbps) download speed and making available higher speeds of at least 100 Mbps on demand. The data consumed through internet and broadband service in the country has increased from around 9.44 lakh terabytes (TB) in 2014-15 to 13.83 lakh TB.
The industry earned a revenue of Rs 15,531 crore from data services in 2013-14. It increased to Rs 24,494 crore in 2014-15. As per six month data available with telecom regulator TRAI, the revenue from internet services reached Rs15,728 crore in September 2015. The overall teledensity increased from 75.23 per cent in March, 2014 to 82.93 per cent in February, 2016. Rural teledensity was 50.63 per cent in February, 2016. It increased by 6.62 per cent during April, 2014 to February, 2016.
Easing life of people by cutting down on distance and enabling them to utilise their time more efficiently can be seen as main reason behind growth of Indian telecom sector. Besides this affordability and reach of telecom networks are another set of reasons that have catalysed growth in the sector. Government efforts to bring most of services on internet eased life of people like booking of train tickets, birth certificates, and filing police complaints online, online banking services, payment of bills for various utilities. The last two years have seen most of the services coming on to mobile phones.
The e-commerce sector has further brought people closer to the internet. Now merchants in small towns have customers across globe and they are selling products online. People in small towns are able to order quality products especially of brands that are not available in their area. Even small merchants, handicraft traders, local service providers use mobile applications like Whatsapp, Hike, Facebook etc to discover market for themselves. The telecom sector has been pivotal in creation of industries around it like e-commerce, BPOs and increased business opportunity across the country.
Government schemes for the sector have played the role of demand enabler in the sector. The Digital India programme designed by the government is an example. This program links the telecom sector with good and effective governance for robust growth of the nation. Besides creating avenues for demand of telecom services, the Digital India program also looks at infrastructure and resource deficit in the sector.
The vision of government under Digital India project includes creation of ICT (Information and Communication Technology) infrastructure like high speed Internet at village panchayat level, on demand availability of government services like health, education etc, and digital empowerment of citizens specially through digital literacy.
The programme is monitored by a committee headed by Prime Minister Narendra Modi and the Cabinet Committee on Economic Affairs (CCEA) will accord approval for projects. A Digital India Advisory Group has been formed and being chaired by the Minister of Communications and IT. There is an Apex Committee which is chaired by the Cabinet Secretary and the Expenditure Finance Committee (EFC) or Committee on Non Plan Expenditure (CNE).
The project aims to provide thrust to nine pillars identified as growth areas. These pillars include—broadband highways, everywhere mobile connectivity, Public Internet Access Programme, e-Governance, e-Kranti (which aims to give electronic delivery of services), information for all, electronics manufacturing, IT for Jobs and early harvest programmes.
Government is working on programme to connect 2.5 lakh village panchayats with broadband. The project is likely to be completed by September 2018.
The government has till date laid optical fibre in about 50,000 village panchayats and broadband services have been provided in 6,834 village panchayats. It expects to connect 1 lakh village panchayats by the end of current financial year. It is estimated that there are 55,669 villages in the country that do not have mobile coverage. Various Schemes are being implemented with financial support from Universal Service Obligation Fund (USOF) for expansion of mobile services in rural and remote areas. Government imposes 5 per cent levy on every call made which is used to create USO Fund. This fund is used for supporting telecom services in rural and remote areas.
Under a shared mobile infrastructure scheme in villages or cluster of villages having population of 2000 or more, around 7,300 mobile towers have been installed. Further, 2199 mobile towers are being set up in Left Wing Extremism (LWE) affected States with a total estimated cost of Rs 3,567.58 crore.
In September, 2014, the government approved a proposal to implement a Comprehensive Telecom Development Plan for the North-Eastern Region (NER) with project outlay of Rs 5,336.18 crore. Under the project mobile coverage has to be provided to 8,621 identified uncovered villages by installation of about 6,673 mobile towers and installation of 321 mobile tower sites along national highways. Government is also in process to strengthen telecom networks in Andaman and Nicobar Island and enhance telecom capacity by three fold in Lakshadweep Island.
Government has set the target to achieve 100 per cent tele-density by 2019. The mobile services are expected to play crucial role in meeting this target. Policy makers have the challenge to strike balance between factors driving telecom penetrations like affordability, infrastructure and governments revenue from this sector. The critical raw material in rapidly pushing telecom service is spectrum. These are airwaves frequencies which are used to transmit mobile signals. The value of spectrum depends on the availability of equipment and consumer devices that can encode and decode signals. The other factor which counts is the area or distance that transmitted signals from a mobile tower can cover.
In India, mobile services are provided in 800 Mhz (2G,4G), 900 Mhz (3G, 4G), 1800 Mhz (2G,4G), 2100 Mhz (3G), 2300 Mhz (4G) and 2500 Mhz (4G). In July, government is planning to auction spectrum in 700 Mhz band which is considered to be most efficient for delivering mobile services. The cost of delivering mobile services in this band is estimated to be around 70 per cent lower than 2100 Mhz band, used for providing 3G services.The cut throat competition in the sector has been pushing telecom operators to acquire spectrum as much they can for survival. The spectrum is allocated to telecom operators for a period of 20 years. Holding of large spectrum chunk can enable an operator meet growing demand in the market coupled with good quality of service.
The government expects a revenue of Rs 98,995 crore from the sector in 2016-17, which includes Rs 64,580.92 crore from spectrum auction proceeds. Inter-ministerial Telecom Commission has favoured putting all available spectrum for auction which at price suggested by sectoral regulator TRAI is valued around Rs 5.36 lakh crore.
The auction is to be held in July and would include sale of most premium 700 Mhz band at a price of Rs 11,485 crore per Mhz. As per the rule approved by the inter-ministerial panel a company interested in buying spectrum in 700 Mhz band will need to shell out a minimum of Rs 57,425 crore for a block of 5Mhz on pan-India basis. This band alone has the potential to fetch bids of over Rs 4 lakh crore. The total potential revenue of Rs 5.36 lakh crore from the spectrum sale is more than double of telecom services industry’s gross revenue of Rs 2.54 lakh crore reported in 2014-15 financial year.
As per global industry body GSMA, the total recommended reserve price for the auction is almost double the cost of all spectrum investment to date in India and more than 20 times the annual free cash flow of the entire mobile industry. The panel has also suggested stringent payment conditions compared to method suggested by Telecom Regulatory Authority of India. The panel has favoured that companies winning spectrum in higher frequency bands, 1800 Mhz, 2100 Mhz, 2300 Mhz and 2500 Mhz band , should make 50 per cent upfront payment and rest in 10 years after a 2-year moratorium.
For spectrum in 700 Mhz, 800 Mhz and 900 Mhz band, companies will require to pay 25 per cent upfront and rest in 10 years after a 2-year moratorium. It is in line with practice of earlier auctions but differs from TRAI suggestion. If all spectrum in 700 Mhz band gets sold at even TRAI recommended base price, then successful bidder will need to pay over Rs 1,00,000 crore upfront after auction.
The rising cost of spectrum is leading to companies opting for premium services like 4G which at present rate is unaffordable for masses at lower rung. Need of hour is for to think of a policy or scheme that can strike the balance between two main pillar of telecom services growth – affordability and infrastructure expansion
Government in last two years has put in place crucial policies like spectrum sharing, trading, active infrastructure sharing, liberalization of spectrum, harmonization, virtual network operators and is further working on uniform rules across country for rolling out telecom infrastructure.
Spectrum sharing has resulted in reduction in cost of owning airwaves especially for companies who have low subscriber base and are unable to grow at rapid pace. Spectrum trading has given way to struggling telecom operators to sell their right to use airwaves to other telecom operators based on their mutual commercial agreement. Earlier, telecom operators depended only on government for procuring spectrum but spectrum trading rules have given them liberty to buy spectrum from other operators based on their need.
After about 7-8 years, government in January 2015 was able to bring all ministries on a table to discuss and free excess spectrum they hold for commercial mobile services. The industry has transformed from spectrum crisis situation till 2015 to over supply of spectrum.
Earlier telecom operators were allowed to only share mobile towers for installing antennas but this year government has allowed them to even share antennas. This would help industry in significantly reducing the cost of infrastructure.
Further, government has approved virtual network operators licence that will help telecom operators in selling their services through another company. The provision of Virtual Network Operator (VNO) will introduce a distributor like layer for companies. This will facilitate companies in selling their services in bulk to a VNO who will then market and sell telecom services further.
A VNO will be able to offer services of various telecom operators under one umbrella to customers. This will also reduce cost of marketing spend that telecom operators are required to promote their services.
The telecom sector is moving in a direction where it will see huge business growth in the time to come. Government has already announced roadmap for the same on May 12, 2015.
(The author is a journalist based in New Delhi. email: prasoon.news @gmail.com. Views expressed are personal.)