Will the new government be able to build the much needed confidence in the telecom industry? What key factors should it keep in mind? We take a look.
Grappling with margin pressure and policy paralysis, India’s telecom industry is having huge expectations from the new government led by Narendra Modi. Not only revival of the existing structure of the telecommunications is expected but the industry is hoping for more and longer term investments and confidence building as well. How can the new government make it happen? We take a look at the key factors/challenges:
As said above, the telecom industry is hoping for more clarity on policies, especially on the spectrum, SEZ and M&A. So far, we haven’t seen the industry moving much ahead as a lot of decisions were left for the new government. However, it’s highly unlikely quick decisions will be made.
“Based on positive government focus, the Indian telecom & ITeS sector is all set to achieve greater success in the coming times. With market oriented policy measures like simplified investment, IPO & taxation policies, positive M&A policies, outlook driven spectrum policies and forward looking SEZ policies, the industry can reach out to its full potential in the next five years,” says Mr. Sumit Goswami, CEO, Key Point Technologies.
“Today the need is for an optimistic impetus to IT-driven innovation sector and the government should look at delivering tailor-made solutions for specific Indian needs. Given the improved economic scenario being witnessed over the past week with the Indian economy being bullish, we expect the sector to finally achieve a double digit growth rate in the near future. All that is needed is a sanguine governmental policy to help it achieve the same.”
“The Mergers & Acquisitions policy still needs through tightening which will allow for transparent development in the sector.”
Regulating the policy makers
Continuous back and forth between the Department of Telecommunications (DoT) and Telecom Regulatory Authority of India (TRAI) has apparently slowed down the decision making process. With the new government, we can expect a better coordination between the bodies, which will ultimately help bring more clarity in the segment. Read: DoT-TRAI fight over CDMA auctions will hurt Indian telecom industry
Spectrum allocation and pricing
Looking at the trend, spectrum allocation has been a major bone of contention for the industry. The industry has long demanded freeing up the unused spectrum. As pointed out in our 4G in India: Challenges and opportunities article, the operators have sought more spectrum to provide smoother LTE services.
Another important issue is the pricing. Following 2G scam, the BJP – then opposition – had taken a firm stance on the pricing of the spectrum. That said, we have seen the spectrum biddings failing flat due to steep pricing. The industry would hope a better pricing strategy is implemented that does not hurt already struggling service providers.
“While the positives are many, a few challenges also create certain impediments to the growth of the sector. The Supreme Court’s ruling of 2012 cancelling a total of 122 licenses still has a deep impact on the policy making in the sector,” adds Mr. Goswami.
“There are several licences ending in FY16. There must be a roadmap for that and a one-year advance notice should be given to the industry on how much spectrum will be available and when,” Indian Express quotes a source familiar with regulatory developments.
More focus on local players
In his campaigns, Narendra Modi has stressed on encouraging the local manufacturing and companies. Will the model be replicated in the telecom industry as well? It seems highly likely. How can it be achieved, though?
Mr. Goswami explains: “The new government should also create a value system that encourages young businesses and offers them critical tax sops and sectoral incentives for greater acceleration. While it is understood that the incoming government has a deep focus on the IT industry, it should also help incubate local players and nurture them to expand their existing markets and help them build upon newer markets. By providing a streamlined and market friendly investment, IPO and taxation policy, the government can help local players compete with international players and create their space in the market.”
“On the basis of the above mentioned recommendations, it can be pointed out that the indigenous players are looking for critical governmental support to compete with international players. This impetus if formulated properly will help create a healthy competition where the local players will be empowered by the government to compete for greater share-of-consumers. Buoyed by positive governmental policy measures, the Indian companies will be able to deliver cutting-edge products at a consumer centric pricing that will offer better choice for the consumer, thus making it a win-win situation for all the constituents involved.”
Improved broadband coverage, quality of service
A confident industry is very important for end users as well. Not only they can now expect more aggressively priced plans and packages, but better coverage and quality of service as well. To achieve this, the new government has to re-look into the deployment of networks.
“The industry can expect significant improvement in broadband coverage & quality by having a re-look by the new government into the tower technology operations. Today Tower Technology operations are at a critical stage as they have been seriously hampered by the license cancellations during the UPA-II regime. Thus the new government by facilitating low-cost loans, tax holidays and other benefits for tower operators can help them regain more domestic and international funding. Once the operators are allowed to invest more, and gain more traction we can expect significant improvement in broadband coverage and network quality,” points out Mr. Sumit Goswami.
It’s too early to predict how the new government will perform, but apparently there’s a positive outlook and hopes for changes and improvements.