Telecom sector: Aruna Sundararajan says investments will come in next 12-months

Telecom sector has always grown stronger on the back of disruption as the market potential in the Indian market is huge, telecom secretary Aruna Sundararajan said. “Currently, there is a consolidation phase going on and it will have to play out. But the telecom sector is no stranger to similar situations. In the past, we have had the situation where entire nature of this sector has undergone fundamental changes but it has always grown stronger on the back of such disruptions simply because of the size of the market and extent of people who are underserved,” she said.

Reliance Jio, a new entrant in the industry, has created a disruption in the market with cheaper tariffs, putting a pressure on the margins of incumbents. The industry has piled on a cumulative total debt of around Rs 7.7 lakh crore, according to estimates. “It is true that right now the industry is undergoing stress. There is high debt, and huge technology disruption and shake out of players is happening. However, the three-four players left are all giants; they aren’t small. They are big players who are capable of pumping in the massive capital,” she said.

The Department of Telecommunications is also confident of attracting $100 billion in the next five years as mentioned in the ‘New Digital Communications’ draft policy unveiled last week.

“Investments will flow into the market in the medium to long term. That is why we have set a five-year target, we are not saying that the investments will come in the next 12-months,” she said when asked where will the money come from given the telecom operators are financially stressed.

The data usage is growing at a rate of 500%, that too on the back of just 30% penetration. “Once 100% penetration is reached, there will be enough scope for new players to come in and new service models to develop,” she told select media on the draft policy.

In the draft of the new policy, the department has also said it will review various levies and spectrum usage charges. A review of the levies will be done in line with the input tax in its principle. To survive, they (companies/telecom operators) have to invest in network and technology without which you can't harness this market.

A review of the tax structure on telecom players may mean a dent in the revenues of the government. But, the secretary allayed the fears on loss in government revenues. "It may not result in a permanent fall in the government revenues. In fact, the department's view is that this may actually see an expansion of revenues because the ecosystem will be much larger."

The department also plans to meet the industry to resolve issues related to ease of doing business. "There is a need for reforms in ease of doing business in this sector… if there are legacy issues, we are saying prospectively we will sit together with the industry to see how this can be sorted out."

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The draft National Digital Communications Policy 2018 released last week aims to attract $100 billion investments in the digital communications sector and broadband for all with 50 megabits per second (mbps) speed and create additional 40 lakh new jobs in the sector by the year 2022.

Source: DNA Money