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BW Businessworld

Modi Govt: Back From The Tower Of Despair

Allowing trading and sharing of spectrum and its transparent allocation has turned the game for the telecom sector

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When the NDA Government took charge in May 2014, telecom was arguably the most controversial sector. A former minister, a secretary and a few industrialists were in jail for their alleged role in the 2G spectrum scam. Though the UPA government had initiated the process of cleaning up the sector, it soon came down with its own problems.

In the last three years, the Narendra Modi government has taken a number of policy decisions that have helped the sector grow. However, a lot more needs to be done to bring it back to good health.

Sharing Is Good

In 2014, the biggest challenge was the fragmented telecom market. There were eight to nine mobile service providers in a state. Most of them held small quantities of spectrum, which resulted in poor quality of services. The quality of both voice and Internet suffered. Some operators wanted to exit the market. However, they couldn’t, as the policies were not conducive for merger and acquisition.

One of the most important policy decisions of the NDA government was to allow trading and sharing of spectrum. This became a catalyst for merger and acquisitions. Within a few months of the policy announcement, Videocon, which had been looking to exit for a long time, sold its spectrum to Bharti Airtel. Aircel (3G) and Tikona (4G) too sold their spectrum to Bharti Airtel. This led to consolidation of the industry.

Now, Reliance Communications is in the process of merging its mobile business with MTS and Aircel (2G), while Vodafone and Idea Cellular have already announced their merger.

This new trend will improve the industry health and benefit consumers too.

Spectrum Ready

Every operator needs spectrum — the backbone of a mobile telecom network — to provide quality services. To that end, the government has and will allot spectrum in a transparent manner, which is very important for a healthy industry.

Within 10 months of taking charge, the Modi government successfully completed auction of 418.05 MHz of spectrum raising Rs 1.10 lakh crore. The next round, which took place in October 2016, gave operators another chance to buy spectrum. Though only 40 per cent of the total spectrum on the block was sold.

Revival of BSNL

Bharat Sanchar Nigam Ltd (BSNL) is the biggest turnaround story of a PSU. From a negative EBITDA of Rs 691 crore in FY13-14, BSNL registered an EBITDA of Rs 672 crore in 2014-15. During FY15-16, its EBITDA jumped to Rs 3,855 crore.

The credit for the turnaround goes to the NDA government for giving a free hand to BSNL chairman and managing director Anupam Srivastava. There is no interference in the day-to-day working of the company, a big change from when A. Raja was the telecom minister during the UPA regime.

Connecting Remote Areas

Though not much publicised, in the last two years, the government has set up a telecom network in left wing extremism (LWE)-affected areas. One of the reasons Maoists have been successful in attacking security forces in those areas is because there was no communication between the troops due to the absence of telecom lines. The government is now expanding the network in LWE areas and setting up new network in the uncovered areas of North East.

Digital India

Under the Digital India programme — that aims to empower citizens by providing services such as e-education, e-health, e-governance and digital banking — the government wants to provide high-speed broadband to 2.5 lakh villages and make in India electronic components. It may take a long time to implement, but the government’s intentions to use technology for citizen services is clear.

Challenges Galore

Increasing urban rural divide: Tele-density (number of phones per 100 people) is 53 per cent in rural areas against 170 per cent in urban areas.

Delay in Universal Service Obligation Fund (USOF): A large number of ambitious projects of the government, including national optical fibre network and expansion of network in areas that are sensitive from the security point of view, are either moving very slow or are struck.

Huge debt: Currently, the sector is reeling under a huge debt of Rs 4.4 lakh crore. Plus, it is staring at a negative growth in revenue (Rs 5-6 crore).Regulatory environment: The entry of a new operator has brought in new regulatory challenges in the sector. It is important that these issues are resolved at the earliest.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Manoj Gairola

The author is editor of TelecomTiger

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