Telecom after five years: 'Achhedin' for sector

- India will be able to move faster in the direction of 'Digital India' only if telecom companies have to raise funds for Five-G services after receiving government relief.

After a painful long wait, India's telecom industry has finally seen an 'era'. The telecom sector breathed a sigh of relief last Wednesday when the central government granted a four-year moratorium on outstanding government payments, including adjusted gross revenue and spectrum. Troubled by massive debt and outstanding government payments, the telecom sector has struggled a lot under an extraordinary regulatory burden. In other words, the telecom industry, which is struggling to survive with government relief, has found a lifeline.

The financial concessions announced by the central government include regional liberalization and procedural simplification, and a dramatic solution to a problem that has long plagued telecom operators. Relieving the telecom sector, the government said that by simplifying the definition of AGR, only telecom revenue would be taken into account. The government will not count non-telecom revenue as adjusted gross revenue.

In addition to the moratorium, new funding will be easier for companies allowing 100 per cent foreign direct investment (FDI) under the automatic route in the telecom sector. Until now, telcos had to seek government approval for 5 per cent FDI. The tariff war in the telecom sector started almost five years ago with the arrival of new player Reliance Jio under the leadership of Mukesh Ambani. In this tariff war small companies failed to survive and disappeared and the big companies that survived are currently struggling to survive. At one time, there were about 8 to 10 companies in India's telecom sector, but now the number has dwindled to just six, including three private and one state-owned telecom company. British telecom company Vodafone India and Idea Limited of India merged in 2014 to survive.

Vodafone Idea has been hit the hardest by the tariff war in the telecom sector. As the situation worsened, Kumar Mangalam Birla finally resigned from the post of non-executive chairman of the company a month and a half ago.

After the advent of Geo, the average revenue per customer (APUR) of telecom companies dropped significantly as the tariff war began. In order for companies to grow financially, strong and sustainable growth in their APURs will be the first priority then they will have to focus on increasing profitability and revenue. Only if the telecom companies are financially sound will they be able to invest enough for the Five-G service and be able to contribute to the building of Digital India.

According to the Department of Telecommunications, Vodafone Idea and Bharti Airtel have to pay Rs 4.5 crore and Rs 4.50 crore respectively as AGR arrears. So far, Vodafone Idea and Bharti Airtel have paid Rs 4.5 crore and Rs 12,008 crore, respectively, as AGR. As per the quarterly financial results of June 2011, Vodafone Idea had a debt of Rs 1.31 lakh crore against which the company had only Rs 50 crore in cash. Experts believe that the four-year moratorium has given Voda-Idea relief in outstanding AGR of Rs 5,000 crore annually and spectrum payment of Rs 500 crore.

These reliefs and reforms are being seen as the beginning of a new era for the telecom sector. The telecom sector can play a big role in making India's digital economy stronger and faster. The telecom sector is one of the driving forces of the economy and the key to India building a digital society. This will enable India to achieve the goals of Digital India.

Although the recent government decisions have brought great relief to the telecom sector, the biggest question now for companies is new fund-raising and revenue generation. The moratorium is four years old and the government will have to pay the arrears thereafter. The four-year-long moratorium gives the telecom industry enough time to increase their average revenue per customer, which is a very cumbersome and lengthy process.

Major challenges facing telecom companies

• Strong growth in average revenue per customer
• Sustainable growth in profitability and revenue
• Raising new funds, attracting investment from abroad
• The structure required to start the Five-G service and the funds required for the investment
• To regain the lost trust among the investor class
• Financial funds required to pay arrears after the completion of the four-year moratorium
• Government intervention, fear of old disputed cases arising
• Satisfying India's growing Internet demand
• Making a significant contribution to the building of Digital India
• Moving forward with cooperation with rival companies instead of cutting the tariff war
• To provide calling and internet facility to Indian people at reasonable and affordable rates