Telecom: Signal restored
The Centre's clutch of decisions on telecom can stave off imminent crisis in the sector and can inject new competition thanks to 100% FDI.
One of the sectors that witnessed phenomenal transformation since the economic reforms is telecom. A modern-day Rip Van Winkle who went to sleep in 1995, the year in which mobile telephony was inaugurated in Kolkata, won’t believe the incredible metamorphosis that the stodgy, black-wired handset has gone through over the past two decades-and-a-half. However, through a process of market forces and different decisions, administrative and judicial, the sector not only lost its competitive vibrancy but also went close to the precipice. The clutch of decisions in the telecom sector on Wednesday would help restore the heath of the players and the market in a great way.
While two embattled players Airtel and VI would be immensely benefitted by the four-year moratorium on payment of adjusted gross revenues and spectrum dues to restore the health of cash flows, it was something that policymakers indicated to nurse the sector back to health. The government has also calculated AGR in a way so that non-telecom revenues are excluded from the gross revenue, thereby lessening the future impact on the service providers. But the real big bang reform was to allow 100% FDI through the automatic route in the telecom sector. It might pave the way for new players in the market, which, in turn, would lead to further efficiency gains for the consumer and new employment opportunities for the youth.
However, in the long term, the health of the Indian telecom sector would depend on how paying the country’s consumer is. One frequent complaint against the Indian telecom market is that the average revenue per user is very low which makes the market unattractive for many. The size of the Indian market is huge but the average revenue realised from each user is a significant indicator that all service provider looks for. Therefore, the long-term health is largely dependent on the ARPU levels. Indians have been pampered by some of the lowest telecom tariffs in the world. They might feel upward pressure on this count soon.