30 years on, India's telecom sector still needs a tariff correction

The Indian telecom story, seen through numbers, could dazzle anyone. But, is it a happy story, 30 years after the first mobile call was made in India in July 1995? First, the numbers.

 

Mobile subscribers in the country are close to 1.2 billion, out of 9.1 billion globally. Internet subscribers in India are pegged at over 970 million, compared to 5.56 billion around the world. India’s broadband subscribers stand at more than 940 million, against the global figure of 5.3 billion.

 

On the handset side, the stats are equally impressive. From importing 75 per cent of the handsets till not very long ago, the country has moved to exporting mobile phones worth ₹1.8 trillion a year. And India has wowed the world with 1.8 billion digital transactions annually.

 

As Telecom Minister Jyotiraditya Scindia told this newspaper in a recent interview, the telecom growth story of India has become the envy of the globe. While that may be the case, the high subscriber numbers and the impressive digital transaction volumes are accompanied by rock-bottom tariffs. Mobile call rates have fallen to around 0.03 paise a minute, from 50 paise a minute 10 years ago. And data cost has seen a steep fall to ₹9 per GB, from ₹287 per GB 10 years ago. Against the average global data cost of $2.49 per GB, India’s is 11 cents ($0.11). That gives India an advantage like none other in terms of digital connectivity. 

 

However, being the cheapest data capital (a title India may get in the near future) has its own problems — something that policymakers can’t wish away. When telecom service providers don’t hike tariffs (both calling rates and data prices) for years at a stretch, there’s a problem. When 5G data comes at the same price as 4G, there’s a problem. When the industry debt runs into trillions of dollars, there’s a problem. When leading telcos want conversion of their pending dues into government equity, there’s a problem. And when preventing a duopoly in the industry becomes a burden, there’s a problem.

 

Beyond the high growth in subscriber numbers and data consumption, the Indian telecom story reflects stress. The number of private telecom players is down to three, and there’s been a looming threat of a duopoly for some years now. The government holds a 49 per cent stake in one of the private telcos — Vodafone Idea. The company is in conversation with the government for further relief after the Supreme Court dismissed a joint plea seeking relaxation of dues related to adjusted gross revenue (AGR) — a term used to calculate the government’s share of a telco’s revenues.

 

While the government does not want to pick up any further equity in Vodafone Idea, as that would theoretically turn the telco into a public sector unit, the company continues to be in talks with the Department of Telecommunications (DoT) to explore some kind of relief. With banks not willing to lend to a stressed telco and promoters not wanting to invest further, another round of relief from the government seems to be the last resort in preventing a duopoly. Meanwhile, another private telco — Bharti Airtel — has approached the government for relief on its AGR dues. The DoT is yet to take a call on the matter.

 

Adding to the uncertainty in the telecom space is the clash between existing telcos and proposed entrants in satellite broadband over the recommendations of the Telecom Regulatory Authority of India (Trai) on spectrum pricing. Telcos, which get spectrum through highly competitive auctions, argue that Trai’s recommendation on pricing overlooks the issue of a level-playing field. Satellite broadband players will get spectrum through an administered allocation process, and Trai has recommended 4 per cent of the companies’ AGR as the spectrum price.                                            

 

Satellite broadband is expected to play a critical role in connecting the unconnected in India’s rural and remote parts, and any delays in its rollout would hurt the country’s telecom story. In the 30-year journey of India’s mobile telephony — from the age when missed calls were the coolest thing to today’s new normal of living life through apps — the digital divide between urban and rural has only been partially bridged, despite the large subscriber numbers and low tariffs.  A large part of rural and remote places still falls in no-go data zones, where last-mile connectivity is either not available or patchy. BharatNet, a government project to provide data connection to gram panchayats and villages, has made progress, but the last mile remains an issue.

 

More than anything else, India’s telecom story needs a tariff fix. Low tariffs are indeed good for consumers —to a point — but they harm the industry. On 5G alone, the telecom industry has invested trillions of dollars and has hardly seen any returns. Without tariff rationalisation, telcos may not invest where it’s needed most — in quality of service. That’s already hurting consumers in terms of poor signal and weak data link.