Sanity appears to be returning to India’s telecom sector. After years of hyper competition and court litigation, companies as well as the authorities are looking to get their act together. As service providers get down to deleveraging their balance sheets—Bharti Airtel intends to take its Africa subsidiary public and Reliance Jio Infocomm plans to sell new shares of its tower company to an investor—the department of telecommunications (DoT), too, has begun to take an accommodative approach. The DoT first asked the Telecom Regulatory Authority of India (Trai) to lower the base prices of various spectrum bands coming up for auction. Then it advised the latter to reconsider the penalties it had recommended against Bharti Airtel and Vodafone-Idea for denying interconnectivity to new entrant Reliance Jio Infocomm in 2016. The fines amounted to ₹3,050 crore. While wrongdoing cannot go unpunished, the DoT’s twin suggestions to Trai reflect the tough times this sector is going through.
During the boom years, the sector must have looked eminently milkable. Taxation has been high, be it the steep import duties on equipment in the past or the 18% goods and services tax now. The Supreme Court-ordered shift to auctions of airwave spectrum has had service providers suffer the “winner’s curse" in recent years, with small fortunes stumped up for this vital resource, leaving the older players far too burdened by debt to invest in much else. User charges, meanwhile, have been driven low by the intensity of market rivalry. Rarely have consumer services been so cheap and resource costs so high anywhere in the world. Another round of auctions—for 5G upgradation—at high reserve prices could cripple them. The outcome would be full of irony: perhaps only one private player would survive. The monopolistic effects of such a market shake-out apart, Indian lenders, already staring at huge write-offs in the infrastructure and aviation sectors, can hardly afford another disaster.
There is no denying that the 2G scam during the second term of the United Progressive Alliance government induced some fear among the authorities. Our institutions of governance grew reluctant to do anything that could remotely be construed as favouring a particular private party. Arguably, telecom has been a victim of this dread. However, it is time now to think clearly about the future of a sector that matters hugely to the country. The promise of the Indian market is such that it should never stop attracting new players. As of now, there are only three big private players, with uncertainty hovering over the future of the fourth one, a state-owned entity. Luring fresh investment should be part of the agenda for telecom. Auction participation needs to widen. The regulator would also do well to adopt measures that lower costs and assure the viability of various operators. Tax relief also deserves some thought. The truth is that the government’s pursuit of revenue maximization through spectrum sales and other levies is now at risk of turning counterproductive. The Centre’s routine revenues from the sector have been on a decline, as its budget records show. This is a bad sign. The expanding use of telecom services ought to be filling government coffers, not the sums that are squeezed out of thin air at auctions. The broad goal, remember, is to arm Indians with choice and help everyone stay in touch as cheaply as possible.