DMPQ:. What are the issues attached with the Telecom sector in India?

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Issues Involved: One of the major issues faced by this sector is declining profitability which is further exacerbating the twin balance sheet (TBS) problem. Profitability is being affected by following issues:

 

  •  Low revenues – Dramatic reduction of prices & coming down of average revenue per user by 22% due to new entrant.
  • High Debt – Unsustainable spectrum prices and low revenue is also leading to high debt. According to industry sources, telecom companies together carry a debt of approximately Rs 5 lakh crore.
  • High levies – Government levy on the sector is in the 30 per cent-plus range of international standard. Other South Asian countries such as Pakistan, Bangladesh and Sri Lanka levy in the range of 20s.

 

  • Expensive spectrum – The price of spectrum in India is among the highest in the world but telecom firms have to buy it to remain relevant and competitive in the business
  • Competition from over-the-top operators such as WhatsApp as they don’t have to pay taxes or levies to the government.

 

  • Restrictive government policies – for example cross-holding norms prevent a telecom company from owning separate stakes in other operators during mergers and acquisition such as RJio or Airtel cannot acquire a stake in Tata Teleservices or Aircel; they can only buy-out 100 per cent of the company so as to create a merged entity.
  • Quality of telecom services – is disappointing due to issues like call drop etc.
  • Differential pricing for data services – Although TRAI promotes net neutrality, there are no laws enforcing it.

Recent reduction in Interconnected Usages Charges (IUC) by TRAI has been described by various operators as a huge loss of revenue.

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