Yet another tumultuous year ahead for telecom industry

Rajesh Kurup Mumbai | Updated on January 02, 2020 Published on January 01, 2020

Firming up of tariffs and improved network connectivity are some of the expectations of the industry   -  P V SIVAKUMAR

Move towards duopoly, AGR issue will be key challenges

The year gone by was a rollercoaster one for the telecom industry and 2020 will be another year of disruption that would radically change the ever-evolving sector’s landscape. The worst for the sector is not over yet and the industry is likely to witness many surprising twists and turns.

Move towards duopoly

The biggest change for the industry, which is under financial strain, would be a move towards duopoly.

“The country is increasingly moving towards a duopoly, with only Reliance Jio Infocomm (RJio) and Bharti Airtel. Vodafone Idea and Bharat Sanchar Nigam Ltd (BSNL) are in bad shape, and we don’t know how long they can continue operations without the Government support,” Amresh Nandan, Vice President-Analyst at Gartner, told BusinessLine.

“It’s not just the financial situation, but the overall crisis in the industry also played its part,” he said, adding, duopoly is not in the best interests of the sector.

To tide over the crisis, the telecom sector needs government support and most importantly on the Adjusted Gross Revenue (AGR) issue.

On October 24, the Supreme Court had upheld the Centre’s plea to recover AGR of about ₹92,000 crore from telecom service providers, a move that widened the operators’ losses. For the second quarter ended September 30, Vodafone Idea recorded a loss of ₹50,921 crore, the highest-ever loss for a corporate in India, on account of provisioning for AGR payouts, while rival Bharti Airtel posted its highest-ever net loss of ₹23,045 crore for the period.

“The industry is expecting a final resolution on AGR in 2020, and we hope that the Supreme Court’s decision would lead to some positive outcome,” Rajan S. Mathews, Director-General of Cellular Operators Association of India (COAI), the apex body of telecom industry, said.

Licence fee

The industry is also expecting a slash in licence fee in Budget 2020, following a representation made to Finance Minister Nirmala Sitharaman and the Department of Telecommunications (DoT).

“We have requested a reduction in licence fee to 3 per cent from the present 8 per cent of the revenue earned and slashing of Spectrum Usage Charges to 1 per cent from about 6 per cent,” Mathews said.

BSNL, MTNL revival

A revival in the fortunes of BSNL and Mahanagar Telephone Nigam Ltd (MTNL) is also expected in 2020, following the success of the State-owned companies’ Voluntary Retirement Scheme (VRS). Nearly, 92,700 employees of the PSUs opted for the separation scheme.

“BSNL is on a revival path and the company is now gearing up for 4G launch with the Government already approving spectrum allocation. BSNL would be allocated 4G spectrum from March 2020, while the management has also taken initiatives to outsource maintaining network to third party,” Sanchar Nigam Executives’ Association, an employees’ union at BSNL, General Secretary Sebastian K said.

“Employees saved BSNL, going to the extent of paying for the company’s maintenance from their own savings, during the crisis and will work hard for its revival,” he added.

5G rollout

However, belying industry expectations, 5G rollout would be delayed further. While the spectrum auctions are expected by the fourth quarter of this financial year, commercial rollout of 5G would not happen in 2020.

“We will see a lot of progress on 5G tests but I think any meaningful launch is at least 1.5-2 years away,” COAI’s Mathews said.

Firming up of tariffs, improved network connectivity and stability on the hiring front are among the expectations of the industry in 2020.

“There also a need to increase fibre on the ground and without adequate fibre, 5G investments wouldn’t be helpful,” Gartner’s Nandan said.

The telecommunication sector is the second largest and fastest growing in the world, with 1.19 billion users (fixed and mobile) as of September 30, 2019 (according to COAI data).

Published on January 01, 2020
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