Landmark reforms in 2016 promise vibrant 2017 for telecom sector

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By Rajan S Mathews, Director General, Cellular Operators Association of India

 
The 11-odd months of 2016 make it one of the most eventful years for the telecom sector. For the Government, the successful auction of spectrum has brought Rs65,789 crore into its kitty. The gains at an opportune moment will help bankroll the Government’s drive towards the digital era. This will facilitate better connectivity, which was affected in recent years after the drive against telecom towers led to the closure of many.

Accordingly, the Right of Way (RoW) norms announced recently are most welcome, since these will propel India into the digital age. The nationwide guidelines can simplify RoW approvals, ensuring better connectivity and coverage, higher speeds, fewer call drops and a more efficient telecom ecosystem. With companies augmenting telecom infrastructure, there will be greater connectivity.

Facilitating Growth
The new RoW rules would facilitate faster site acquisition to erect mobile towers and speed up the provision of required infrastructure. It will also be possible to allow faster rollouts of optical fibre cables and over-ground telecom infrastructure – a critical factor for promoting Digital India. These rules will also ease clearances for establishing mobile towers via single-window mechanism through a nodal officer in states.

The above reforms have been timely. With the country having more than 220 million users, it is the world’s second-largest smartphone market, displacing the US, as per a report from Counterpoint Research. Nonetheless, numbers don’t tell the full story because smartphone penetration in India is below 30%. But this shortfall also highlights the huge market potential.

Growth statistics from TRAI reveal a great opportunity. Telephone subscribers grew from 1,036.41 million at end December 2015 to 1,058.86 million at end March 2016. This is a 2.17% growth over the previous quarter, while the year-on-year rise is 6.26% over the same period of the previous year. Likewise, overall teledensity rose from 81.83 on 31 December 2015 to 83.36 on 31 March 2016.

Similarly, with 22.74 million subscribers added during December 2015 to March 2016, total wireless subscribers went from 1,010.89 million to 1,033.63 million – a 2.25% growth rate over the previous quarter. Simultaneously, Internet subscribers rose from 331.66 million in December 2015 to 342.65 million in March 2016, indicating quarterly growth of 3.31%.

But rising numbers also tell another story – about the steady rise of e-Commerce users across the country. By adding 25 million users each year, the nation’s Internet user base of 400 million in 2016 is higher than that of Brazil (210 million) and Russia (130 million), reveals a joint ASSOCHAM-Forrester report. Besides, about 75% of online users come within the 15-34 age bracket, whereas most online shoppers are in the 15-24 age groups. Many online transactions happen due to online travel bookings, which have witnessed growth in numerous sub-categories: airlines, hotels, car rentals and travel information, among others. About 60-65% of India’s total e-commerce sales are via mobile devices and tablets.

Driving Data Usage
With online shopping through smartphones poised to become a game-changer, industry experts believe mobile commerce can contribute almost 70% of e-Commerce revenues. These assumptions are supported by data that India’s 3G and 4G users rose 300%, touching 120 million within two years. With affordability increasing, it is expected the market will expand to about 300 million by March 2018, states a report by CLSA – a brokerage and investment entity.

The above mentioned trends are driving higher usage of data, reveals a Nokia MBiT study. The average 3G data usage per customer reached 753 MB (megabyte) versus a global range of 800 MB to 1GB (gigabyte). Moreover, the report showed India’s overall mobile data traffic soared 50% in 2015 with 3G outpacing 2G in all circles for the first time. With 4G operations now a reality, data usage will shoot up further, as it did globally, where data usage rose four times. Given the robust data usage through mobile phones, India’s total mobile services market revenue is expected to reach $37 billion in 2017. This would mean a CAGR of 5.2% between 2014 and 2017, as per research firm IDC.

The increase in mobile technology has also encouraged various technology startups in diverse sectors, such as hotels, hospitality, restaurants and cabs. Government programmes like Aadhaar and Digital India have also ensured people adopt digitalization.

Despite this, the transition won’t be without hiccups. Being the country’s second-largest diesel user after the Railways, the telecom sector will be affected by GST because it maintains telecom towers 24/7. As petroleum products continue to remain outside GST, telecom players will not be allowed to offset input costs. Therefore, they will continue bearing Central excise duties and State sales taxes. In turn, this will create a tremendous cascading outcome that reduces profits.

Lastly, the Government’s decision to ban Rs 500 and Rs 1,000 notes will boost mobile telephony in the months ahead, despite causing some short-term discomfort now. With two high-value notes demonetized on 8 November, almost 86% of the currency in circulation became invalid overnight. Consequently, all sections of society have no option except using online and digital transactions. For almost everyone, banking through cell phones is most convenient as it reduces the cost of every transaction.

Despite transition issues, demonetisation will ensure huge benefits to banks, the telecom industry and the people. Undoubtedly, India’s telecom industry will experience happier times in the coming months.

— The writer is Director General – Cellular Operators Association of India

 

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