The year 2022 was a landmark year for Indian telecom. The launch of 5G services and satellite broadband promises to propel the telecom industry, and its users, into a new and higher orbit. In addition, a series of regulatory reforms and the promise of more reforms set the sector on a firm footing for the future.
In addition to reforms on the services front, the production-linked incentive (PLI) schemes have a strong telecom focus. This is more long gestation, but investments in the sector should continue to rise as manufacturing and research and development get off the ground. As a result, through 2023 and beyond, Indian telecom should see the flow of new investments. In addition, the enabling of fast, low-latency networks should lead to many new revenue streams for enterprise users.
5G services were launched in October 2022 after the spectrum auction raised over Rs 1.5 trillion. The auction saw the entrance of the Adani Group, which picked up licences and spectrum for six circles. Over 20 enterprises including Infosys, Capgemini, GMR, Larsen & Toubro, Tata Communications, Tata Power and Tejas Networks have applied for direct allocation of 5G spectrum for setting up private networks. This indicates how interested enterprises are in 5G.
Only Bharti Airtel and Reliance Jio have rolled out commercial 5G services so far. The PSU presence in 5G is likely to be delayed due to BSNL and MTNL looking at a late 2023 launch of 5G services. But the pan-Indian roll-out of Jio and Airtel is likely to be among the fastest in history with both service providers committed to offering 5G coverage all over India by December 2023. Unfortunately, Vodafone Idea is likely to be left lagging in this race.
Reforms in the satellite broadband and aerospace sector have led to a burst of activity. A Hughes-Airtel joint venture (JV) launched satellite broadband services in conjunction with the Indian Space Research Organisation (ISRO). NewSpace India Limited (NSIL) has signed agreements with various private sector companies including OneWeb (another Airtel JV initiative) to launch satellite broadband services.
There’s a lot that still needs to be done for policy clarity in this area. The Department of Telecommunications (DoT) made a crucial start to freeing the satellite sector by abolishing network operations control centre (NOCC) charges. The government has also enhanced the scope of the commercial VSAT licence to enable provisioning of user terminal stations on moving platforms.
But stakeholders and interested parties need to interact with policymakers to formulate a business-friendly space policy and to decide on the details of a spectrum allocation and licensing framework. The new Indian Space Policy and a follow-up Space Activity Bill are potential game changers.
Apart from the space arena, telecom reforms included enabling e-KYC, rationalising bank guarantees, eliminating spectrum usage charges (SUC) for spectrum acquired in future auctions, allowing 100 per cent FDI through the automatic route, rationalising adjusted gross revenue, and rationalising interest rates and penalties.
Other key reforms included the Wireless Licensing Reforms, 2022 and the Indian Telegraph Right of Way (Amendment) Rules. The latter facilitates the right-of-way (RoW) process through the Gati Shakti portal. The new licences reduced the processing fees from Rs 1,000 to Rs 100 and expedited the process for obtaining Standing Advisory Committee on Radio Frequency Allocation (SACFA) certificate clearance to place small cells on street furniture. The RoW (Amendment) Rules considerably ease the restrictions on the deployment of small cells and towers.
Quite apart from reforms and 5G and satellite broadband, there was steady progress in teleconnectivity and internet penetration. Indians consume 16.4 GB of data per month – the highest per capita in the world. At a cost of Rs 10.29 per GB, data tariffs are also the cheapest in the world. Rural teleconnectivity is up to 58 per cent while broadband connectivity is at 816 million. 4G has been rolled out to LWE areas, in the Northeast, and to the Andamans. Around 190,000 gram panchayats are connected by optical fibre.
The telecom PLI schemes have an outlay of Rs 122 billion for a period of five years. The scheme provides 4-7 per cent incentives on sales of specified products. The Union Budget 2022-23 announced design-led manufacturing for 5G products and provided additional incentives. DoT has approved a total of 42 companies, including 28 MSMEs, under the PLI schemes. This is expected to generate additional sales of Rs 2.45 trillion of telecom and networking products and create additional employment for 44,000 persons.
Even in the near future, as the pace of 5G adoption picks up, new use cases will quickly develop in manufacturing, healthcare and education. Direct ARPUs are also likely to pick up, albeit slower than telcos would like. India could become a leader in 5G penetration in the medium term due to the high population density and fast roll-outs.
The new 5G technologies can enable many new revenue streams for enterprises. It can drive the metaverse- and
internet of things-led applications. It can enable new platforms powered with artificial intelligence. It can jump-start new machine-to-machine uses, drones and big data analytics.
There are still many issues and challenges for the sector. The lack of competition is not ideal for long-term dynamics. Vodafone Idea remains extremely cash-strapped and is not capable of competing meaningfully. The rescue-cum-merger plan for BSNL and MTNL will cost over Rs 1.6 trillion with no guarantees that it will work.
Further clarity is required on the policy front, and enabling legislation will need to be pushed through. It is clear, however, that the sector is now on a better foundation with a promise of strong growth. This, in turn, will generate employment and enable growth both upstream and downstream, given the PLI schemes and the new enterprise use cases for 5G, satellite broadband, etc. This could be a new dawn for the telecom sector, after several years in the doldrums.
Devangshu Datta
