WHILE the IT sector has transformed both urban and rural India and has brought millions of poor people into the economic mainstream; telecommunications has also wrought havoc on businesses and operators and the continuing changes in the segment are expected to worsen the situation.

The gross revenue of telecom service providers in India has fallen by 8.1 per cent for the October-December quarter of 2017-18, according to the Telecom Regulatory Authority of India (TRAI). Worse for the government, the licence fee that it collects has dropped by 16pc during the third quarter of fiscal 2017-18.

Gross Revenue and Adjusted Gross Revenue of the telecom service sector for the quarter ended December 2017 added up to Rs610 billion and Rs385bn respectively.

The spectrum usage charge, another major component of government revenue, fell by almost 30pc. And the monthly average revenue per user was down by 5.37pc to Rs79.

India had almost 1.2bn telephone subscribers at the end of 2017, while the number of internet users shot up to almost 450 million.

A report last week by ICRA, a Moody’s Investors service company, said the telecom sector will continue to face cash flow pressures for a few more quarters.

Debt levels, which are quite high, are however, expected to ease a little after the end of the current fiscal (March 31, 2018), and could fall in the new financial year.

Reliance Jio’s dramatic entry last year has transformed the sector

“The debt levels, estimated at Rs4.7 trillion as on March 31, 2018, are expected to reduce to Rs4.3tr by FY2019 driven by asset monetisation and increased promoter support,” says an ICRA report on the sector.

Revenues are also expected to fall by 13pc for the current fiscal and operating profit before depreciation, interest, tax and amortisation are expected to decline by a whopping 34pc.

According to Harsh Jagnani, sector head and vice-president, corporate ratings, ICRA, the exit of smaller telcos has provided an opportunity for larger firms to garner subscribers. “The competition for them remains intense,” he says. “We expect the migration of subscribers from the exiting telcos to the continuing telcos to complete over the next six months,”

The aggressive entry by Mukesh Ambani’s Reliance Jio in September 2016 had a devastating effect on the fortunes of then existing biggies including Bharti Airtel, Vodafone India and Idea Cellular. International major Vodafone and Idea (owned by the Aditya Birla group) are now planning a merger to take on Reliance Jio.

The merciless competition between the telecom majors has resulted in the industry’s consolidated debt ballooning to an unimaginable Rs5tr. Worse, the three main players have slashed jobs and about 40,000 were left jobless in 2017, according to reports. And job losses are expected to double in 2018.

The telecom majors have also seen dismal quarterly performances. Bharti Airtel, still the largest operator with 250m subscribers, has seen a dramatic fall in its quarterly profits in the current fiscal. And Reliance Jio has seen

consolidated net profits fall by almost 40pc in the third quarter ending December 31, 2017.

Reliance Jio’s dramatic entry last year has transformed the sector, with tariffs falling phenomenally. While Bharti Airtel, Vodafone and Idea have been critical of Reliance Jio, Ambani recently claimed that his company’s entry has resulted in India emerging as the number one consumer of mobile broadband in the world, even overtaking the US and China.

Analysts following the sector expect things to improve in the new fiscal, especially with consolidation happening over the next few months and prices unlikely to drop further.

THE telecom sector in India is expected to witness dramatic changes over the coming months, especially with the introduction of 5G technology. Aruna Sundararajan, the telecom secretary, said recently that the government was working with all stakeholders to ensure that India emerges as a top 5G player in the world.

“A high-level forum on 5G, which includes global and industry experts, has already commenced work and done a fair amount of deliberation,” she said recently. “By June, India will have a full roadmap ready on this.”

The top telecom bureaucrat expects the 5G technology to boost new services connecting new industries, various forms of devices and also empower new user experiences. “We will soon see a transformation in the way we live due to 5G and I am glad that India is at the forefront of this change,” she added.

The Department of Telecommuni­cations will also come out with a roadmap for the adoption of 5G mobile in just two months. Of course, 5G rollout in India is not expected before 2020.

Dubbed as the ‘industrial internet,’ 5G technology is expected to dramatically transform the economy. India has been slow in adapting to the new technology, with countries like the US, China and South Korea leap-frogging ahead.

Telecom industry sources point out that China had last year finalised spectrum bands for trial runs in 5G. The country is expected to roll-out 5G by early next year.

The Indian government has also started tuning spectrum for 5G services, which after being rolled out would ensure download speeds of over 1,000 Mbps on mobile devices.

Telecom Minister Manoj Sinha notes India is keen to collaborate with other countries for adapting new technological developments including 5G.

The telecom sector in India has grown phenomenally in recent years. This has also attracted increasing foreign direct investments into the sector.

According to government figures, FDI equity inflow into telecom touched $6.08bn in the first half of the fiscal (April-September 2017), more than four times that the sector witnessed in fiscal 2015-16 and 10pc more than in 2016-17.

With the expected emergence of 5G technology, the sector will continue to flourish in a country where just 20 years ago, most people had to wait decades to get a phone connection.

Published in Dawn, The Business and Finance Weekly, April 2nd, 2018