Response Of ICRA – NDCP 2018

“The Union Cabinet has approved the National Digital Communications Policy, 2018, which emphasises the importance of broadband and fibre connectivity in the country and aims to grow the contribution of the industry to the economy. The draft of this policy was released by the Department of Telecommunications in May 2018 and the key strategic objectives that the policy aims to accomplish by 2022 include providing broadband for all, creation of additional 4 million jobs in the sector, apart from enhancing the contribution of the sector to 8% of India’s GDP from prevailing around 6%.

The industry has been facing a double whammy of deteriorating profitability metrics under intense competition, and burgeoning debt levels. Improvement in broadband penetration as well as emphasising on emerging technologies like 5G and Internet of Things definitely would add new revenue streams over long term and can assist in improvement in the return on capital which has been subdued for some time now. Further, rationalising of levies and taxes will also be cost savings for the telcos thereby leading to improvement in profitability. Moreover, with growing data consumption, spectrum requirements would remain high and thus the policy incorporates identifying new spectrum bands along with making available harmonized and contiguous spectrum. Further the policy also talks about optimal pricing of the spectrum which also bodes well for the industry. For example, as per the recently proposed pricing for forthcoming auction, the pricing of spectrum in 700 MHz band is proposed to be reduced by around 42% compared to the past. Nevertheless, overall, the key would be the implementation of such strong vision.

Harsh Jagnani, Sector Head and Vice President, Corporate Ratings, ICRA Limited

The Policy aims at establishing a ‘National Broadband Mission – Rashtriya Broadband Abhiyan’ to improve broadband penetration, which is increasingly being seen as an essential infrastructure with economic, and social implications. The strategies for this include funding of broadband initiatives by the Universal Service Obligation Fund (USOF); to improve the fibre footprint and to take fibre to the home, enterprises, and to key development institutions; to make adequate spectrum available, especially in the new bands to ease the deployment and growth of next generation access technologies. As of July 2018, the total broadband subscribers in the country stood at 460 million, translating into teledensity of 35%. Out of this, the home broadband subscriber base stood at 18 million, or roughly 10% of the households. Thus, there is a long way to go for the country, and the implementation of the strategic vision would be key. Further, as of now spectrum is held by the telcos in the bands of 800MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz, with proposal to auction spectrum in 3300-3600 MHz and 700 MHz bands in the medium term.

These apart, ease of doing business and data protection have also found a place in the policy, along with creating a roadmap for emerging technologies like 5G, Internet of Things, etc. The Policy also talks about attracting investments of $100 billion in the sector. As per RBI’s provisional data, India’s communications services segment received $8.8 billion of investment in FY2018. Out of this, the telecom sector attracted Foreign Direct Investment of $6.2 billion, surging nearly five times in 3 years from 1.3 billion USD in FY2016.

An important proposal of the policy is on reforming the licensing and regulatory regime by reviewing the levies and fees including license fee, USOF levy, spectrum usage charges (SUC) along with rationalising taxes and levies on equipment, infrastructure and services. As of now, the industry faces around 4% SUC and 8% license fees which includes 5% of USOF levy. These charges are a significant burden on the industry already facing deep financial stress”.

– CT Bureau