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Fresh policy, consolidation, 5G-glare in financially-stressed Indian telecom in 2018

NEW DELHI

Amid continued financial distress, the Indian telecom sector witnessed major developments in 2018, including the introduction of the National Digital Communications Policy (NDCP) and significant market consolidation.

Talks of the country moving towards 5G network by 2020, efforts of companies trying to monetise their assets to strengthen their balance sheets and fulfilling their debt obligations also made headlines during the year.

The Union Cabinet, in September, cleared the National Digital Communications Policy, which replaced the National Telecom Policy 2012 and aimed to provide broadband to all, ensure India’s digital sovereignty and attract $100 billion worth of investments into the telecom sector.

“The proposed investment of $100 billion will not only make access to communication services easy, but will also provide much relief to the financially distressed telecom sector reeling under debilitating debts, falling revenue and squeezed margins,” said Cellular Operators Association of India Director General Rajan Mathews.

“Overall, NDCP 2018 is pivoted around guaranteeing the sector’s long-term sustainability and its readiness to invest in futuristic technologies,” he added.

The policy also takes into account the concerns of telecom operators. According to COAI, the fact that Indian service providers pay more than 30 per cent of their revenue as taxes and levies compared to the 10 per cent in other countries, was also considered and rationalised in the new policy document.

Among the ambitious targets of the policy in its bid to provide broadband to all is the aim to provide 1 giga-bits per second (Gbps) connectivity to all gram panchayats by 2020 and 10 Gbps by 2022.

Consolidation in the sector was, by-and-large, complete in 2018 with the merger of two majors – Vodafone India and Idea Cellular – to create Vodafone Idea, India’s largest telecom service provider in terms of revenue and subscriber base.

The merged entity became operational by the end of August with Kumar Mangalam Birla named the Chairman and Balesh Sharma the CEO of the new entity.

Sector experts observed that as a result of the consolidation the market structure is now healthier and more stable with three major private players — Vodafone Idea, Bharti Airtel and Reliance Jio — and the public sector BSNL.

As a majority of the telecom operators languished under debt and financial stress, the companies took to monetisation and transferred assets or businesses to subsidiaries.

Bharti Airtel, at its Board meeting on December 20, decided to sell 32 per cent stake in Bharti Infratel to its wholly-owned subsidiary, Nettle Infrastructure Investments, for potential monetisation of the stake in future.

With this, Bharti Airtel’s share in Infratel would be 18.33 per cent, Nettle would have 35.18 per cent and the remaining 46.49 per cent stake would be held by the public and other shareholders.

In November, Vodafone Idea too decided to demerge its fibre infrastructure business by transferring the assets to Vodafone Towers Ltd.

Reliance Jio in December announced that it would hive off its fibre and tower businesses and form two separate companies.

“The year 2018 was one of continued financial stress with a collective debt of Rs 8 lakh crore. This has accelerated further consolidation where companies were trying to monetise their assets to service debt obligations,” Hemant Joshi, Partner for technology, media and telecommunications at Deloitte India, said. (IANS)

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