India aims to attract new players to telecom sector via “structural” reforms

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India said that it aims to attract newer players to its telecom sector with the help of a structural reform package announced by its Cabinet on Wednesday.

The country’s IT & Telecom minister Ashwani Vaishnaw said that the Indian government is looking to attract more players to the Indian telecom sector, especially after the 5G spectrum auction with the help of reforms and the relief package. “The reforms are deep and broad and are structurally going to make a change in the industry going forward. The reforms will give sustainable growth to the industry,” he said.

The measures, which include a 4-year moratorium on payment of statutory dues by telecom companies and 100% FDI through the automatic route, will improve the telecom sector’s cash-flow situation and will “significantly” reduce exposure in banks’ balance sheets. Both sectors will see improvement in their cash-flows, which will then be used for 2G to 4G up-gradation and deploying 5G.

Vaishnaw, who recently took over from Ravi Shankar Prasad after the Cabinet reshuffle, said that “healthy competition” is a must for India’s telecom sector as it will offer more options to Indian consumers.

His comments addressed industry concerns over a possible duopoly of Reliance Jio and Bharti Airtel in the market as third-ranked Vodafone Idea was struggling to survive due to the burden of statutory dues including AGR payments. The move will likely ease the cash crunch at Vodafone Idea, which is saddled with high debt and owes a significant amount towards AGR dues.

 “…competition is extremely important for the telecom industry to offer choice to customers. This right has to be protected. The reforms are to ensure healthy competition and attract new players,” he said

The minister further added that the Indian government would further bring reforms around the time of the 5G spectrum auction to allow the entry of more players into the telecom sectors.

The government is expected to auction 5G spectrum in the first half of the 2022 calendar year. It, however, hasn’t officially announced any date.

Notably, the Indian government on Monday said that it is fixing the auction calendar, which will allow spectrum auctions to be normally held in the last quarter of every financial year.

The minister said that the “structural reforms” introduced by the government would infuse liquidity, encourage investment, reduce the regulatory burden on telecom operators, generate employment opportunities, promote healthy competition and protect the interests of consumers.

“The package is also expected to boost 4G proliferation, infuse liquidity and create an enabling environment for investment in 5G networks,” he said, adding that the optimum cash-flow will be used for 5G deployment in the country.

“Reforms are revenue neutral to the government,” he clarified.

Under the reforms, the Indian government is also mandating local 4G and 5G telecom equipment development. “…the prime minister has given a mandate that 4G and 5G core and RAN need to be designed and manufactured in India.”

He informed that state-run telco BSNL and networks of other telecom operators would deploy locally-designed and manufactured telecom technology.

BSNL and other networks will see only India-made technology deployment, and this locally made equipment will also be exported to other parts of the world.

India will soon approve domestic and multinational telecom vendors and contact manufacturers under the production-linked scheme (PLI) for telecom equipment and networking products. Nokia, Cisco, Foxconn, HFCL and Tejas are among 33 companies likely to get the approval in the coming days.

Responding to the measures, Reliance Jio and Bharti Airtel bosses said that the industry would benefit and the move would boost growth.

“Telecom sector is one of the prime movers of the economy and the key enabler for making India a Digital Society,” RIL chairman and managing director Mukesh Ambani said, adding that reforms will encourage it to provide “newer and greater benefits” to its customers.

Sunil Mittal, chairman of Airtel, said that the move would pave the way for a sustainable three private plus one state-owned telecom operator structure to serve a large market like India. It will catalyse explosive growth of this vital sector.

Kumar Mangalam Birla, Chairman, Aditya Birla Group, said the reforms will go a long way in “unshackling the telecom sector.” “These reforms demonstrate the government’s firm commitment to ensuring healthy growth of the industry.”

“We commend the resolve shown by the Government of India to find a comprehensive solution that would support a competitive and sustainable telecom sector in India,” said Nick Read, CEO, Vodafone Group.

Related article: India 5G spectrum auction plan may hit a Navy hurdle

India plans long-term measures to ease financial burden of telecom sector

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