Exclusive: Financial health of the industry is severe, says Rajan Mathews

Exclusive: Interaction with COAI DG on the upcoming Union Budget and on National Telecom Policy

As we all know, Reliance Jio has shaken the whole telecom industry and forced incumbents to cut their tariffs in order to remain relevant. Now this has been acknowledged by the Government in it's Economic Survey 2017-18.

According to the survey, the telecom sector is going through a stressful period with growing losses, debt pile-up, price war, reduced revenue and irrational spectrum costs and the new entrant has disrupted the market with low-cost data services and has also initiated the downfall of revenue of incumbent players.

The crisis has also severely impacted investors, lenders, partners and vendors of these telecom companies, the survey said.

Meanwhile, GizBot had interviewed Rajan S Mathews, Director General of Cellular Operators Association of India where he has shared his views on Economic Survey observations.

In an interview, he said, "We have been highlighting and saying that financial health of the industry is severe and it is detrimental to the ongoing digital program."

He said, "We are glad the Government acknowledges this in a public document and it is no longer the industry crying the matter."

"The top line revenue stream has eroded by 40 percent almost halving of their revenue stream infact many operators have closed shops and sold their resources because they think the market is not sustainable," he replied when asked about the losses.

He also shared about the recommendations for the upcoming budget and said There are five to six critical element that we wanted to bring before the Government, firstly we wanted them to reduce the license fee as well as the spectrum usage charge because both of these caused significant erosion in the financial health of the industry," he further added.

He also pointed out certain tax hurting the telecom sector. With regards to the same, he continued, "we have asked for reducing the duties on 4G LTE equipment, third one is to set up dedicated financial institution that will give specialised loans to the industry for long time projects, fourthly we are hoping GST rate should bring down to 5 percent and we
also talked about the duties that have been imposed on imported component for optical fibre."

"We have recommended that the authorities understand that the discount extended to pre-paid distributors is not commission. However, in order to bring the ongoing litigation to an end, given the low margins earned by the distributors, a lower withholding tax rate of 1 percent may be prescribed for telecom distributors," he concluded.

However, the survey pointed out that the Government is in the process of formulating the New Telecom Policy, targeted to be released in 2018, after holding the wide range of consultations with various stakeholders.

The major themes that new Telecom Policy shall try to address include Regulatory & Licensing frameworks impacting the sector, Connectivity for All, Quality of Services, Ease of Doing Business and Absorption of New Technologies including 5G and Internet of Things and Telecom Regulatory Authority of India (TRAI) has also recommended the new policy on 'Net Neutrality' which prohibits discriminatory tariffs for data services.

It said that, Government is committed to extending the reach of telecom network to the remote and rural villages, and bridging the digital divide with support from all stakeholders and it is implementing the flagship 'Bharat Net' project (in two phases), to link each of the 2.5 lakh Gram Panchayats of India through optical fibre network. This is the largest rural connectivity project of its kind in the world and is the first pillar of Digital India Programme.