Four out of every 20 mobile subscribers in metro circles have a 4G enabled smart device and 11 have a 3G enabled smart device, according to a new study by ASSOCHAM-KPMG.
The study said India is now one of the biggest smartphone markets in the world in terms of volume with an increase in the usage of data services leading to a rapid increase in smartphone sales.
It said that Social media and messaging application drove data consumption with nearly 90 percent consumers accessing applications on mobile devices. Videos continued to be the main growth engine for data traffic with nearly 65 percent contribution.
The overall data traffic in India went up by 28 percent of the total data traffic pan-India in a year since launch. In India, 4G subscribers have reached the mark of approximately 160 million as of 31 March 2017.
The study also highlighted that Tariff wars, increasing debt burden, spectrum license fees and new types of internet-based players etc. have fuelled this situation resulting in a phase of financial stress in the industry.
The telecom industry at this point of time has a debt burden of close to Rs. 5 lakh crores in its quest to provide state of the art infrastructure and buy spectrum," ASSOCHAM added.
This debt increase has been primarily driven by high spectrum procurement costs from five successive auctions wherein the highest bid/sale price at one auction acts as a floor price for the succeeding auction.
Aggressive participation of service providers in spectrum auctions has significantly increased the debt burden, it further added.
Furthermore, the study informed that the declining trend in the profitability of the TSPs is likely to continue due to various reasons like entry of greenfield TSPs as against the existing brownfield operators which will have to undertake huge investments for updating their existing infrastructure, participate in spectrum auctions, imposition of multiple taxes and levies such as Spectrum Usage Charges (SUC), Universal Service Obligation Fund (USOF) contribution and license fee.
The government may consider deliberations on the same with TSP's while formulating policies and regulations to address challenges faced by all contributors/ verticals of the sector in its entirety. Levy of higher taxes (recent increase by 3 percent putting the telecom sector under the 18 percent tax slab) on telecom industry may lead to an overall increase in the cost of doing business for other sectors and may impact affordability for the end customers.
Thus, reduction in service tax may be considered by the government, urges ASSOCHAM.
With the introduction of spectrum auctioning, the license and spectrum are now separately granted with the licensee having to bid for the available spectrum at market-determined prices. For the spectrum allotted, the TSPs have to pay the price of the spectrum as decided in the auction and annual SUC to the government.
Since the purchase price of the spectrum is now market determined and considerably higher than before, SUC adds on to the financial burden of TSPs.
Further, since SUC is a fixed proportion of the AGR, the better a TSP performs in terms of revenue, the more they are charged as SUC.