One nation, one telecom licence could soon be reality. It is because the draft of the New Telecom Policy unveiled by Telecom Minister Kapil Sibal, proposes to do away with roaming charges allowing users to port their mobile numbers, keeping the same number, even while switching service areas. "The idea is to connect the telecom revolution to rural areas," Mr Sibal said. The policy states an ambitious target to boost rural connectivity to 100 per cent by 2020 from 35 per cent now.
However, there is always a price for convenience. Experts say that the de-linking of the spectrum from licences could drive prices of acquiring these licences. This means cost of operation could go up. The policy also does not spell out any ideas on mergers and acquisition or consolidation in the space. The new policy was expected to make consolidation a smooth process. Investment bankers expect consolidation at some stage. Here are some key takeaways and implications:
For more details: http://www.dot.gov.in/NTP-2011/press_brief_NTP-latest.pdf
- The biggest difference for telcos is that the spectrum will not be linked to the licence and will be available at market prices only. For consumers, there may soon be no roaming charges. However, according to Hemant Joshi, partner, Deloitte, a consultancy firm, the cost of spectrum will go up which will in turn increase customer servicing costs.
- The new policy proposes to accord the telecom industry the status of an infrastructure sector, which will help ease credit flow to companies for funding roll-out plans or expansion activities. This is a significant move as bank credit would now move faster to the sector. Telecom companies, including those which provide tower services, are to be given infrastructure status. This could push more investment into the telecom tower companies.
- Mobile service providers would also benefit from the policy as it proposes to allow companies to pool, share and later trade spectrum - a scarce resource. The minister also said the government would look at bringing legislation for governance of spectrum.
- Since spectrum will be linked to market prices, pooling, sharing and trading of spectrum among telcos will be permitted. Operators will have to undergo periodic audit to ensure efficient use of spectrum. A new law to deal with all issues related to spectrum will be put in place. For telcos looking to exit the business, a new policy is on the anvil.
- The policy outlines a vision for broadband services to be made available on demand. A broadband connection would now mean 512 kbps speed and not 256 kbps currently. The policy aims to have over 600 million broadband customers.
Reacting to the draft proposal, the Bharti Airtel management said the proposal to provide more spectrum, allow sharing of spectrum and allocation of spectrum through transparent market based processes are progressive policy decisions, which will provide much needed capacity augmentation to the vital telecom sector.
"The proposal to give infrastructure status to the telecom sector and rationalization of taxes and levies will provide much needed relief to the sector as well," the company said in a statement.
"The only negative - though good for consumers - is roaming, which is likely to be free and at the same rate as local calls... That is where the industry could have a negative impact of Rs. 2,500-3,000 crore for the year," said Prashant Singhal of E&Y.