Ailing Telecom Sector

What is the issue?

• Tata Teleservices has announced a Rs 275 billion loss in 2017-18 as highlighted in a recent report.
• This is indicative of a larger trouble in India's telecommunications sector.

How is the telecom sector performing?

• Tata Teleservices' loss was partly due to a write-down following the transfer of its wireless business to Bharti Airtel.
• Even so, this sets a new record for corporate India.
• The second-highest such loss is also in telecommunications and also in 2017-18.
• Reliance Communications lost Rs 239 billion in the same financial year.
• Many other players have exited the sector, leading to significant job losses.
• These underline the troubled state of India's telecommunication sector.
• Only the disruptive new entrant, Reliance Jio, has a healthy financial position.
• Even this is due to the funds being pumped in from the cash-rich group.

What are the concerns in the sector?

• Competition - There has been a consumer-friendly race in the recent period to make data cheaper.
• Consequently, past drawbacks and the current unbalanced competition have distorted the market.
• It has also hampered the growth-focused investment.
• Policies - The overall policy in the sector has neither helped its growth nor been consistently in favour of consumers.
• There is a continuing concern of inconsistency and arbitrariness in the policy.
• There have been some questionable regulatory decisions that are likely helping the newcomers.
• It is making it easier for a cash-rich entrant to seek dominance.
• But existing firms will also need to make investments if India is to have a healthy telecom sector.

• Approach - The government’s view of the sector has become focused on its ability to provide non-tax revenue.
• It is missing to see the sector as an engine of growth or provider of essential services.
• This flawed approach has indeed led to the current impasse.

What lies ahead?

• The communications sector has played a significant role in the past to drive Indian growth.
• If India is to once again come close to double-digit growth, telecom is a significant sector to focus on.
• There is thus a need for a competitive market structure in the telecom sector.
• Companies have to be incentivised to continually improve service quality to ensure that consumers are benefited.
• Administrative discretion that is facilitating opportunities for corrupt dealings has to be minimised.
• These are essential reforms to alter the state's approach to the telecommunications sector and ensure its beneficial contribution.

Source: Business Standard