5G

Among continuous financial distress, the Indian telecom sector observed major developments in 2018, including the introduction of the National Digital Communications Policy (NDCP) and major market consolidation.

The country is moving towards 5G network by 2020, companies are trying to monetize their assets to reinforce their balance sheets and fulfilling their debt obligations also made headlines in the year.

In September, the Union Cabinet, cleared the National Digital Communications Policy, which replaced the National Telecom Policy 2012 and intended to supply broadband to all, ensures India's digital independence and attract $100 billion worth of investments into the telecom sector.

"The proposed investment of $100 billion will not only make access to communication services easy but will also provide much relief to the financially distressed telecom sector reeling under debilitating debts, falling revenue, and squeezed margins," said Cellular Operators Association of India Director General Rajan Mathews.

He also said, "Overall, NDCP 2018 is pivoted around guaranteeing the sector's long-term sustainability and its readiness to invest in futuristic technologies."

The policy also considers the concerns of telecom operators. According to COAI, Indian service providers pay more than 30 percent of their income as taxes and levies compared to the 10 percent in other countries, was also considered and streamlined in the new policy document.

Among the decided targets of the policy in its proposal to offer broadband to all is the aim to give 1 giga-bits per second (Gbps) connectivity to all gram panchayats by 2020 and 10 Gbps by 2022.

The merger of two majors - Vodafone India and Idea Cellular NSE 0.67 % was completed in 2018 - to create Vodafone Idea, India's largest telecom service provider in terms of revenue and subscriber base. This entity started operation by the end of August with the chairmanship of Kumar Mangalam Birla and Balesh Sharma the CEO of the new entity.

According to the sector experts, because of the consolidation the market structure is now healthier and more stable with three major private competitors Vodafone Idea, Bharti Airtel NSE -1.28 % and Reliance Jio -- and the public sector BSNL.

As some telecom operators suffered under debt and financial burden, the companies went for monetization and transferred assets or businesses to subsidiaries.

For potential monetization of the stake in future, Bharti Airtel, at its Board meeting on December 20, decided to sell 32 per cent stake in Bharti Infratel to its wholly-owned subsidiary Nettle Infrastructure Investments.

With this, Bharti Airtel's share in Infratel would be 18.33 percent, Nettle would have 35.18 percent and the remaining 46.49 percent stake would be held by the public and other shareholders.

In November, Vodafone Idea also decided to transfer its assets to Vodafone Towers Ltd to demerge its fibre infrastructure business.

Reliance Jio in December declared that it would separate its fibre and tower businesses and create two different companies.

"The year 2018 was one of continued financial stress with a collective debt of Rs 8 lakh crore. This has accelerated further consolidation where companies were trying to monetize their assets to service debt obligations," Hemant Joshi, Partner for technology, media and telecommunications at Deloitte India, said.

In spite of the poor financial condition, "5G" or the Fifth Generation network came up with some telecom and technology players.

While the Centre and some market competitors expect to commercially compress the 5G network in 2020, sectors in the industry feel the environment is not encouraging for huge investments for going to next-generation connectivity due to the weak financial condition of the majority of the market participants.

Joshi said, "It looks rather difficult considering the financial stress and multiple technologies which are at play. Secondly, we should take own time to roll out 5G, till used cases for addressing the challenges of the country are established,"

A panel created by the Centre has suggested that the 5G programmes would need funding by the government and a "high-level budget committee" has to be formed to ensure enough availability of funds for the sector.

Recently, Telecom Secretary Aruna Sundararajan said that procedures for the auction of 5G spectrum are probably be completed by August 2019. According to her, the Department of Telecommunication (DoT) is working on the recommendations of both the Telecom Regulatory Authority of India (TRAI) and the 5G task force set up by the government.

She said, "Everybody has already said that since the ecosystem is not ready, it will be (ready) somewhere only after July-August next year. We expect that we would have completed all the due procedures by then, so that you have the spectrum auction".

A major expansion, which affected operations in the sector, was the Supreme Court's Aadhaar verdict in September as it beat Section 57 of the Aadhaar Act that permitted private companies to seek Aadhaar authentication. This also barred the compulsory linkage of mobile phone numbers to the Aadhaar number. So, the industry had to work on an alternative e-KYC (Know Your Customer) procedure to authenticate and register subscribers.

"The industry worked with the government on an OTP-based digital verification solution. This was done to keep customer convenience in mind for an entirely paperless process," the COAI's Mathews said.

According to data provided by the government this month, development on BharatNet has till now crossed halfway with 301,154 km of optical fibre cable (OFC) laid connecting 121,652 Gram Panchayats of the targeted 250,000 to be covered by March 31, 2019.

Till now the OFC under BharatNet are service-ready in 116,411 gram panchayats.

Additionally, service providers have installed WiFi hotspots in 39,359 gram panchayats under the WiFi Choupal initiative, as per government data.

In October, Union Communications Minister Manoj Sinha announced that the Indian telecom industry will roll out one million WiFi hotspots in the country by December next year.

In a major move for the broadband segment, Reliance Industries Chairman Mukesh Ambani in July announced that the company would launch fibre-to-the-home broadband services, Jio GigaFiber. The roll out of its services is so far awaited.

Experts and market players experience the entry of Jio into the broadband segment might disrupt the segment as it occurred in the telecom sector.

On the viewpoint for the approaching year, Mathews said the industry would advocate a stable and sustainable policy environment to promote innovation for a digitally empowered India through a "financially strong and viable industry".

Deloitte's Joshi told that 2019 may persist to be a year of financial stress and to deal with this, the sector requires thinking out-of-the-box and decreasing its debt load.

"A model which the government uses for recapitalizing the banks could be considered by the government for the telecom sector as well, especially with reference to spectrum pricing," he said.