Is the Sun Setting on the Telecom Sector in India?

Abstract

Not a single day passed during the late nineties, when some newspaper or other did not carry an exciting story about the Telecom sector. These were justifiably among the most exciting times in the India’s growth story. The decade from 2000 to 2010 perhaps witnessed the most dramatic impact of policy and regulatory measures in the Indian Economy. This not only surprised the general public but the regulators themselves. Combined with the dramatic growth and explosion of the IT sector, even skeptics started to believe that ‘the elephant can indeed dance'.The Mobile Phone Industry supports a vast ecosystem of other industries like tower infrastructure, excavation and cable laying, Network equipment manufacturing, Signal and coverage Testing Equipments, Captive power plants, Logistics , Sales and Distribution systems. IT/ITES services etc. The share of Telecom sector in India’s GDP has also risen significantly during this decade. The Government has been a direct beneficiary of this growth, as its share of revenues has not only increased from taxation of the sector, but from non-tax revenues like license fees, spectrum charges and sales/auction of additional spectrum.The momentum that the opening up of the economy had on the telecom sector seems to have run out of steam. It is hard to find anyone talk about telecom revolution other than for the wrong reasons. The 2G scam is but the icing on the cake. Big Telecom operators have been wrestling with falling ARPUs and profit margins. Market valuations of these companies have hurt the investors badly. The heavy consequence of the policy of unrestricted entry was the twin failures: to bridge the digital divide by increasing rural penetration and to make the industry self sustainable propelling for future growth.