Policy Initiatives and a Strained Indian Telecom Industry

The hypercompetitive nature of the mobile services business has led to the consolidation and a reduction in the number of carriers. Even after the merger of Vodafone and Idea, the combined entity was signalling distress and movement towards insolvency. The Government of India (GoI) stepped in September 2021 by giving a four-year reprieve to these firms from paying adjusted gross revenue (AGR)-related dues. The moratorium period is expected to provide the firms time to transform and restructure to get into a revenue positive situation. A market duopoly would be less likely if the operators concentrated on restructuring and profitability.

The government also crafted a few more policy initiatives to increase the profitability of telecom firms, which were (i) allowing 100% foreign direct investment (FDI) in the telecom sector through the automatic route, which was earlier 49%; (ii) spectrum auctions in the future will be for a period of 30 years instead of the current 20 years, and that the spectrum can be surrendered after completing a 10-year lock-in period from the date of purchase; sharing of the spectrum is being promoted by removing the spectrum usage charge (SUC) of 0.5% for spectrum sharing; and (iii) the government had also offered the operators the option to convert the interest amount pertaining to the moratorium period into equity.