Indian telcos could get a boost from new digital policy

The government eyes to launch two million Wi-Fi hotspots in rural areas.

India unveiled its new national digital communication policy (NDCP) which eyes to expand broadband coverage funded by the universal service obligation fund and in partnership with private telcos.

The NDCP mulls to connect 600,000 villages to the broadband network, launch two million Wi-Fi hotspots in rural areas and another one million in urban areas. As of present, broadband adoption rate in rural areas is seen at a single digit figure.

The policy also eyes to expand fibre coverage and increase the proportion of towers connected through fibre optics to 60% from 25% to accelerate the adoption of 4G/5G technologies. With the move, private telco firms could get a lift as the policy will broaden the customer base and improve internet adoption, particularly in rural areas, Fitch Ratings said.

Moreover, the policy could also beef up private telcos as it encourages more efficient spectrum usage by making available harmonised and contiguous spectrum bands and further liberalising spectrum sharing and trading.

“Accelerated 5G deployment, increased spectrum supply and harmonisation would help telcos to keep up with growth in data usage,” Fitch Ratings said, noting that monthly data usage per customer rose to around 6-8GB in 2018, from about 1GB in 2017.

“However, the plan is likely to encourage companies to increase investment in 5G spectrum which, depending on the 5G spectrum asset price, may further stretch already heavily indebted balance sheets over the next two years,” they added.

With NDCP eyeing to review the sector’s tax structure and to optimise future spectrum asset pricing, costs and red tape spent by telcos could be cut, Fitch said.
At present, Indian telcos bear heavy and multiple taxes such as licence fees, spectrum usage charges, and universal service fees on top of expensive spectrum assets.