Large spectrum-spend will hit telco infra rollout
The government is all set to earn in the region R100,000 crore from the current auction of radio spectrum in the 800, 900, 1800 and 2100MHz bands. While the rich pickings—approximately a third will be paid in FY16—will help the finance minister prune the deficit, it will end up hurting the country in the longer term. The immediate impact could be on the high-voltage Digital India initiative. Under the programme, all government services are to be made available to people electronically by 2018. Digital India aims at reducing the daily interface that the citizen has with bureaucracy. But, its success hinges on providing high-speed broadband connectivity, an area where progress has always been slow. As of end-December 2014, India had just over15 million fixed broadband connections, but well over 300 million mobile internet users—for Digital India, what really matters is the broadband access since delivering good content requires large bandwidth. IDC estimates there will be 378 million smartphone users in India by 2018. For these users to get broadband connectivity, it is imperative that operators beef up their networks in a big way.
That becomes difficult for an industry that is bogged under a combined debt of R275,000 crore. In 2010, it collectively spent R106,262 crore on spectrum followed by R9,408 crore in 2012, R3,639 crore in 2013 and R61,162 crore in 2014. In 2016, telecom operators need to bid all over again for the 2100 MHz band that will be critical for providing data services. Add to that the $5 billion or so that operators need to collectively invest each year on building infrastructure. That becomes difficult for an industry that is stretched thin. With operators not in a position to invest in capital expenditure in a big way, it will not be possible to provide broadband access across the country—as FE pointed out in a series called Spectrum First (goo.gl/AGTrCI, goo.gl/uhZeK6 and goo.gl/CyfnBG), as things stand, Indian telcos will not even be able to bid for spectrum after the current round is over. The only way out is to substantially start hiking tariffs which, in turn, will also slow down the roll-out of the Digital India initiative. It is time the government comes up with a credible roadmap for spectrum allocation that does not end up killing the goose that lays the golden eggs. This means not just making more spectrum available, it means coming out with attractive spectrum sharing norms so that spectrum lying waste with firms like MTNL and BSNL can be productively used. And finally, the government has to stop looking to telecom and other auctions as a revenue source. Auctions are about bringing in transparency, not inducing a winner’s curse as is the case right now—in the case of coal, the absurd bids being got relate to a scarcity of coal, not the intrinsic value of the mines.