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Draft National Telecom Policy: Progressive measures

Networth | 12 Oct, 2011  | Follow Author | Add to my Favourites 
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Draft National Telecom Policy - 2011

Indian Telecom industry is one of the fastest growing sector which emerged as a key player in developing social and economic system. Over the past decade its contribution to GDP grew from 1.3% to ~3% and it acted as third largest sector in attracting FDI inflows. But, because of current myopic scenario of the industry which has been dented by one of the biggest scam, badly needed some stern reform measures. To alleviate such situation and instilling confidence among investors and consumers, draft of National Telecom Policy (NTP)-2011 was introduced on 10 Oct 2011. It is expected to provide a positive impact on subscribers and will create a level playing field for service providers and overall telecom industry.

Following are the key objectives under the NTP-2011

- To enhance rural tele-density to 100% by year 2020 from current 35%.

- To provide reasonably priced and dependable Broadband for everyone by 2015
The govt expects to achieve 175 million users by year 2017 and about 600 million users by 2020 at a minimum download speed of 2 Mbps and further provide additional higher speed upto 100 Mbps on demand. Also, existing download speed of 256 Mbps will be revised to 512 Mbps for all. Further, it is planned that through this initiative most of the Panchayats and habitations will be able to access broadband through optical fiber network and this will help citizens to participate in and contribute to e‐governance, e-panchayat, NAREGA,ADHAAR,AAKASH initiatives etc. in key sectors like social, health, education, banking etc.

Networth believes this initiative will be helpful for telecom operators and new broadband service provider to tap large population under broadband umbrella in coming futures. Also it will promote R&D, innovation and manufacturing in the industry by enhancing market accessibility and competency in telecom sector.

- To enhance domestic equipment manufacturing industry so as to fulfill 80% of domestic industry
demands by year 2020.
For this a corpus will be created to uplift indigenous R&D, IPR creation, entrepreneurship, manufacturing, commercializing and deployment of state‐of‐the‐art telecom products and services during the 12th five year plan. This aims at enhancing export too.

Networth expects such initiatives to ramp up the domestic equipment manufacturing industry. Further domestic players like ITI, Kavveri Telecom, Astra Microwave and Gemini Communications etc. would be benefited by availing required help through corpus thereby achieving required scalable levels.

- One nation - One Licence policy across all the service areas (22 circles)
This will lead to Full Mobile Number Portability and work towards One Nation - Free Roaming. Also, policy will allow delinking of spectrum from license and priced at market value.

Though it will be an advantage for subscribers to enjoy Full MNP services and at the same time zero roaming availability across the nation. But This will lead to negative impact on operators (Bharti Airtel ,Idea etc.) EBITDA margins for short time (decrease by ~3‐4%) as roaming charges accounts ~ 10% of overall revenues for operators. To protect the margins we expect operators to revise upwards the tariffs. However a single license for all service areas would benefits dual service providers (Rel. Comm.) and new broadband entrants. Reliance Industries to gain larger opportunities by providing varieties of services (voice, data, video, VAS etc).

- Additional Availability of spectrum of about 300 MHz spectrum for IMT (International Mobile Telecommunication) services by year 2017 and another 200 MHz by year 2020. Also operators will be allowed to share, pool and trade spectrum.

- To frame a suitable Exit Policy for the existing licencees
This will be helpful for all those players who wish to surrender their license/ spectrum to the Government and same can be reallocated among other players to improve their requirements.

- To work towards consideration of telecom as Infrastructure Sector for both wire-line and wireless and extension of the benefits available to infrastructure sectors to telecom (tax exemption etc.).

Over View
The draft of the National Telecom Policy 2011 is directionally encouraging for the sector, as the authorities have followed a holistic approach by addressing the concerns of operators, infrastructure providers, equipment vendors and VAS players. It is imperative to formulate clear M&A guidelines specific to the exit policy. The new policy should also address the concerns around taxes and levies in the sector, which is one of the highest taxed compared to its Asian peers. Further allocation of spectrum at 3G determined market prices may not attract any takers. The draft highlights the action plan of the Government to enable the aggressive growth in the coming decade.

Networth views the policy as quite progressive.

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About Networth

Networth has been successfully providing premium financial services and information for more than a decade. Their aim has consistently been to empower investors to take charge of their financial future & help them grow their Networth. Networth has always endeavored to make a difference in the financial services space. It constantly focuses on scaling and upgrading the technology infrastructure so as to provide the best services to the investors and has a presence of over 300 centres across India.


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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.

 




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