Encouraging policy, but “when” and “how” needs clarity

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The Hindu – Business Line

Prashant Singhal
Telecom Industry Leader, EY

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.

The draft aims at achieving ‘broadband on demand' by 2015 and enhancing rural penetration to ensure quality and affordable telecommunications services to all citizens.

The policy promotes indigenous R&D, innovation and manufacturing to reduce dependency on imports and enhance the exports. The highlight of the draft is the move towards unified licensing with the proposed one nation-one licence regime.

The policy supports delinking of spectrum from the licence as well as spectrum sharing, trading and pooling. The industry which has contributed nearly 3 per cent the national GDP in the past decade, will finally be awarded infrastructure status under this policy.

However, it is imperative to formulate clear M&A guidelines specific to the exit policy, as, in a well represented sector, only a handful of telcos are cash positive in India. Implementing the proposed free roaming arrangement will be further detrimental for the players, already reeling under the stress of low tariffs with the industry losses presently pegged at USD 500 million.

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. But, the ‘when' and ‘how' of the policy implementation will help to successfully establish the foundation for the industry. After the bull-run that the industry has witnessed in the past decade, a progressive policy like this becomes increasingly important to guide unparalleled growth and transformation in the coming decade.

(The author is Telecom Industry Leader, EY. The views are personal)