Report says telecom policy will help in reducing costs of telecom companies

The new telecom policy will help companies in serving growing data needs, cut costs and reduce red tape, a report said Friday.

The Union Cabinet Wednesday approved the National Digital Communications Policy (NDCP) 2018, which aims to attract USD 100 billion investment and create 40 lakh jobs in the sector by 2022. Private telecom companies' growth will be supported as the NDCP focuses to expand broadband coverage funded by the universal service obligation fund and in partnership with private telcos, global ratings major Fitch said in the report.

It explained that this will be possible through broadening of the customer base and the improvement of Internet adoption, particularly in rural areas. NDCP's plan to encourage more efficient spectrum usage will also help private telcos by making available harmonized and contiguous spectrum bands and further liberalizing spectrum sharing and trading, it said.

The agency said implementing proposals like connecting six lakh villages to the broadband network, establishing two million Wi-Fi hotspots in rural areas and one million in urban areas, will be a challenge.

Accelerated 5G deployment will encourage companies to increase investment in the 5G spectrum which, depending on the 5G spectrum asset price, may further stretch already heavily indebted balance sheets over the next two years, it warned. However, the agency was quick to add that private telcos may also skip 5G spectrum auctions if the prices are "too high".

On the positive side, the report said NDCP's plans to review and rationalize the sector's tax structure and optimize future spectrum asset pricing can cut telcos' costs and the red tape. The agency said at present the telcos face a lot of pressure on taxes through license fees, spectrum usage charges and universal service fees on top of expensive spectrum assets, while the litigation is also high.

In what can come as a relief for the sector, which has been impacted since the launch of the deep-pocketed and aggressive new entrant Reliance Jio, the agency said the emergence of three large operators will eventually ease price competition.