It is a well-known fact that telecom service providers are in the throes of a financial crisis. Lifetime-free voice and free data usage till March 2018 by Reliance Jio is just one of the contributory factors. Reeling under rising debts; erosion in EBITDA (the total EBITDA of the sector on an annualized basis is estimated at 65,000 crore,
against a debt of 46,000 crore); increasing requirement of working capital to remain competitive; declining ARPUs; steady investment required to improve networks; high taxes, cumulative tax incidence adding up to about one-third of revenues are some of the woes.
While they are still looking to get relief on spectrum payment from the present eight years to 16 years and for a lowering of interest rate on outstanding spectrum payments (from the current 10.5 percent), the recent proposal by the Telecommunication Engineering Centre (TEC), for implementation of a mandatory testing and certification of telecom equipment, prior to sale/import/use in the country is another nail in the coffin.
According to the proposal, any original equipment manufacturer (OEM), importer, and dealer who wishes to sell, import, or use any telecom equipment in India, would have to obtain a certificate from TEC and affix the product with an appropriate certification label. The certification aims to ensure that the telecom equipment complies with the relevant national and international regulatory standards and requirements. The proposal is under consideration by the Department of Telecommunications (DoT).
COAI has appealed to the TEC that this proposal be abolished, as mandatory local screening will create potential supply chain disruptions, increase the cost of telecom services, and hurt end consumers. Also, this move would be a technical barrier to trade and is not in sync with government's objective of improving the ease of doing business.
Under current rules, telecom companies take full responsibility for the equipment they deploy in their networks. This means providing an undertaking to the DoT that the equipment they plan to install is in keeping with globally accepted standards. Indian authorities assess the testing reports from reputable international bodies.
India's telcos are of the opinion that it would force their suppliers to have network gear tested locally before it can be deployed in Indian networks. COAI reiterates that India should continue with these practices instead of testing equipment locally. The new rules will drive up costs and disrupt business. The apex body has warned that the business disruptions could be huge if the proposal is taken forward. The declining revenue, mounting debt, and hypercompetitive marketplace have posed tremendous pressure on network investments and expansions. The financial pressure is leading to further debt and the industry is already going through a rough patch.
The proposal is surely going to cripple the entire telecom sector ecosystem, which is already debt ridden, overburdened with regulatory and policy interventions and multiple government/sectoral compliances, argues COAI. It also pointed out that the products have already been meeting legal and regulatory requirements in over 180 markets, including India. Moreover, the proposal will act as a direct deterrent to the Make in India initiative of the government.