Economic Survey 2019-20: Competition, low tariffs led to financial stress in telecom sector

The data price in the country came down by over 99% during 2016-2019, making it among the lowest tariff in the world, according to the survey.

Substantial competition and low tariff rates by telecom operators since 2016 have led to a financial stress in the sector, the Economic Survey said on Friday. The data price in the country came down by over 99% during 2016-2019, making it among the lowest tariff in the world, according to the survey.

“Since 2016, the sector has witnessed substantial competition and price cutting by the telecom service providers (TSPs), creating financial stress in the sector. As a result, the sector is experiencing consolidation. While some operators have filed for bankruptcy, others have merged, in their quest to improve viability,” the survey report said.

In April-June 2019, the price of data was ₹7.7 per gigabyte (GB) as compared to ₹200 per GB in June 2016, it added.

“The Average Revenue Per User (ARPU) for GSM based mobile services has also gone down substantially from ₹126 in June 2016 to ₹74.30 in June 2019,” the survey said.

The tariff war started in the market with entry of new telecom operator Reliance Jio in September 2016.

“BSNL and MTNL are also affected by the tariff war that has impacted their cash flow resulting in mounting losses,” the survey said.

The financial health of the public sector telecom firms plummeted to a level where they have been finding hard to pay employees salaries in time.

The government has drawn up a plan to revive these PSUs which is still in work.

The revival plan consists of several measures, including reduction of staff cost through voluntary retirement scheme, allotment of spectrum for 4G services, monetisation of land and building, tower and fibre assets of BSNL and MTNL, debt restructuring through sovereign guarantee bonds and ‘in-principle’ approval for merger of BSNL and MTNL.

The survey said that the wireless telephony now constitutes 98.27% of all subscriptions whereas share of landline telephones now stands at only 1.73% where market share is dominated by private sector players.

“The overall tele-density in India stands at 90.45%, the rural tele-density being 57.35% and urban teledensity being 160.71% at the end of September 2019. The private sector dominates with a share of 88.81% (106.06 crore connections) at the end of September, 2019 while the share of public sector was 11.19% (13.36 crore connections),” the survey said.

The lower price of data has also lead in surge of broadband connections and average consumption of the internet.

Total broadband connections increased by about ten times, from 6.1 crore in 2014 to 59.46 crore in June 2019, the survey said.

The number of internet subscribers (both broadband and narrowband put together) stood at 66.53 crore at the end of June 2019 as compared to 25.16 crore in 2014.

The number of mobile internet subscribers was 64.36 lakh at the end of June 2019 while the number of wireline internet subscribers was 2.17 crore.

“India is now the global leader in monthly data consumption, with average consumption per subscriber per month increasing 157 times from 62 MB in 2014 to 9.8 GB in June 2019. The cost of data has also reduced substantially, enabling affordable internet access for millions of citizens,” the survey said.