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Rediff.com  » Business » Telecom delay to cost Rs 800 cr a day: report

Telecom delay to cost Rs 800 cr a day: report

November 28, 2007 02:46 IST

The Indian economy stands to lose around Rs 800 crore daily if it continues delaying decisions on telecom recommendations -- the current spectrum impasse being one such issue.

The asssumption is based on the fact that an investment of nearly Rs 34,021 crore (slightly over Rs 90 crore a day) has contributed to an increase of Rs 5,71,874 crore (over Rs 1,500 crore a day) to the GDP in fiscal 2006-07, according to a new report by Frost & Sullivan.

Even as the impasse over spectrum allocation continues, the report suggests that the de-linking of spectrum and the licence is essential as the operator who obtains a license might not need it at all.

The shortage of spectrum forces operators to increase their cost between 25-50 per cent which, in turn, results in higher tariffs.

The indirect costs too could be substantial as the telecom sector is one of the major export earners such as IT-BPO, notes the report that was commissioned by Nokia-Siemens Networks.

The impact of telecom growth is multi-fold -- ranging from employment generation to economic benefits in key sectors such as agriculture. For every one per cent increase in tele-density, for instance, it is estimated that the GDP growth rate goes up 0.6 per cent.

The International Telecommunications Union (ITU) notes that for every one per cent increase in mobile penetration and broadband penetration in developing nations, the GDP per capita increases by about Rs 9,500 and over Rs 35,000 respectively.

India's annual telecom services gross revenue was over Rs 1,00,000 crore in 2006, exhibiting a CAGR of over 21 per cent since 2004, notes the report, titled Telecom - Catalyzing India's New Economy.

This is expected to grow at an annual rate of 26 per cent to reach nearly Rs 3,50,000 crore by 2012.

The estimates translate into direct revenue contribution of nearly Rs 2,40,000 crore to the GDP between 2007 and 2012, and gross value added (GVA) of around Rs 1,44,000 crore to the Indian economy.

Moreover, it is estimated that a one per cent growth in the number of telephone subscribers will lead to an exponential growth of close to two per cent in its contribution to the service tax revenue collected by the government.

India, it appears then, with its over 22 per cent tele-density is on the right track. It currently has over 200 million mobile users and is adding 6-7 million subscribers every month. However, to reach the 650 million subscribers mark by 2012, a focus on rural markets is imperative, notes the report.

Mobile telephony in urban areas is growing at a very high rate (50%) as compared with mobile telephony in rural areas (around 5 per cent). The main reason for low tele-density in rural areas is lack of infrastructure and lack of initiatives from both the government and the telecom service providers.

The report also notes that although increasing potential customer base in the rural markets is the objective of the USO fund contribution, the disbursement of the funds have not been performed efficiently.

The main issues with rural deployment are infrastructure (tower and power), affordability, availability of skilled resources and access devices. The current infrastructure is not adequate to meet the needs of the an additional 400 million subscribers.

The state of wireless technology is slightly better with 1,10,000 mobile base stations in place. However, there is a need of about 1,00,000 towers to achieve the subscriber target. 

Currently, BSNL and MTNL combined have in excess of 37,000 towers across India – 80 per cent of which are within B & C circles.

With infrastructure sharing, the investment to roll out rural telecom infrastructure would be lower and also increase the competitive efficiency of rural markets by bringing in private operators to access rural areas and hence assist government in getting to the 650 million number well before the proposed date of 2012.

Leslie D'Monte in Mumbai
Source: