Telecom sector's wishlist for Budget 2010

India's telecom sector is one of the world's fastest growing sectors. The industry has maintained its growth momentum despite a slowdown seen across various sectors. India has crossed the 500 million wireless subscriber mark in November last year. With the increase in the number of players and reduced tariffs, this number is expected to soar. Overall tele-density has touched 46.32, a whopping 250% jump in the last four years.

A key milestone in the history of the telecom sector was marked by Tatas foray into GSM services last June. What was then described as the 'moment of triumph for the Indian consumer' by Ratan Tata changed the landscape of the telecom sector. In partnership with Japan's DoCoMo, it shifted from the per minute billing practice adopted by telecom players to pay-per-use regime. Thus, ushered in the per second billing regime in India. 

Despite all the hype, the sector is beseiged by problems. Unified licensing rules have allowed basic and mobile operators into each other's territories and have ushered in perhaps the final stage of industry consolidation.

Only companies with deep pockets are now able to effectively compete and survive the cut-throat competition which has seen tariffs touch a low of half a paise per second. Averge revenue per minute has fallen by 30% in 2009, which points to the huge tariff cuts operators have undertaken during the period. This is despite the rise in demand for high margin, value-added services like ringtones, games, et al.

Road ahead for telecom

Introduction of WiMAX and 3G would be of great significance for India, as it would help in bridging the gap between rural-urban digital divide.

3G has the scale to drive down the cost of a wide range of devices - from mobile phones, data cards and embedded laptops today, to wireless consumer electronics devices in the future. 3G networks provide both the capacity and coverage to minimize the number of sites needed when compared with other technologies, while offering high data rates and exceptional customer experience.

However, stoppage in allocation of spectrum and the government's failure to meet deadlines of 3G spectrum on several occasions does not auger well for the sector.

The year 2010 would be that of the tower infrastructure players. Apart from an expected consolidation in the sector, the infrastructure majors will increase the rate of tower rollout across all the 22 circles in the country.

2009

2008

• Increase in duty on mobile phones by 1%
• Introduction of national rural employment guarantee scheme with allocation of Rs 16000 Cr to all 596 districts in India
• Exemption in excise duty on raw materials for manufacture of specified electronics/IT hardware
• Introduction of Internet telecommunication service under the service tax bracket

Companies impacted by Budget Proposals: Bharti Airtel, Reliance Communication, Idea, Tulip IT, Spanco Tele

2007

• No change in license fee

Companies impacted by Budget Proposals: Bharti Airtel, Reliance communication

2006

• Increase in service tax from 10% to 12%
• Provision of Rs 1500 Cr for USO

Companies impacted by Budget Proposals: MTNL, VSNL

2005

• Provision of Rs.1, 200 crore for Universal Service Obligation (USO) fund
• Reduction in corporate Tax rate cut
• Reduction in custom duty on optical fibers and optical fiber cables from 20% to 10%
• Continuation of Custom duty and CVD exemption on components and accessories of mobile handsets including cellular phones

Companies impacted by Budget Proposals: VSNL