MC Interview | For telcos to make capex, they must generate returns: Jyotiraditya Scindia on tariff hikes

Union Minister Jyotiraditya Scindia

Jyotiraditya Scindia, Union Minister for Communications and Development of the North Eastern Region, believes India's telecom sector has enough players when compared with other major markets of the world, and the cheapest mobile data and call rates in the world. However, to expect players to commit to capex in the sector, there shall have to be the promise of returns, he added.

In an exclusive conversation with Moneycontrol, Scindia said that while telcos are implementing higher tariff, the hike has been miniscule compared to historic highs seen by the sector in the past.

The Minister told Moneycontrol's Managing Editor Nalin Mehta along with Shweta Punj in this exclusive conversation, that the Made in India 4G Stack can emerge as a global alternative to what Chinese players are providing.

Here's the edited excerpt of Moneycontrol's interaction with the Union Communication Minister.

Nalin Mehta: We are delighted to be joined today by the Minister for Communications and North-East, also a leading light of the Modi cabinet, and an MP from Guna - Mr Jyotiraditya Scindia. Sir, thank you very much for taking the time.

In this tenure as Minister, you’ve talked about the goal of Bharat as a telecom superpower. You’ve met with the stakeholders recently, set up committees. Tell us a little bit about what your vision for the Ministry is now, and for telecom sector? What kind of targets you've set and what kind of reforms can we expect?

Also Read: The India Stack an alternative to Chinese tech?

Jyotiraditya Scindia: Let me start by saying that telecom is an integral part of any country's growth potential today in the world. Telecom is not no longer only a means of communication, but it's a means of education. It's a means of garnering information, and information equals knowledge, equals IP, equals innovation, equals success. Therefore, telecom has become an integral part of, as I mentioned, any country’s growth story. India has leapfrogged to that extent in the last decade under Prime Minister Narendra Modi’s leadership, whether you look at mobile connectivity, where penetration has grown to close to 85% with 116 crore mobile subscribers, whether you look at internet connectivity which has grown from a low base of 20 crore to almost 95 crore, with 67% penetration rate.

At the same time, the economies of scale argument has come into place where, when revenues rise and cost of service falls. If you look at telecom rates, which were roughly at 0.51 paise per minute in 2014, today it is 0.03 paise per minute. So, it has got slashed by 96%. The same holds good for internet connectivity, where 1 GB of internet connectivity used to cost Rs 287, it now costs Rs 9, down by 94%.

Having said that, I think it's important for India to ensure a couple of things. First, the Prime Minister's imperative that we need to be atmanirbhar, if indeed we are going to translate our goal of Viksit Bharat into reality, then India must be atmanirbhar, i.e. must produce its own equipment and technology. Therefore this insistence, at least with the government-owned telecom service provider - the BSNL.

We have now got our own 4G technology –the third country in the world to have its own 4G stack. Which means, not only the core, but also the Radio Access Network (RAN), along with BTSes (base transceiver station), combined with data centers is in the process of being rolled today for BSNL. And it's’ been a Herculean effort. I must commend all the organizations that have worked together with one goal, one vision and one plan to make that happen. The technology and the Proof of Concept has been proven, we are now moving ahead. TCS along with C-DOT and Tejas and BSNL are working together in a project management unit to roll that out. We have a target of rolling out one lakh BTS (base transceiver station) towers over the next six months to a year, to be able to have 4G penetration. So, that is one of the very key goals.

The second is 4G saturation. In our country, we need to ensure that the access to information goes down to the last village, and that too has been the prime minister's imperative. Whatever we do, we must do with saturation. And so there are 52,000-odd towers that still need to be erected across 10,000 villages in India. This is not limited to the government company, it's across all TSPs. All four TSPs are working assiduously at that, something that I'm monitoring on a daily basis.

Along with that is the PLI. It's important for India to become – we are already the mobile phone manufacturer of the world, but I think it's important to also become telecom equipment manufacturer of the world. And for that, we launched the PLI scheme which is paying rich dividends. We need to ensure proliferation and greater adoption of that happens, both in terms of equipment manufacturing and equipment R&D. So, that would also be one of the things that I would look at, as an imperative.

Finally, the Telecommunication Act was passed by Parliament last December. We have put it through the Gazette notification route this June, which gives us a window of 180 days to make sure that all the rules are out there, 23 sections and 35 rules that need to be pushed out, and we are monitoring that.

I am also responsible, most importantly, to my customers, and the Telecom Ministry must make sure that we have quality of service in place for customers, i.e., no call drops, no intermittent issues with regard to communication on mobile phones, as well as to reduce the number of spam calls and fraud calls. TRAI has already passed a regulation to that effect in the last days 15-20 days, and we must see execution of that.

Also Read: Govt won't interfere in Vodafone Idea's affairs, says Telecom Minister Scindia

Shweta Punj: Mr. Scindia, you have a daunting task. As you mentioned that you are answerable to the customers of India. We have seen telecom market shrink substantially. From a whole host of players, we’re now down to three big players. Is that a situation you’re comfortable with, because ultimately consumers must have choice. You also mentioned about telecom tariffs which are low, but we have seen tariff hikes come in recently.

Jyotiraditya Scindia: Thank you for your question, Shweta. But I think it's important that Moneycontrol also does deep dive in terms of what has happened already, prior to looking at what's happening in the Indian market. We have four players in the Indian market today, and if you look at any country in the world today, I would dare say that no country in the world has more than 2-3 players. So, we are very comfortably placed in terms of the number of players. We have got to look at how the global industry telecom is working when we look at the perspective of how Indian industry is working.

The answer to your first question is we have enough players in India. Four players is a decent number of players compared to what the world is looking like, on a country wide-basis.

Your second question is with regard to tariffs. There are three or four things that are at play here. If you compare the rate of a package in India, which, if you look at 70 SMSes, 2GB of data, plus a number of calls, then India is priced at roughly about $1.89 for that package. The US is priced at $40, developed countries somewhere between $12 to $35, while developing countries are priced upwards of $9. So, suffice to say that we are the cheapest in the world.

In the last 10 years, tariff for voice calls have fallen by 97%, from 0.53 paise to 0.03 paise. Data costs have fallen by 94%, Rs 287 per GB to Rs 9 per GB. So, you have a declining cost structure for consumers over a decadal period. On the other side, you had the fastest rollout of 5G in the world happening in India. Started in October ’22, and in 21 months we’ve rolled out for 5G across the country. You've got 4.5 lakh BTSes that have been set up for 5G. What does that mean? That means that telcos have gone through a capex plan of Rs 4.26 lakh crore over the last two years. The last tariff hike was three years ago, right? This year there has been an 11% tariff hike. What does that mean? That means that your cost per minute has gone up from 0.03 paise to 0.033 paise. Your data cost has gone up from Rs 9 per GB to Rs 9.9 per GB, when it used to be Rs 287 per GB.

So, if we are expecting companies, whether government or private sector, putting in that amount of capex, there has to be a return for it. You've seen declining costs over a decadal period, and the last tariff being imposed three years ago - prior to 5G being rolled out - and a Rs 4.26 lakh crore capex cost. Being Moneycontrol, I'm sure you understand the economics of that argument.

Also Read: India's telecom tech to provide alternative option to world: Scindia

Nalin Mehta: On the first point you have made about the India stack, a number of countries must be in touch with India to use some of this indigenous technology. How do you see that happening, and also do you see this India Stack as an alternative to the Chinese technologies around the world?

Jyotiraditya Scindia: Absolutely. I think if we successfully roll this out - and I would wait until mid of next year - we've got 22,000 towers that have already been put up. Our core network is working across all four centers, and our data centers are up and running. So, we already have live customers on 4G as we speak. It's no longer a proof of concept, it's actually in execution as we speak. And, when we roll out our one lakh BTSes, then I'm very, very confident that this is going to be an alternative technology. There are only three countries in the world that have this technology, and India is going to be one of them. Let me also add, in terms of the question that you’ve not raised, that the movement from a 4G to a 5G technology is only going to be incremental from this 4G technology. The 4G core can be used for 5G as well. The only change that you’ll probably need to bring about is adding a couple of BTSSs on to the towers. So it's going to be just incremental and a not a monumental change to switch from 4G to 5G. However, we'd like to first make sure that 4G is stable and running well.

Shweta Punj: We recently had the 5G spectrum auctions and the response was not as encouraging as one would have hoped. Any analysis on what really happened? And since this is the last question, we also want to get a sense from you on BSNL and Vodafone Idea.

Jyotiraditya Scindia: Let me take the first question. I think the auction was tremendously successful, let me explain why. We had eight bands of spectrum that were put out, and we had auction bids came in for four bands of spectrum. Please do also understand that this is on the back of very large spectrum auction that took place in 2022-23 where we sold spectrum worth almost Rs 1.5 lakh crore, and that was for 4G, 5G technology. So this round of auction was mainly for those whose spectrum was expiring and they required more spectrum. The 5G bids that went in mainly were for 3300 Megahertz to 26 Gigahertz spectrum, which were taken up last time. Of the total 10,500 Megahertz that we put up for auction, this time, across the eight bands, close to about 9,900 Megahertz was in the 26 Gigahertz and 3,000 Megahertz spectrum which is for 5G. So, actually, what you're putting up for auction was only 531 Megahertz, and we sold 141 of that.

So, we almost sold close to 30-35% of what we put up for auction, and we garnered Rs 10,000 crore out of that. Let me give you the breakup. The renewal part of the spectrum across the major players was about 40-45% of that 141 Megahertz that got sold, and the balance 60% was for additional spectrum that they took to service their needs on those spectrum bands which were different from the 5G spectrum bands. So, it was a very successful auction, I would say.

Regarding Vodafone Idea, it has got its own professional management. Therefore, what happens in the financial and operational workings of a company is their business and not our business as a ministry. As far as BSNL is concerned, we are EBITDA positive. We would like to see the rollout of 4G.

Number one, good execution. Number two, quality of service and customer satisfaction ratings increasing for our customers. And if you're able to do both of those, profits will accrue from that time. Please remember that in life, your notion and your thinking should never be bottom line alone, it should be satisfaction of customers. If you're going to satisfy the customers, the bottom line will come. That's theory number one of business. Our concentration right now is to execute 4G.

Nalin Mehta: And finally, as a stakeholder in Vodafone Idea, any thoughts on increasing or decreasing the stake?

Jyotiraditya Scindia: As I mentioned, it is the management of the company that has to decide what practice to follow. We would like a competitive telecom sector and the Ministry of Telecom would like, at the end of the day, the best quality service and choice to customers.

You can watch the entire video of this exclusive interview right here.

Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.