The Indian Telecom industry will now become a favourable ground for outside investors. In the last couple of weeks, the Indian government has announced a slew of reforms that are going to boost the telecom sector. The outside investors were worried to step into the Indian telecom sector because of low tariffs resulting in a low average revenue per user (ARPU), high statutory dues for every operator aside from Jio, and a lot of legal troubles.
But a lot of these issues have been addressed now. The government has allowed foreign direct investment (FDI) under the automatic route with a certain condition for the neighbours being only allowed to invest under the government route.
Government Has Reduced Statutory Dues Significantly
The Indian government has already announced that the Bank Guarantees (BGs) will be reduced for the operators. Further, the definition of the adjusted gross revenue (AGR) dues has been changed to exclude the non-telecom revenues. The government has also removed spectrum usage charges (SUC) for future spectrum auctions.
The operators have also been provided with the option of a payment moratorium for spectrum and AGR dues. Bharti Airtel and Vodafone Idea (Vi) have accepted it as well, which will boost their cash flow in the near to medium term.
Further, the government is working to reduce litigation from the sector. This will also save the telcos a lot of money. On top of all this, a tariff hike is expected in the near future that can increase the ARPU of the telcos.
All of this marks India as a favourable ground for outside investors who want to invest in the telecom sector. With 5G on the way, the revenues of the telecom sector, especially the enterprise revenues, are expected to grow. The telcos will require a lot of capital to invest in 5G spectrum and related technologies. This is the right time for the outside investors to jump on the telecom sector’s 5G train.