Mint Explainer: Are more reforms needed for the Indian telecom sector?

livemint.com:

Subscribe to enjoy similar stories. India's telecom sector is a critical pillar of the country’s digital economy. It provides services to over 1.2 billion people and contributes significantly to the country's GDP.

While several reform measures have been taken by the government to help the sector, it seeks more enabling initiatives that it feels are necessary to drive growth, improve financial health, and enhance consumer services. Are more reforms still needed for the sector? Mint Explains. Yes, there have been improvements in the financial health of the telecom sector in recent years.

The industry faced severe financial stress in the past due to high debt levels, the heavy burden of spectrum fees and high operational costs. The entry of Reliance Jio in 2016 made matters worse, as the company offered ultra-cheap data tariffs and made voice services free of cost, piling pressure on other telecom operators. However, over the past two to three years, a more stable business landscape has emerged.

Major telecom operators, especially Bharti Airtel and Vodafone Idea (Vi), have been able to improve their financials with increased average revenue per user (ARPU), consolidation within the sector, and a reduced need for competitive price cuts. The sector as a whole has also seen a rise in ARPU, the average revenue they derive from each user that drives profitability, largely due to tariff hikes in 2019, 2021 and 2024. Yet, the industry still faces substantial debt burdens and needs to make continuous investment to expand and improve infrastructure, particularly for 5G services.