The telecom sector has made giant strides during the past one year. One of the biggest developments was the launch of “big bang” procedural and structural reforms to address some of the long-standing issues of the industry. Further, the government fast-tracked the launch of 5G services by concluding the first-ever 5G spectrum auctions. It also launched an indigenous 5G test bed with the aim of supporting the country’s telecom industry and start-ups.
To expedite digital infrastructure roll-out for 5G services, the government launched the Gati Shakti Sanchar portal, a central right-of-way (RoW) portal. A SARAL Sanchar portal was also launched to simplify the application process for registrations and obtaining of licences from the Department of Telecommunications (DoT).
On the manufacturing front, the government approved investment proposals from 31 companies amounting to Rs 33.45 billion under the production-linked incentive (PLI) scheme for telecom and networking equipment and decided to extend the scheme by another year. A PLI scheme for semiconductor and display board production was also approved during the year.
A look at the key highlights in the telecom sector during the past one year…
Telecom reform package
In September 2021, the government launched a reform package for the sector. Under the package, the much-awaited policy decision to exclude non-telecom revenue, although on a prospective basis, from the definition of the adjusted gross revenue (AGR) was announced. Further, the government reduced the performance and financial bank guarantee requirement of telecom operators by 80 per cent, thereby unblocking the cash that operators earlier needed to keep with banks to furnish bank guarantees. Several measures were also announced to enable operators to increase their spectrum footprint. For instance, operators would not be required to furnish bank guarantees to secure instalment payments for auctions to be held henceforth. Further, the government abolished the spectrum usage charge, increased spectrum tenure from 20 to 30 years and permitted operators to surrender spectrum after 10 years for airwaves to be acquired in future auctions.
The reform package also sought to help operators improve their liquidity position by enabling them to clear their past dues over an extended period. To this end, the government offered a four-year moratorium on past dues related to AGR and spectrum acquisitions, with an option to convert the due amount on these deferred payments to equity at the end of the moratorium period.
5G spectrum auctions
The much-awaited 5G spectrum auctions recently came to a close on the seventh day of the sale, with the government set to net a record over Rs 1.5 trillion. Reliance Jio emerged as the most aggressive bidder, followed by Bharti Airtel and Vodafone Idea Limited (Vi). Besides, the auctions saw participation from a new entity, Adani Data Networks, which is said to have bid for 5G airwaves in the 26 GHz band, to be used for its captive private networks. Reliance Jio acquired spectrum in the 700 MHz, 800 MHz, 1800 MHz, 3300 MHz and 26 GHz bands; Bharti Airtel acquired 19,800 MHz spectrum by securing a pan-India footprint of 3.5 GHz and 26 GHz bands, while Vi acquired spectrum in the 3300 MHz and 26 GHz 5G bands. Further, Adani Data Networks bought 400 MHz of the 26 GHz band (mmWave) across six circles.
Post the auction process, the Department of Telecommunications (DoT) received over Rs 178.73 billion from telcos towards 5G spectrum dues. DoT has now issued spectrum assignment letters to telcos, paving the way for the launch of 5G services.
Launch of Gati Shakti Sanchar and SARAL Sanchar portals
A key development on the RoW front remained the launch of the centralised RoW portal called the Gati Shakti Sanchar portal. The portal aims to provide a collaborative institutional mechanism between all stakeholders, including the central and state/union territory (UT) government(s), central landowning authorities (railways, defence, etc.), local bodies and service providers to facilitate RoW applications and permissions for the deployment of digital infrastructure such as mobile towers and optical fibre cable in the country. As per the central RoW dashboard data, 36 states and UTs have been onboarded to the portal. As of August 24, 2022, DoT has received 99,084 RoW applications, of which 42,722 have been approved, 29,329 have been rejected, 19,349 are pending and 6,875 have been reverted.
Further, the SARAL Sanchar portal, is a web-based portal, which has been launched for issuing various types of licences and registration certificates as a part of various digital initiatives being taken by DoT. In its present form, the portal covers receipt of applications for issue of new unified licences and PM-WANI registrations.
Establishment of private 5G networks
In June 2022, the government issued guidelines for captive non-public network (CNPN) licences to establish the legal framework for CNPNs. The guidelines stated that enterprises seeking to establish CNPN may obtain spectrum on lease from telecom service providers or directly from DoT. These guidelines also provide that DoT will undertake demand studies for direct assignments of spectrum to enterprises setting up CNPNs. Recently, DoT has started the process of undertaking demand studies for direct assignment of spectrum to enterprises setting up CNPN and has invited participation for the same. To this end, DoT has launched a module on the Saral Sanchar portal for carrying out the demand studies. It has informed that enterprises having a net worth of more than Rs 1 billion and willing to set up CNPNs by obtaining spectrum directly from DoT are invited to participate in the exercise from August 10, 2022 to September 9, 2022.
Launch of indigenous 5G test bed
Another major development on the 5G front has been the launch of the country’s first 5G test bed to support the country’s telecom industry and start-ups to validate their products, prototypes and solutions in 5G, as well as next-generation technologies. The 5G test bed has been developed as a multi-institute collaborative project by a total of eight institutes, led by IIT Madras. Other institutes that participated in the project include IIT Delhi, IIT Hyderabad, IIT Bombay, IIT Kanpur, IISc Bangalore, the Society for Applied Microwave Electronics Engineering and Research (SAMEER) and the Centre of Excellence in Wireless Technology (CEWiT). The project has been developed at an estimated cost of Rs 2.2 billion. Recently, the government has decided to offer the use of indigenous 5G test bed free of cost to government-recognised start-ups and micro, small and medium enterprises (MSMEs) up to January 2023 to boost 5G ecosystem within India and achieve the objectives of Atmanirbhar Bharat and Make in India. It is available at a very nominal rate to all other stakeholders.
Modification in the PLI scheme for the telecom sector
In October 2021, the government granted approval to about 31 companies, including 16 MSMEs and 15 non-MSMEs under the PLI scheme for telecom and networking equipment. The companies selected under the scheme included Flextronics, Foxconn, Jabil (an Ericsson Group firm), Nokia, Rising Star, Dixon Technologies, VVDN Technologies, Tejas Networks, HFCL, ITI, Coral Telecom and Lekha Wireless.
The Union Budget 2022-23 amended the scheme and added the concept of design-led manufacturing, in order to encourage research and development, especially with a focus on building the 5G services ecosystem. Recently, in July 2022, DoT decided to extend the PLI scheme in the sector by another year and also cleared a new set of 11 telecom and networking products, which will be brought under the scheme, with additional incentives of about Rs 40 billion under design-led manufacturing.
As per DoT, existing PLI beneficiaries will be given the option to choose financial year 2021-22 or financial year 2022-23 as the first year of incentive. Further, DoT granted an option to companies selected under the telecom PLI to also apply for design-led manufacturing, which gives 1 per cent higher incentive. However, in order to get selected, companies have to design locally and register the source code in India.
Boost to semiconductor manufacturing
In December 2021, the union cabinet approved the PLI scheme for semiconductor and display board production. The scheme envisages an investment of Rs 760 billion in semiconductor production over the next five to six years and aims to provide attractive incentive support to companies that are engaged in silicon semiconductor fabs, display fabs, compound semiconductors/silicon photonics/sensors (including MEMS) fabs, semiconductor packaging (ATMP/OSAT) and semiconductor design.
Through this scheme, the government aims to usher in a new era in electronics manufacturing by providing a globally competitive incentive package to semiconductor and display manufacturing companies.