Much has been written about the implosion of the telecom industry in India lately. The current situation in the industry will not end easily. A very well capitalised new player has come in, fighting for market share. But the incumbent big players do not like their lunch to be eaten. So, they drop prices too, leading to a reduction of the total revenue in the industry. This, combined with the rocketing debt of the industry, would mean that total operational profits are completely insufficient. Something much bigger must happen to get the investment cycle in telecoms going again. The most obvious thing would be to immediately get rid of annual spectrum usage charges, of the mandatory payments for the infrastructure fund (USO), and the sharing of revenues with the government. Interest on deferred spectrum payments should be substantially reduced; otherwise, there is little benefit in deferring spectrum payments. If the operators can repay their loans, the state-owned banks and the government will gain enough. And the already committed purchase price for spectrum should be paid (otherwise we get an even bigger distortion of the level playing field), but the annual interest of the outstanding can be reduced substantially. All those measures together will mean an immediate improvement of the cash flows of the operators. For the rest, the market has to do its work: The only thing the government needs to do is make sure that there is a true level-playing field.

(Economic Times)