India's national digital communication policy (NDCP) could benefit the sector by making it easier to meet rapidly rising data demand and addressing tax and fee burdens on the industry, according to a report by Fitch Ratings.
The NDCP, which received the cabinet's approval on Wednesday, ensures broadband access to all with 50 mega bytes speed and 5G services, among other services.
The ratings agency said that the NDCP's plan to expand broadband coverage funded by the universal service obligation fund and in partnership with private telcos is likely to support private telcos' growth, as it will broaden the customer base and improve internet adoption, particularly in rural areas.
The private telcos are likely to bear fruit from NDCP's push for 5G and plan to encourage more efficient spectrum usage as it aims to make it easily available in spectrum bands and liberalising spectrum sharing and trading, the report said.
Fitch said the new decisions are likely to help telcos keep up with the growth in data usage.
Telcos' costs and red tape could be cut by the NDCP's plans to review and rationalise the sector's tax structure and optimise future spectrum asset pricing, said the report.
The telcos face heavy taxes such as licence fees, spectrum usage charges, and universal service fees on top of expensive spectrum assets. The competition in the telecom industry has also limited the companies' pricing power.
"We expect price competition to ease in the medium term following the emergence of three large telcos - Bharti, Reliance Jio and the merged entity of Vodafone-Idea - which we estimate have a combined revenue market share of over 90 percent," Fitch said.
RIL, the promoter of Reliance Jio, also controls Network18, the parent company of CNBCTV18.com.