Expenditure can be Capital or Revenue in nature. Capital expenditure is a type of expenditure where the benefits are received over a longer period while the benefits received by revenue expenditure exhaust over a short period. The telecom sector which includes Jio, Bharti Airtel, and Vodafone Idea as major market players, has introduced 5G and this includes a Capital expenditure for obtaining the 5G spectrum from the Government through auctions and then setting up channels to provide such network to users. Telecom becomes the new Utility! When we compare the Share in overall capital expenditure (CAPEX) of the Telecom sector over 5 years between 2013-2017 and 2018-2022 we see that it has increased by 8% from 9% to 17%. No other sector including steel has shown such an enormous jump. Steel which forms one of the core sectors of our economy has grown by 1%. When we compare these 2 sectors we can frame “Telecom as the new core sector of the economy.” But why so? The Department of Telecommunication conducted statistics which gave inferences that out of more than 500 million smartphone users in India, about 100 million are expected to have a 5G-ready device by the end of this year and many smartphones manufacturing companies such as Samsung are also loaded to shoot the 5G supporting smartphones which will meet the demands and make prices stable enough for the Indian consumers to afford it. Also, to consider the pandemic has made the overall economy realize that telecom is an important service providing a basket of services such as internet connectivity, calling, roaming, international connectivity, and much more. Telecom companies have now also started to provide Wi-Fi services. The majority of mobile subscribers expect that upgrading to 5G service will lead to a reduction in call drop and connect issues, and better network availability and speed. Hence, an overall increase in CAPEX is an indicator of the growing importance of the sector. But what about returns from such CAPEX? Will the Telecom companies be successful to get benefits out of such capital expenditure? This is still unsure because as per records 43 percent of those willing to switch to 5G are not willing to pay anything more than the current tariff for 3G or 4G services, just a mere 2 % are ready to pay extra for the 5G upgrade. So, the benefits received from such CAPEX will be received after some time but the public will realize the importance of technology upgrades soon. Thank you.
Regards,
Murtaza Kachwala,
Kautilya,
IBS Mumbai.
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Amazing!!
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