India's ambitious Digital India programme could get derailed due to the financial challenges faced by telcos, apart from the low quantities of spectrum deployed for commercial use and the absence of a road map for releasing more airwaves, telcos and experts say.

Mobile phone operators in India face multiple challenges lowest spectrum holdings in the world and that too fragmented as it's divided among 7-13 operators in a circle, apart from being non-continuous, which is a basic necessity for high-speed data services. Additionally, the cost of bandwidth in India is almost the same as that for global operators, but the average revenue per user is far less as data and voice tariffs are far lower, thus hurting the rate of returns on investments, say analysts.

"The current regulatory regime of higher spectrum cost with the expectation of lower tariffs is not sustainable and has deteriorated the financial health of the industry," said Rajan Mathews, director general of the GSM industry body, COAI said. The body represents top mobile phone operators Bharti Airtel, Vodafone India and Idea Cellular, among others.

The telecom industry's cumulative debt burden has surged increased to over Rs 3,00,000 crore in FY 2014-15, from Rs 82,726 crore in 2008-09. The debt-to-equity ratio of a majority of the carriers has doubled since 2010-11 and the average return on the investment made by an investor for the industry as a whole is at Rs 1 for every Rs 100 invested, say analysts.

These factors could leave the industry struggling to invest more into rolling out broadband networks, which would eventually hurt Narendra Modi-led government's Digital India initiative. The project is aimed at building a robust information network or information highways across the country and use these highways to deliver key services of e-governance, e-health and e-education to the remotest corners of India.

The Prime Minister has set a vision of 650 million internet connections and broadband speeds of up to 2 Mbps by 2020. At present the country has close to 200 million internet connections and broadband speeds of 512 Kbps. "Given the ambitious targets of Digital India, operators need to beef up their spectrum holdings," Mathews said.

However, unlike US president Barack Obama, who has promised free 500MHz of airwaves for private use in the next few years, the Indian government is yet to come out with a well-defined plan, leaving the industry skeptical about the success of Digital India. Newly-appointed Vodafone India CEO Sunil Sood said that the government should give long-term clarity on the amount of spectrum and the kind of airwaves to be auctioned, besides clarity of merger and acquisition norms and spectrum sharing & trading guidelines.

The quantum of spectrum held by Indian carriers on average about 13MHz is about a fourth of the next largest 45MHz held by Japan's NTT DoCoMo. China Mobile, the largest telco in the world by subscribers, holds some 100MHz of airwaves.

Prashant Singhal, global head for telecom practice for EY, said that one of the biggest problems for the industry is lack of a road map for sale or vacation of airwaves. Spectrum sale in the past has been mostly in an ad hoc manner.

Since 2010, airwaves are being allotted via periodic auctions, but operators aren't sure when the next sale will take place. Spectrum trading and sharing rules, which can lead to more efficient use of the available airwaves, are yet to be released.

"The department of telecom can make a huge difference in this one very critical area. This single move, of making public even a tentative timeline for spectrum vacation and sale can make a very big impact to success of Digital India," Singhal said. Experts add that the key to the success of the Digital India initiative could lie with the defence forces followed by department of space and railways, which together hold close to 50% of the airwaves which can be deployed for commercial use.

According to industry data, out of the 2x285MHz spectrum per service area which can be used for commercial communication, more than 50% of spectrum is with Defence, department of state and Railways and is not available for commercial communication services.

"To achieve Digital India, the industry needs to get to well over 50MHz of spectrum per operator from the present 15 to 18MHz operators have on an average today," said Singhal.

Some say a roadmap of spectrum to be allocated or a higher quantity of spectrum being offered for sale will subdue bidding interest during auctions, hurting government revenue. However, lower spectrum payouts, if at all, will in turn make services more affordable, and attract more people to mobile broadband, thus achieving the goals of Digital India. More spectrum for commercial use can also facilitate higher broadband penetration through Wi-Fi hotspots in the rural areas of the country an aim of the Digital India initiative.