The telecom industry in India is in a deep crisis. Once a booming market having a dozen carriers, it’s now left with only three private players, two of them reeling under heavy debt and losses (Airtel and Voda-Idea) and two nearly bankrupt PSUs (BSNL-MTNL). The newest blow from the Supreme Court (SC) ruling on the adjusted income (AGR), asking the telcos to pay dues and interest amounting to Rs 1.33 trillion within three months came as a death knell to the incumbent telcos. The exception seems to be Reliance Jio Infocomm, which is currently the sole profitable operator within the sector.
For the past several years, the telecom sector has been calling for rationalization of levies, duties and taxes, to not forget the series of political controversies and scams that continued to feature in its woes. Of course, a number of us would’ve forgotten the irony that in these very years, the world made massive strides with the rollout of 4G and connecting just about the complete nation on its networks, besides generating employment across the board.
Mukesh Ambani’s takeover of India’s telecom sector is sort of complete. Aided by Indian authorities, the country’s wealthiest man has driven most of his smaller rivals into mergers or out of business since late 2016, when his Reliance Jio business first bowled into the market. Only two other national players within the private sector remain: Bharti Airtel and Vodafone Idea. Both are struggling. Vodafone may not survive.
Several years ago, India had one in every of the world’s best telecom markets, with numerous players vying for business. Now, there’s a heavy risk of monopoly.
Outside the telecom sector, where tens of thousands have lost jobs, nobody is making a giant fuss. Jio has lured customers by offering super low-cost access to a state-of-the-art network. Its generosity relies on the financial strength of parent company Reliance Industries, India’s most beneficial firm. Hooked on a daily feed of cheap gigabytes, Jio’s customers won’t care.
Mukesh Ambani’s Reliance Jio has rapidly become India’s biggest telecom carrier and indeed one in all the world’s most sought-after companies assisted in no small measure by a series of regulatory changes that permitted it to enter and take over the market.
In the future, they merely might. Regardless of the sector, monopolies aren’t typically related to low fees and top-notch services. Jio’s charity might continue after the disappearance of its competitors. But that’s a giant if. And Ambani didn’t become India’s richest man by giving services away at no cost.
Ordinarily, the duty of the competition authority is to confirm this type of thing doesn’t happen. There are only two explanations for the predicament that India now faces: Either regulators have failed dismally in their jobs over a sustained period, or they have colluded in Ambani’s land grab. Developments point to the latter.
That is because nearly all India’s regulatory moves within the previous couple of years have favored Jio. This started even before the launch of services, when the corporation received India’s only pan-India voice and data license for what critics said was a small fraction of normal fees. The accusations were quickly dismissed by India’s government.
Authorities followed up with another favor in 2018 after they changed rules on predatory pricing to suit Jio. Previously, they’d based assessments of great market power on a company’s subscriber numbers, turnover, network capacity and traffic volumes. With the overhaul, only subscriber numbers and turnover were up for consideration. It meant older companies would face pricing restrictions while Jio wouldn’t.
Since Jio’s arrival, India’s competition authorities have waved through a succession of takeovers and mergers that might have departed alarms in the other democratic countries. Consolidation usually means the disappearance of perhaps two or three players. India’s list of casualties is long enough to pin to an industry memorial. They include names like Aircel, MTS, Reliance Communications, Telenor and Tikona. Vodafone India and Idea Cellular, two former titans, have merged. No doubt, India was ripe for change. When Jio rocked up, it looked grossly inefficient and had fallen behind other parts of the planet on the rollout of high-speed mobile data networks. The catalyst provided by a brand new operator, taking advantage of the most recent technologies, was welcome.
But the looming prospect of a monopoly in a very market that when featured over a dozen players would make any rational policymaker stop and think. Instead, India’s authorities have hit the gas. they’re now chasing operators for billions in what they assert are unpaid licensing fees. Jio, notably, owes significantly to Bharti Airtel or Vodafone Idea.
5G Spectrum Auction
In the latest development, India has been forced to postpone a 5G spectrum auction that was purported to happen this April. Neither Bharti Airtel or Vodafone Idea is in a very position to shop for new spectrum licenses at the high prices the government wants to charge. Only Jio could realistically afford those rates.
India desperately needs a U-turn. It’s reportedly preparing a rescue package for stressed telecom companies and will offer relief to companies that owe licensing fees. But it’ll go far to steer the international community; it upholds fair play. Otherwise, India’s smartphone addicts may eventually find Jio is their only option.
While it should be an indication of confidence in Indian industry that the world’s largest companies are willing to place money into an Indian company, it’s obligatory for the authorities to confirm that these massive deals don’t happen at the value of competition and selection for Indian consumers. If Jio’s success in spreading the web across India ends with it turning into a price-gouging data-grabbing monopolist, will that actually be within the country’s best interests?