The telecom industry has been through a rough patch for a while now, since Reliance Jio played havoc with its low-cost data service, incumbent players fumed with insecurities resorting to acquisition and mergers. As non-performing assets (NPAs) pile up, debts sore and smaller players jostle to survive, imminent threats beset the industry. Consequently, operators turn to government for intervention to bring about favourable reforms and relaxation in levies.
India is presiding over a digital wave, surpassing combined usage of China and US for the year 2017. As the number of subscribers soar to 988.49 million, demand for data has only fuelled. This perhaps is condescending to the persisting turbulence in the sector, as these numbers fail to substantiate for dwindling revenues and rapid consolidations by giant telcos. The economic survey twice, since the last year has flagged concerns over plummeting profits and sky-rocketing debts that has further impacted investors, lenders and vendors.
What’s really going wrong?
On one hand, behemoths- Airtel, Idea and Vodafone are vying to retain their subscriber base against the ruthless price wars, and on the other, moderate players- Aircel, Reliance Communication and Telenor—prepare to clear up their rubble.
Frequent Mergers: As Idea and Vodafone merge to acquire maximum subscriber base to stave Airtel off its spire, Norway based operator Telenor and Tata Teleservices get consumed by Airtel. To counter the onslaught of M&A’s, Jio aced a win-win deal—buying- towers, spectrum and other wireless infrastructures—from Anil Ambani’s debt-laden RCom.
Addressing employees’ woes: The state of hyper competition within the sector is advantageous for the subscribers at least in the short run, but the major jolt will be for the employees. As Aircel filed for bankruptcy, more than 5000 of its employees were hit, this is only after it had shut 6 out of 18 working circles, as more players are compelled to bow out—the impact of these layoffs will be abysmal.
Financial Burden: Consternation within the sector is overpowering, owning to- unsustainable levies & taxes, high licence fees, high operational costs and spectrum pricing, together they add up to the plight of the operators.
The Big three: The sector has been tapered to three key players, currently acquiring 91.4 percent of the market share all by themselves. With debts burgeoning to 7.7 lakh crore, the incumbent operators are facing financial stress, as average revenue per user (ARPU) for the industry came down to 22 percent by august 2017, the situation looks dire for the growth of industry.
Who’s favouring who?
Even after being a late entrant, Jio’s disruptive pricing has cropped up persistent contention within the telecom industry.
Jio versus the rest: The spat between Jio and incumbent operators has outspread after the Telecom Regulatory Authority of India (TRAI) issued certain regulations in the past that have proven advantageous for Reliance owned Jio.
With the recent ‘diktat’ on- predatory pricing, significant market power (smp) and segmented pricing has apparently ‘favoured’ Jio.
COAI has raised concerns before the government to address these financial grievances, by bringing down spectrum pricing and rationalising levies that currently amount to 32% of the revenues. Thus, also reducing barriers to entry for sustainable and fair growth of this segment.
Calling out Gov. for Growth Dial up
Addressing to telcos’ woes, government has assured roll out of constructive amendments in the upcoming National Telecom Policy (NTP)—expected to materialize by March, 2018—in order to ameliorate the drooping enthusiasms of operators, and to provide boost for Digital India.
Quickly on NTP:
- A policy intervention that seeks to ameliorate the current state of Telecom Industry by reviewing and rationalising pricing and levies to establish a coexisting space for proliferation of industries
- Purpose of National Telecom Policy is to integrate telecom with other industries in order weave to conducive social connectivity and improve telecom as a whole.
- It is touted to generate 20 lakh jobs, achieve 900 million with subscription and download speed of 2 MBPS
- According to the suggestions made by TRAI— corresponding to changes in the licensing/ registration/ permissions structure is necessary to ensure transparency.
- TRAI further suggested for a review of GR (gross revenue) and AGR (adjusted gross revenue), and create awareness on value of spectrum and conducting audits to ensure maximum utility.
Sigh of relief?
There is a hint of relief after the relaxation of spectrum holding caps has come into being- which means that the payments tenure for auctioned airwaves will be extended—from earlier-12 years, including extending a two-year moratorium, to now -16 years. But, merely extending the tenure of repayment of liabilities is almost as if resorting to a transitory refuge, while in the hindsight—operators will end up paying more. Instead, an interest rate reduction would have better compensated the demands of the sector, per se.
All the elephants in the room
Jio’s entry, no doubts revolutionised the data consumption in India, taping millions by facilitating data accessibility. Despite, this must not dither existing players off their turf, Department of telecom must therefore provide for a level playing ground for all operators-without preferring the ones with deeper pockets.
Government must mull over Industry’s demand and needs to promote investor-friendly modifications, realising India’s capacity to make use of 5G and IoT(Internet of things) technology and resuscitating standards of operating.
It is high time for the government drafts policies that foresee above and beyond the aberrations to India’s growth, since telecom as a sector is not confined, it has suffused with healthcare, infrastructure and several Gov.-led social initiatives to reach out to people across all touch points thus, and government must support for its conducive growth and leverage its full potential.