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World's cheapest telecom market faces life-threatening crisis
1GB mobile data costs just $0.26 in India as against $12.37 in US & $6.66 in UK; Operators demand for floor price for operational viability
New Delhi: From being the world's cheapest and fastest growing market, India's telecom sector is sputtering as it faces life-threatening liability running into billions of dollars, a crisis that may alter the character of an industry that has already seen a painful price war destroying profits and pushed several operators out of the market.
The Supreme Court order for including non-core revenue in telecom groups' gross adjusted revenue -- the figure on which the levies are charged -- revived the rivalry between the old operators and Mukesh Ambani's low-cost upstart Reliance Jio during 2019, but there are signs of a truce with the rival camps agreeing to raise tariffs and also favouring regulator's intervention in fixing floor or minimum tariffs.
"We have fundamentally gone from an all (mobile) voice (calling) network to a hybrid network (of voice and internet data), to soon an all data network," said Rajan Mathews, Director General of Cellular Operators' Association of India (COAI).
And to survive, a floor price is needed quickly, before March 2020, he said.
With 1 gigabyte (GB) of mobile data costing just $0.26 compared to $12.37 in the US and $6.66 in the UK, India in 2019 emerged as the nation with the cheapest telecom tariff in the world.
It was also the fastest-growing telecom market. But, below the surface, a price war since the 2016 launch of Jio had ringed the sector hallow. And when on October 24, the Supreme Court, on a petition moved by the government, ordered payment of past dues according to its new definition of AGR, the country's second-biggest carrier Vodafone-Idea Ltd warned of shut down if no relief is given.
The total dues for the industry ran into a whopping Rs 1.47 lakh crore. For an industry that has come from 7-8 operators to just three private players and state-owned fourth operator, the warning by Vodafone-Idea sounded like a death knell.
The year saw resurfacing of a bitter war of words between the old and the new operator, and intense lobbying by telecom czar Sunil Bharti Mittal and billionaire Kumar Mangalam Birla of Vodafone-Idea.
Mittal and Birla had faced the brunt of brute competition unleashed by Ambani, as Jio ate into their user base and quickly grew to become the nation's biggest operator in terms of subscribers.
Airtel and Voda-Idea reported record financial losses, but Jio continued to surprise the markets with astonishing profits through the year.
The representations to the government, worked. The government announced a two-year deferment on spectrum payments for the stressed telecom companies as it worked to avoid the sector becoming a monopoly, soon after the three operators signalled the end of price war by raising tariffs.
Mittal lobbied for regulator prescribing for a floor tariff for industry viability - an idea that Jio had initially opposed on grounds that it would tantamount of giving up industry right of forbearance, Telecom Regulatory Authority of India (Trai) quickly moved in to float consultation paper to fixing minimum rates.
