Telcos can do with help, for a monopoly will hurt consumers
A recent India Ratings report put the total debt of the top three telcos — Airtel, Vodafone-Idea, and Reliance Jio — at ₹3.9 lakh crore or ₹3.9 trillion in 2018-19. This can be partly attributed to Jio’s unnaturally low pricing, which has eroded the market share of other telcos, apart from forcing them to lower their own tariffs.Updated: Oct 29, 2019, 17:44 IST
The government’s move to set up a committee headed by the senior most bureaucrat, the cabinet secretary, to suggest ways to alleviate the financial stress in India’s telecom companies (telcos) is welcome. The committee’s broad mandate is to look at deferring spectrum payments payable by the telcos in 2020-21 and 2021-22; a review of payments they make to the government under the universal obligation fund and for spectrum usage; and to explore possible floor prices for voice and data services. A recent India Ratings report put the total debt of the top three telcos — Airtel, Vodafone-Idea, and Reliance Jio — at ₹3.9 lakh crore or ₹3.9 trillion in 2018-19. This can be partly attributed to Jio’s unnaturally low pricing, which has eroded the market share of other telcos, apart from forcing them to lower their own tariffs. With its pricing strategy, Jio, launched only in 2016, has already become the country’s largest telco with almost a third of the market (by subscribers).
The decision to set up the committee of secretaries comes a week after the Supreme Court ruled in favour of the Department of Telecommunications (DoT), and against 15 telcos in a long-standing dispute. As a result, the telcos will have to pay DoT around ₹92,000 crore. Of this, Bharti Airtel will have to pay around Rs 22,000 crore and Vodafone-Idea, Rs 28,000 crore. The dispute was over the definition of Adjusted Gross Revenue. Telcos pay licence fee to the government on the basis of this. DoT believed that it should include income from even non-licensed activities such as dividend and treasury income, or rental income from the sharing of infrastructure. Without going into the merits of the case, which dragged on over a decade-and-a-half, it is clear that the ruling will hit many telcos hard (10 of the 15 are no longer in existence, after the Supreme Court scrapped 122 telecom licences — for good reason — in February 2012, pushing the sector into its first big crisis in India).
The ruling has thrown the telcos into a tizzy; some have warned of job losses as a result. They, and several experts, have also pointed out the strategic importance of telecom services (which fit the definition of public goods). There’s a far bigger danger. Given Jio’s staying power and aggressive pricing strategy, it isn’t inconceivable that India could, one day, have just one telco. Monopolies are rarely good for consumers, and the government would do well to remember that.