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How Will History Remember Us?

India was well aware that every country in the world had only three to four mobile operators at the start of the game. It had adequate case studies to dip into. And yet 16 licenses were issued, license fees collected, and spectrum auctioned. The government thrived on a licensing model with double taxation, upfront payments for auctioned spectrum, and a share of the revenue as license fees and SUC. Major duplication was made in telecom infrastructure creation. And, later the manufacturing suppliers had to shut facilities. The writing on the wall for where we were headed was clear from the beginning.

While the game was being played, the situation worsened and worsened further. Whereas 2001–2004 saw the exit of regional players like Koshika Telecom and Escotel and the emergence of pan-India operators, the current consolidation led to huge value destruction. Most of the deals were perceived as distress sales by loss-making companies, including Telenor, Videocon, and Tikona Wireless. Exits are now being made in noncash deals.

The gross ARPS (average revenue per SIM) declined to Rs. 83 in Q1FY2018 after it had increased from Rs 113 in Q1FY2014 to Rs 128 in Q1FY2016. Also, the AGR (aggregate gross revenue) of the industry showed a similar trend where it increased from Rs 30500 crore to Rs 38600 crore and then declined to Rs. 30100 crore over the same periods. The debt levels of the industry went up to as high as Rs 4.6 lakh crore, before the hue and cry being made by the industry was heeded. Stakeholders, including lenders bled, while unemployment in the industry rose.

Financial recovery with pricing power is still far away. Reeling under increasing financial stress, hyper competition, high GST rates, plunging ARPUs, declining return on investment, and rising cost of credit, it will take some time for the bloodbath to end. The Idea Cellular–Vodafone combine, Airtel’s buyouts of Telenor India, a potential acquisition of Indus Towers by Bharti Infratel, the closure of some parts of RCom’s wireless business, and the National Telecom Policy 2018, are all on the cards.

The real question is, was all this really necessary?

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