Reliance Jio Telecommunication has dismissed the allegations of Vodafone Group CEO Nick Read that it was the only beneficiary of the telecom regulator’s decisions as “fake news” and blamed India unit and Bharti Airtel for “killing” the competition even before it started services in September 2016.
Jio president Mathew Oommen reacted at Bharti Airtel chairman Sunil Mittal’s comments on forming an optic fibre JV with Vodafone Idea, telling that, “If one company is not able to execute, now two companies coming together may not be able to execute. It is about outcome and deliverables, and not about coming together.” He noted that Jio has more fibre connectivity than its rivals combined.
But, the Mukesh Ambani owned Telecommunication Company backed its rivals in calling for lower 5G spectrum prices, an unusual example of a united stand on any subject, especially against the Telecom Regulatory Authority of India.
He claimed that Bharti Airtel and Vodafone, now Vodafone Idea had “destroyed the Indian telecom ecosystem” even before Jio started services, benefiting from high interconnect usage charges (IUC) and denying it adequate points of interconnection (PoIs).
TRAI more than halved the IUC charge to 6 paise per minute from October 1, 2017, and scrapped it for local calls starting January 1, 2020, a move lauded by Jio and decried by its rivals. “There were 12-15 operators that disappeared. When we launched services in 2016, how many operators were stable? There was Airtel and there was Vodafone that were reasonably stable and they were killing every other operator,” Oommen said.
Vodafone and Idea Cellular, which united last year, and Airtel have alleged that Jio’s free voice calls and data offers at dirt cheap rates, which TRAI allowed, had hurt the revenue and earnings of operators and led to a spate of exits and consolidation, shrinking the number of private players to three. “What we have done is what major incumbents didn’t do — that is connecting the unconnected. We don’t think that’s unfair, rather it’s very fair to the consumer,” Oommen said.
He rejected Read’s comment that the current pricing in India was “artificially” low and that all three operators need to sit and discuss increasing tariffs.
“That is not going to happen. That is collusion. One needs to do tariffs in meeting customer’s expectations and it cannot be telcos getting together,” Oommen said.
He said about 400 million people in India still need to be connected to the Internet, signaling that the price war was far from over.
“These people have an affordability metric. I don’t think this is the time to change the tariff model,” he said, adding that it has to be an “obligation and commitment” from telcos to connect the unconnected.
Low tariffs have helped Jio garner over 280 million subscribers by December and a revenue market share of 29.7%, closing in on market leader Vodafone Idea’s 387.2 million users and 31.4% share and Bharti Airtel’s 284.2 million subscribers and 30% share. However, in a rare instance of unanimity, Jio joined Airtel and Vodafone Idea in calling for a lower base price in the planned 5G spectrum auction. In Jio’s first official comments on the pricing of airwaves, Oommen said the starting prices for 5G spectrum, which will likely be auctioned this year, were “significantly higher” in India than elsewhere globally and would hurt the deployment of the next-generation wireless broadband technology.
TRAI set a base price of Rs 492 crore per unit for 5G airwaves in the 3300-3600 MHz bands, seven and a half times higher than Rs 65 crore per unit at a recent 5G auction in South Korea.
“There is a room for improvement in spectrum prices because the cost of spectrum in India is significantly higher than globally. So, if you put your capex and capital into a spectrum, then obviously, you would have less capital to play with (for deployments),” Oommen said. He said each telco needs a 100 MHz block of airwaves for good quality 5G services, thereby making it essential for the government to reduce prices.
Trai Chairman RS Sharma has said the regulator “stands by” its pricing recommendations, even after the Department of Telecommunications nudged it to lower rates.
Experts said a key reason for agreement among the three operators on spectrum pricing could be the huge debt that’s pressuring their balance sheets.
Vodafone Idea’s net debt is over 25 times its earnings before interest, tax, depreciation & paying back, while for Jio it is 6.9x and for Airtel consolidated it is 4.2x, forcing all three to look at ways to raise funds through asset sales or rights issues.—News Heads