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Unsustainable Telecom Wars

The telecom industry continues to go through a churn, with Mukesh Ambani’s Jio overtaking Sunil Mittal’s Airtel to become the second largest services provider. With over 306 million subscribers, Jio has left Airtel far behind at 284 million while Vodafone–Idea remains at the top with 409.3 million subscribers.

All three large telecom players have more or less the same level of revenues. The difference is that Jio continues its uptick with profitability while Airtel and Vodafone–Idea bleed on the margins.

What’s common to all three is their heavy indebtedness to banks and financial institutions. Indian banks have over Rs 4 lakh crore exposure to the telecom sector, making the tariff wars unsustainable in the long run. High spectrum costs have been cited as enough reason for the build-up in debt of these companies out to undercut each other.

The Telecom Regulatory Authority of India (TRAI) has also faced brickbats for allowing Jio to indulge in predatory pricing till it garnered 30% of the market share. Some analysts have drawn parallels between telecom and aviation companies to emphasize on the non-workability of unending market warfare.

The moot question is, should Jio be reined in from making a song-and-dance of its success due to the deep pockets of Mukesh Ambani’s Reliance group? Tariff wars have already led to either closure or forced mergers and acquisitions of at least four large telecom companies.

For the moment, low-end telecom consumers are not complaining at all, given basic internet connectivity and virtually free voice calls. Only after the entry of Jio were Airtel and Vodafone–Idea forced to lower tariffs and turn the competition data-centric.

On the positive side, it denoted the maturing of telecom services from the days of cartel-making by big players that virtually fleeced the customers for smart messaging service (SMS), voice calls and even basic internet connectivity, let alone for value-added data services. Now, the fight between the three companies is to corner as many as high-value customers as possible.

None of the three big players has, however, been able to address nagging network congestion, call drops and connectivity hurdles faced by consumers. Also, ushering in 4G high-speed data services has turned into a joke as customers struggle with 2G or 3G speeds.

Globally, 5G services are now coming online, but these are unlikely to become available in India until at least next year. Making fresh investments in telecom infrastructure,judicious use of spectrum across bands and deploying state-of-the-art technology to serve customers better is the only way forward.

The TRAI, meanwhile, can restore its credibility by playing a neutral referee.―Deccan Herald

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