Saturday, November 30, 2019

Disruption in Telecom Sector in India

Disruption in Telecom Sector in India, Jio, Airtel, Idea, VodafoneIt was the second time when Reliance Industries in form of Reliance Jio has made a disruptive entry into telecommunication sector in 2016 to change the whole dynamics of telecom industry forever. The first entry was in form of Reliance Infocomm (now Reliance Communications) in 2002 which resulted into a kind telecommunication revolution in the country. As result of Reliance’s entry into business, telecom services became reachable and affordable to all, even in remotest villages also when telecom services were considered to be a luxury and status symbol for most of the people. Disruption brought by Reliance during that period of time was need of hour as telecom services were limited into a very few hands and benefits were not being utilized to its strength. 

Following the earlier pattern, Sh. Mukesh Ambani controlled Reliance Jio promised to revolutionize data services in India but at the end of day, it has ended up changing the whole face of telecom industry forever. It has not only brought down the cost of data services but also calling rates substantially by offering free services to initial customers for many months. This was an unexpected as well as unwarranted penetration strategy adopted by Jio which eventually increased the competition in the industry. As a result of increased and unsustainable price competition, the number of telecom operators decreased from more than a dozen telecom operators to only three telecom operators in Indian market. Today every other player (Airtel and Vodafone-Idea) besides Jio is struggling for survival. Airtel is looking for funds in offshore markets through FDI and other routes and Vodafone and Idea has to merge with each other. Even Vodafone has been contemplating the idea of quitting Indian market! 

The competition imposed by Reliance Jio in telecom sector has increased data consumption substantially but at the cost of average revenue per user (ARPU) for the whole industry. Because of free services provided by Joi every other operator was forced to cut prices any times leading to decrease in ARPU. This fall in ARPU is having negative impact on the bottom line of telecom operators forcing the whole telecom sector is under stress. Not only this, the losses of telecom operators are increasing with every passing quarter expect Jio and to some extent Airtel. The way private sector operators have pushed BSNL and MTNL on the verge collapse, Reliance Jio is doing the same with other private telecom operators. 

Neither the Competition Commission of India (CCI) nor Telecom Regulatory Authority of India (TRAI) has been taking cognizance of this matter. Even courts have given clearance to launch of services by Jio. So technically, every effort of penetrating the market by Jio is legal. In the wait of so called consolidation, this attempt of monopoly but in the name of competition is killing the telecom sector. But at this juncture of time when telecom sector breaking down rather than consolidation, the government needs to intervene as soon as possible before it’s too late. In long term it will have negative impact on telecom sector. The prices of service would again increase substantially as announced by operators. In any way any unhealthy sector cannot survive for long. And all this is happening when the whole economy is already under tremendous distress.

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