The telecom industry in India is one of the largest and most rapidly growing in the world, with millions of users relying on mobile and internet services every day. The cost of wireless data has also significantly reduced and is now among the most affordable in the world. However, behind this apparent success and mobile revolution in the country lies a complex interplay between private capital, market forces, and monopolistic tendencies.
Further, the recent developments in the industry, particularly the rise of Reliance Jio, have raised concerns about the possibility of a telecom monopoly in the country. This concern has been further amplified by a recent judgment by the Supreme Court of India on the definition of Adjusted Gross Revenue (AGR) and the dues owed by telecom companies to the government of India.
Read below to know more.
The evolution of the telecom sector in India
The telecom industry in India has witnessed a constant influx and exit of both Indian and international capital. Numerous big Indian businesses and international players such as DoCoMo and Telenor have entered and exited the industry over the past three decades. The industry’s opening to private capital was driven by the belief that private capital would bring efficiency, dynamism, and innovation. However, this was far from reality.
Private players in the telecom sector in India were observed to focus on quick monetary gains rather than long-term investments. Many Indian investors treated telecom ventures as additional investments in their portfolios, leading to exits once suitable buyers were found. Companies employed complex tactics such as selling licenses, changing brand names, and engaging in mergers and acquisitions to maximise profits. Further, spectrum allocation cannot be ignored that spun that infamous 2G scam. Real estate companies and non-telecom players got on the bandwagon of spectrum allocation and acquired licenses to sell them for gains. To work their way around eligibility criteria and other regulations, established companies used independent entities pretending to be new telecom players.
Besides all these issues, the prime pain point for major telecom companies has been AGR (Adjusted Gross Revenue) and their mounting dues, all indirectly leading to the rise of a carrier monopoly.
The current scenario of the telecom industry
The ripe debate currently is the free market principles vs monopoly-finance capital. On the one hand, proponents of a free market argue that the telecom industry should be left to market forces, with companies competing on the basis of pricing, service quality, and innovation. On the other hand, critics argue that a telecom monopoly would be detrimental to consumers and the industry. They point to the potential for reduced competition, higher prices, and a decline in service quality.
The current market comprises 4 players – Vodafone Idea, Airtel, BSNL/MTNL, and Reliance Jio. The number was 12 in 2016!
Bharti Airtel and Vodafone Idea have expanded through mergers and acquisitions, whereas the entry of Reliance Jio intensified price competition. Reliance Jio entered the market in 2016 and disrupted the industry with its affordable pricing and high-speed internet services. The company’s aggressive and predatory pricing strategy resulted in a significant increase in its subscriber base while also causing significant financial losses for its competitors. According to recent reports, Reliance Jio has become the largest telecom player in the country, with over ~42 crore subscribers!
While Reliance Jio’s rise has been a boon for consumers, there are concerns that it could lead to a telecom monopoly in the country. The company’s deep pockets, coupled with its massive subscriber base, give it a significant advantage over its competitors. Moreover, the recent Supreme Court ruling on the definition of AGR has resulted in massive dues for telecom companies, putting them at risk of bankruptcy. This has led to concerns that Reliance Jio could use its financial muscle to acquire or merge with struggling companies, further consolidating its position in the industry.
The possibility of a telecom monopoly has significant implications for consumers and the industry as a whole. A monopoly could lead to reduced competition, which could result in higher prices, hurting consumers.
So will Reliance Jio succeed? Watch this space.
There is minimal competition in the Indian telecom sector, with just 3-4 players competing against each other. There is an increased risk of monopoly staring at the sector. With limited competition and dominant players, it is crucial to balance free market principles and regulatory oversight to ensure fair practices and sustained growth in the telecom sector.