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Ballooning Debt

Some research reports predict that the triangular battle for market share between Airtel, Vodafone-Idea and Reliance Jio would persist

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Delivering a keynote address at the Mobile World Congress at Barcelona, Spain last month, Sunil Bharti Mittal, founder and chairman of Bharti Enterprises, made two very important points. He said, “Large countries only need three service providers while smaller nations could be covered by two carriers.” The second point he made was that “Governments and regulators have got it wrong for too long that giving out new licences means more money for the government and more competition for the customers. It’s quite the contrary.”

India is certainly moving towards a three player market for mobile telephony and a high-speed data network. A decade or more ago, India had over a dozen telecom operators. Today, apart from Airtel, Vodafone-Idea combined, Reliance Communications (merging Aircel, Tata Teleservices and MTS) and Reliane Jio, we also have State-run BSNL and MTNL.

Airtel recently acquired the Norwegian company, Telenor’s India unit and subsequently, Tikona Networks for Rs 1,600 crore. The Tikona deal brings in 20 MHz of 4G spectrum in five circles for Airtel and boosts its 4G network. “We believe that combining our capacities in TD-LTE and FD-LTE (both technologies to deliver 4G services) will further bolster our network, and help us provide unmatched high-speed wireless broadband experience to our customers,” said Gopal Vittal, managing director and CEO of Bharti Airtel (India & South Asia).

Meanwhile, Vodafone and Idea Cellular also merged to create the country’s largest telecom company with a 42 per cent market share. These developments got a kick start in September last year when Mukesh Ambani’s Reliance Jio launched free 4G services for an initial period of 90 days, followed by another 90 days of free voice and data services effective till midnight of March 31. Voice accounts for 72-75 per cent of the revenue of telecom companies. But with Reliance Jio keeping voice free, charging only for the data, chances are that a year or two down the line, data will dominate the revenue.

Some research reports predict that the triangular battle for market share between Airtel, Vodafone-Idea and Reliance Jio would persist. While the three-corner fight ensures affordable data for consumers, it costs industry dear. The tariff wars have put the financial status of the entire industry at risk. Rajan S. Mathews, Director General, Cellular Operators’ Association of India estimates the debts of industry players to be in the region of Rs 4.3 lakh crore.