The Telecom Quandary

The Telecom Quandary

The Telecom sector which is in deep distress was (and is till) hoping to get some relief from the government, after it was dealt a severe blow after the Supreme Court judgement last week. The judgement has caused a very deep cut (over 90k crore mainly between Airtel and VodafoneIdea) into the already wounded sector which is now left with only 4 players (4^th being BSNL) from over a dozen that existed not very long back. 

If that was not enough, there is trouble brewing with the public spat between the COAI and RJio. COAI was left red-faced at being slammed by RJio and has brought to fore some fundamental differences between Jio and the incumbent operators.

This should not come as a surprise to the industry watchers as this is not the first time that their differences have come out in the open. They have a history of multiple such very sharp public squabbles. In fact much earlier in 2002, when RIL in its earlier avtar as Reliance Communications (now a part of Anil Ambani group) launched ‘mobile’ services under the Fixed Service License (WLL), COAI had protested saying Reliance’s WLL was a back door entry into the mobility space. 

And subsequently when RJio launched in 2016 they don’t see eye to eye with the rest of the members of the COAI. In fact hostilities broke out between the COAI and RJio at the launch stage itself when RJio sought interconnect nodes from the incumbents and COAI responded saying there was no provision for providing free trials. They alleged that the new operator under beta test is generating huge traffic using spectrum allocated for commercial use, but not yielding revenue share for government. This was followed by R-Jio hitting back by saying the claims were "malicious, unfounded, ill-informed and frivolous" and were made with an "ulterior motive" of promoting vested interests of incumbent operators.

In fact COAI has also been taking on the authorities at times accusing it of siding with ‘a particular operator’ and RJio has been tacitly coming to the defence of the authorities just as in this case. COAI without naming R-Jio went as far as to say that TRAI’s orders “seem to be strengthening the ambitions of one particular operator with deep pockets and monopolistic designs at the expense of other operators.” COAI’s comments were “intentionally, wrongfully and maliciously made to induce disparaging and inimical opinions against Jio” said R-Jio and demanded a public apology.

There have been numerous such instances – differing on levying Spectrum Usage Charges, on net neutrality, IUC changes and other many similar instances. So the fact is that the latest showdown is not the first one… and is most likely not the last one, the Telecom Sector has seen. With R-Jio not agreeing with almost any of the views shared by the other operators, industry watchers  just wonder why they are ‘together’ in the first place or that ‘does COAI really represent the collective view of the telecom operators?’ 

Even with the latest missive by R-Jio in which they say that “the service providers have chosen to continue with their below cost tariffs, especially when there is no competitive pressure compelling continuation of these tariffs.” While it is true that the tariffs charged by the operators are meant to be ‘forbearance’ … the fact is that there is tremendous competitive pressure and that too from R-Jio itself. Right from the launch of services in 2016, R-Jio has been offering extremely low pricing and has disrupted the market. It has caused the crash of prices from Rs 250 per GB to effectively almost Rs 2 now. Voice and SMS is almost free. Private telecom operators’ haven’t seen a healthy balance sheet ever since.

In fact R-Jio never thought of themselves as a ‘regular’ telecom operator. They have always considered themselves in a league of their own and hence ‘beyond’ compare. This is not completely untrue. They have taken bold moves and that’s not just by dropping their prices. They have deployed technologies which were hitherto untested at this scale. They changed the telecom charging paradigm from ‘ala carte’ to ‘buffet model’ which means voice and data were charged at per minute or per GB rates when R-Jio arrived at the scene and turned tariffing on its head by offering ‘Unlimited everything’ plans for a fixed fee. In fact they call themselves a Digital Services player and have offered loads of content like Music, Movies, Live TV, News, Magazines, cloud storage etc and created a full consumption ecosystem to go with their core telecom services. This is something which other telecom players attempted to match but still haven’t been able to..in the same measure. So R-Jio does indeed offer much greater value to the customers, whereas the incumbent operators try to match up with Jio and complain of financial difficulties (not without reason though)

Arun Shourie had very famously said ‘Reliance had done something in excess of what had been licensed.. and most would say today that those restrictions and conditions should not have been there in the first place. And that the Dhirubhais are to be thanked, not once but twice over: they set up world class companies and facilities in spite of those regulations, and thus laid the foundations for the growth all of us claim credit for today...’ . It was a very controversial statement made in 2003 by a Union Minister in the presence of the current Prime Minister. However, we are seeing shades of the same being played out today with Mukesh Ambani now at the helm. 

And when competitors allege that regulations are meant to favour a ‘certain operator’, R-Jio goes about its task of aggressively taking on competition and sometimes testing the boundaries of regulation - it’s just another day at work.