Indian mobile operators that are winding up operations or struggling to stay afloat in a highly competitive market have themselves to blame because they had ample time to prepare their strategy to counter Reliance Jio Infocomm, government officials say.
They said the Centre could not have done much to save the likes of Aircel and Reliance Communications from going out of business.Instead, the companies should have invested to be ready for competition.
“They had four full years, because Jio’s network was under implementation during this time, and they had announced that their network will be all IP and that they were betting on data…all of this was known,” a senior official said. The carriers should have anticipated the change in paradigm given that the telecom sector has always been brutally competitive, the person said, pointing out that Jio had bought airwaves supporting data back in 2010.
The comments came a day after Aircel’s petition declaring bankruptcy was accepted by the National Company Law Tribunal (NCLT) — the first such case in the telecom industry’s history which has so far been considered as the poster child of success in the country.
“Frankly, even though you don’t want job losses or even for anyone to go out of business, the fact of the matter is that a player is bigger and stronger, and is prepared to put money where his mouth is, what can the government do?” a second government official said, referring to Mukesh Ambani owned Reliance Jio.
Aircel gave in to competitive pressures and mounting debt of nearly Rs 50,000 crore, and filed for bankruptcy after over four months of attempts to settle the matter with its lenders.
The Chennai-based carrier’s only lease to life was a strategic debt restructuring, but that too elapsed, after the Reserve Bank of India scrapped all loan recast schemes. Aircel has shut operations in six circles and is struggling to keep going in others.
Meanwhile, Anil Ambani-owned Reliance Communications (RCom) is trying to sell its assets to Jio for around Rs 25,000 crore, to pare its outstanding debt of Rs 45,000 crore. RCom, which has shut its voice services last year after it could not close a merger with Aircel, has been facing legal challenges to the sale as well.
Other small operators such as Tata Tele services and Telenor have also wrapped up operations and are now merging with Bharti Airtel, as they could not cope with competition triggered by Jio, which started giving free voice and data offers from September 2016.
Based on its free services on top of new voice over LTE (Volte) technology, Jio managed to garner a subscriber base of over 160 million as of January. The company’s move forced incumbents Airtel, Vodafone India and Idea Cellular to offer low-cost tariffs and free voice, besides launching Volte services themselves. While this led to eroding profits and impact on revenue, consumers now enjoy near-to-the-ground tariffs for data, and India has become the No 1country in terms of data consumption. “If you’re in the market, you have to play by the rules of the market,” said one of the officials cited earlier. The carriers should have estimated the demand for data in the market, and not expected that they could go on with plain-vanilla voice services for another five years, the person said.
“It’s not possible.” The official said the incumbent carriers should not have expected that they could carry on business as usual, since the entry of a ‘stronger, bigger, more aggressive player’ had caused a radical shakeup in the sector.
Nothing prevented the companies from changing their business model to look at data, or go into the wireline business, enterprise business or even content, besides investing in technology to counter Jio’s all-IP network and data oriented business plan, the official said.
The troubled companies should have anticipated that voice alone will be not be enough in the market which had a huge pent up demand for data services, the officials said.