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Telecom

Published on: Dec. 28, 2021, 3:41 p.m.
Duopoly denied, is it the new dawn for telecom?
  • Will the telecom business get the right signals? Photo: Pixabay

By Ritwik Sinha. Consulting Editor, Business India

At the beginning of 2021, the biggest question for the telecom business in the country was: is the sector decisively heading for duopoly? Yes, that was the biggest threat as for a substantial period both the mighty partners of Vodafone-Idea appeared to have succumbed to the staggering AGR pressure. And with continuous financial bleeding and modest erosion in its subscribers, month after month, Vodafone had almost become a rudderless ship.

Furthermore, with government-run agencies like BSNL and MTNL being comfortably placed in peripheral corners, in the long term, the Indian telecom sector was believed to be set for complete dominance by two leaders – Reliance and Airtel.

However, much to the relief of many observers and stakeholders who were quite vocal in deciphering the dreaded prospects of a two-player dominance, the duopoly threat has been averted. 

The key question today is: will Vodafone manage to bounce back after having got a fresh lease of life? A comprehensive package announced for the telecom industry in September by the government included four years moratorium on dues of telecom service provider, excluding non-telecom revenue of telecom firms from AGR list, rationalisation of spectrum and provisions to encourage expansion of the 4G and 5G regimes in the coming years. Many believed this package was primarily meant to provide relief to Vodafone and that is how the scene has evolved since then.      

Vodafone now seems to be in a serious revival mode and even as its top brass is keeping the world guessing, speculations are rife market that there would be fresh, modest scale fund infusion from the leading promoters – Kumar Mangalam Birla and Vodafone – to keep the show intact in the near run. That is likely to be followed by equity financing by some leading global investors or even some debt infusion by leading banks. 

By saving Vodafone and denying duopoly, the government, in some way has salvaged the scene and its own face. There is no gainsaying that Indian telecom is at a critical juncture today with the generational graduation to 5G technology round the corner. It is believed that the spectrum auction exercise will be set afoot after March and as per all estimates, the investments needed would be of a staggering scale – to the tune of $30 billion in the next three-four years as per an estimate. But that is where the telecom game is going to be guided in the coming years. 

And allowing a leading player in an extremely truncated market (in terms of the presence of service providers) to take the exit route would have made many prospective investors and stakeholders nervous. “The package that was unveiled by the government recently has very clearly been lapped up by the markets and the stakeholders. There is now a great degree of confidence and hope that the players that now remain will set the agenda for the digital backbone for our industry and country,” Sunil Mittal, Airtel Chairman had said in his speech at the recently held India Mobile Congress while adding that the pending litigation must be settled expeditiously.

Meanwhile 2022 is expected to be defined by two critical trends. 2021 has decisively made it clear that the cutthroat price war scenario in telecom is over (something that has just left a handful of players on the stage, forcing others to leave in a bruised state) and after a modest telecom retail price appreciation in the range of 15-25 per cent, the trajectory will continue to move northwards.

The marginal improvement in the industry Average Revenue Per User (ARPU) metric last year (after a continuous decline since 2007) is probably the best news for telcos, giving them hope that it will continue improving in the years to come as consumers are now gradually getting ready to pay for data driven services.  

There will be some real action on the 5G rollout front (as per indications from the telecom ministry’s senior functionaries) and leading players are eagerly waiting for it with their own test runs in the current year. Speaking at the India Mobile Congress early this month, Reliance chief Mukesh Ambani had clearly stated that 5G rollout should be the country’s top priority. “To keep millions of Indians at the bottom of the socio-economic pyramid confined to 2G is to deprive them of the benefits of the digital revolution,” he had commented.

And the urgency emphasised by him is quite understandable as various reports are projecting 5G taking off big time in the coming years, after a slow start in the beginning. “5G will represent around 39 per cent of mobile subscriptions in India at the end of 2027, estimated at about 500 million subscriptions,” a recent global insights report by Ericsson has underlined.

Meanwhile, there is another proposition which continues to remain baffling for many as the new dawn becomes visible. Will the government do anything for the resurrection of its own telecom firms which were considered monoliths in their own rights not so long ago and let them have a role in a more exciting   future? Nobody has a clear answer.

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