How to ensure sustainable competition in India’s telecom sector?

Abstract

Telecom sector has been declared as an infrastructure sector way back in 2013. It was one of the sunrise sectors in the beginning of the 21st century. In fact, lot of FDI came into India looking at the under penetration and possibility for further growth in this sector. No doubt sector lived up to reputation wherein tele-density which was around 3.58% in 2001 touched 91.37% by 2018, mainly due to subscriber addition in the wireless network. Meanwhile, Government of India started auctioning of the spectrum in a transparent manner in 2010 for allocation and could garner Rs 1.06 Lakh Cr in the auction. GOI saw potential for raising financial resources which helped in bridging the fiscal deficit. In view of the lack of roadmap for spectrum auction, high reserve prices, small quantity of spectrum put into auction etc. operators were forced bid high prices. Meanwhile, Supreme Court of India, in 2012 in a landmark judgement directed the GOI to auction all the natural resources. In 2016, Reliance Jio launched its operations starting with free connection, voice free service for lifetime and data free for first 6 months on a superior 4G LTE platform. After free period, they started offering prices at a dirt-cheap price which other operators were forced to match. This led to closure of many of the operators. No of operators which was 13 in 2013 came down to 4 as of now. Meanwhile, except Reliance Jio, all the other operators were making losses on a consistent basis and their debt has been increasing. Meanwhile, AGR verdict by Supreme Court of India in October 2019 which went in favor of Government, required two operators namely VIL and Bharati Airtel to pay around Rs 53,038 Cr and Rs 35,500 Cr respectively. VIL has clearly indicated that they will not be able to pay, and they may close down their operations. Even Bharati Airtel finances are already stretched. State run operators namely BSNL/MTNL have been incurring losses for the last one decade. Government wants to auction 5G spectrum at a much higher reserve price than other countries in April 2020. Under these circumstances, it is very likely that India will be left with a dominant operator namely Reliance Jio with Bharati Airtel as another runner. In the case of duopoly, customers’ welfare will be an issue in the days to come. Taking above issues into account, policy memo looks at various alternatives that could be done to alleviate the present situation.