Is government finally taking note of Reliance Jio’s impact?
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New Delhi: High-level meetings, centred on Reliance Jio Infocomm Ltd that preceded the telecom regulator’s Thursday order halting a complimentary offer from the Mukesh Ambani-run telco, seem to suggest that the government has taken note of the impact of free services on the industry and its own revenue.
A day before the Telecom Regulatory Authority of India’s (Trai) order, telecom minister Manoj Sinha met officials to discuss Reliance Jio’s promotional offers and their impact on the telecom sector and licence fee collection, two people familiar with the matter said.
Licence fee collection in the March quarter is expected to decline 28% to Rs2,300 crore from Rs3,165.8 crore in the December quarter, these people said, asking not to be identified.
Sinha was briefed by his bureaucrats about the industry’s demand that licence fee for the fourth quarter should be on actuals and should be equal to the licence fee of the March quarter. Sinha was also informed that the industry’s debt levels have risen sharply from Rs2.7 trillion in 2014 to Rs4.85 trillion at the end of 31 December, 2016.
P.K. Pujari, secretary, ministry of power, who also holds additional charge for the department of telecom (DoT), did not respond to phone calls and a text message seeking a response.
Rajan Mathews, director general, Cellular Operators Association of India (COAI), confirmed that he had written to DoT seeking respite from submitting licence fees, among other issues.
“Nobody in their wildest dreams had thought that revenue will come under pressure as we thought subscribers will keep increasing, but now, because of the situation that we are in, nobody had anticipated that somebody will give away 100% services for free,” Mathews said.
An email sent to Reliance Jio on Thursday remained unanswered till press time.
Telecom companies have repeatedly complained against Jio’s free offers since its launch in September.
Jio initially offered free voice calls and data until the year-end in a promotional offer, and later extended them to 31 March, further to June-end, which is now being rolled back.
Sinha’s meeting came days after cabinet secretary P.K. Sinha asked SBI Caps to apprise him of the situation in the telecom sector. According to a Moneycontrol.com report on 5 April, the state-run investment bank highlighted the industry’s debt situation as a major worry.
Such activity in the government, the people mentioned earlier said, were largely triggered by Jio’s announcement on 31 March, when it said it had a paid subscriber base of 72 million and that its services would remain free for three more months till end-June for certain users.
Experts said Trai and DoT may be seeing merit in arguments that the industry incumbents are hurting as a result of these offers.
“The regulator’s decision likely reflects a more holistic view of the health of the players, which would be critical for the roll-out of 4G services and fulfil the Digital India agenda of the government,” Deutsche Bank Markets Research said in a note on 7 April.
JPMorgan Asia Pacific Research said that it expects a Rs1,500-crore annualized shortfall in the government’s revenue because of a tariff war that has disrupted the industry.
“Going forward, new free offers from Reliance Jio could invite greater scrutiny and may not be easy to push through, if this event is any indication,” it said in a note on Friday.
“This could be an indication that Trai and the DoT have begun to see RJio’s promotional offers as dragging down and/or hurting industry revenues (by implication, affecting government proceeds by way of licence and spectrum fees it collects from operators) – a mild relief for the incumbents,” JP Morgan added.