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Photo: Pradeep Gaur/Mint
Photo: Pradeep Gaur/Mint

Opinion | Telecom twists speak of market myopia

The recent drama over telcos being asked to cough up their revenue-sharing dues within hours only served to highlight a policy approach out of sync with our long-term interests

Now that the last word has been spoken on how much revenue cellular service providers must share with the Indian exchequer, it is time for the industry, the government and the country to count the costs. After the Supreme Court on Friday issued a stern warning to telecom firms to pay up, on the threat of both them and the payee being held in contempt of court, the country was witness to the drama of a midnight deadline that held onlookers riveted by its scarcity of patience as much as an air of absurdity. The sums involved were too huge to materialize within hours. On Saturday, Vodafone Idea announced that it would cough up its dues within a few days, but needed to assess what money it had available. This company had been sending out signals of its inability to survive in the market if forced to do as much. Bharti Airtel, also slapped with a gasp-inducing bill, has raised some funds and is seen to be better placed to keep going. An exit of either operator, it has been clear, would leave India’s telecom sector more or less a duopoly of two private players, with Reliance Jio in the lead. Potentially, this could restrict the consumer’s choice not just of operators, but also of higher-end services if a cash-strapped Airtel is unable to buy sufficient spectrum to compete effectively in the arena of 5G services expected to kick off later this year.

Critics ascribe the gloom to a lack of policy stability. Back in 1999, when telecom operators that had overbid for licences and airwaves switched to a revenue-sharing model in order to relieve their fee burden, little did they expect that the earnings to be shared with the Centre, as notified some years later, would include money made through means other than spectrum usage. They protested the government’s demand for a bigger chunk of revenue as extortionary, but the judiciary struck their case down last October, throwing into a tizzy major players that had already had their finances battered by a tariff war of attrition after Jio’s entry in late 2015. If the revised tabs weren’t daunting enough, they also needed funds for technology upgradation and spectrum auctions round the bend. But, with an extra 1.3 trillion or so at stake in a year that its coffers were woefully short of funds, the Centre was not inclined to hear out pleas of relief, except to allow slightly deferred payments.

That window appears to have slammed shut, too, leaving observers to wonder if a peculiar form of market myopia has taken hold. Telecom policy, after all, cannot afford to be oblivious to the role that competitive intensity plays in the development of a sector vital to India’s future as a digital economy. The government had envisioned a market with space for three private operators alongside the state-owned Bharat Sanchar Nigam Ltd, but that looks increasingly unlikely now. The general impact of a muddled policy approach to this sector has begun to show up in patchy connectivity across India at a time the country’s rivals are turning the internet into an enabler of much more than ever before. If we end up lagging behind other economies as they ascend the curve of 5G applications, thanks to each operator striving ever harder to outdo others, we would only have ourselves to blame. In few fields of business does the role of mutual rivalry have so much riding on it.

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