Predatory pricing, biased TRAI spells turbulent times for Indian telcos

The slugfest playing out in the telecom space has banded the older players like Bharti Airtel, Vodafone and Idea Cellular against TRAI’s blue-eyed boy (need we say who).

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2018 hasn’t exactly been a year Indian telcos were looking forward to. Lugging a humongous debt burden of Rs 3,59,940 crore, the telecom sector banked upon the 2018 Union Budget to address their woes. But that wasn’t to be.

Post budget, Rajan S Mathews, Director General of the Cellular Operators Association of India (COAI) said that the telecom industry was “deeply disappointed” because none of its key demands found a mention in Finance Minister Arun Jaitley’s agenda.

“We had sought a reduction in levies and taxes, and an urgent intervention is critical for resuscitating the sector, which is currently experiencing its worst financial health and hyper competition,” shared Mathews.

COAI’s wish list sought a reduction in extremely high and unsustainable levies and taxes; a reduction in basic customs duty on 4G LTE equipment; clarity on Right of Way related taxation at the state level; and clarification on lowering the tax rate to 1 percent on discounts extended to small dealers. 

“While, the FM has emphasized the importance of moving to a digital economy, the actual digital highway, which is telecom has found no mention in terms of substantive support,” said Mathews.

While the government is firing on all cylinders to bring India to the forefront of 5G deployment, the cellular operators association believes that it may be easy to rollout 5G in a country like Japan or South Korea, but India is a fundamentally different market with diverse needs. “There would be huge financial and structural challenges. We have to make India specific case for 5G,” explained Mathews.

Intense competition and predatory pricing takes a toll

While Sunil Mittal, Chairman of the Global System for Mobile Communications Association (GSMA) called for networking companies to band together to help connect the unconnected, he also admitted to “facing resistance” from independent players.

On February 26, Vittorio Colao, Group CEO of Vodafone revealed that the telecom regulators' new norms on predatory pricing favor the latest entrant, and govt.’s blue-eyed boy – Reliance Jio.

The COAI, alleging the Telecom Regulatory Authority of India (TRAI) to be biased towards Reliance Jio, moved the court, and as predicted – lost. Jio, in retaliation, filed a defamation notice to COAI and demanded a public apology within 48 hours.

Earlier this week, the cut-throat competition in the telecom sector claimed its first victim. Aircel pulled out of the race owing to unsustainable debts in a “highly financially-stressed industry.”