Few sectors in India have been celebrated as beacons of economic growth as the telecom industry. With frenetic consolidation over the past several years, and the eventual emergence of three large players, India’s telecom sector has been seen as evidence of a burgeoning economy, where large chunks of the population have been given access to mobile telephony, and cheap data. Alongside, the mobile revolution has created jobs, and spawned several new ventures, giving a major boost to India’s startup ecosystem. All in all, quite a success story. Till now.
Today, the sector is in the throes of what is arguably its biggest crisis ever, with mounting debt, poor infrastructure, unreliable service, and one of the three major players—Vodafone Idea—teetering on the brink of collapse. How did this storied industry come to this moment? The answer lies in a few things. When Mukesh Ambani-owned Reliance Jio Infocomm stormed into the scene in 2016 and offered data at dirt-cheap rates, its major rivals Sunil Mittal’s Bharti Airtel, Vodafone India, and Kumar Mangalam Birla’s Idea Cellular knew they had to invest heavily to take on Jio. A year later, Vodafone India and Idea decided to merge to create Vodafone Idea to deal with Jio’s onslaught. But it took the incumbents a long time to offer 4G services countrywide. Even so, Airtel was faster on this than Vodafone Idea. On the other hand, Jio came in without baggage and had a head start over its rivals. And while Airtel could raise money and pump in hefty investments to upgrade its network, Vodafone Idea began floundering. The body blow for the sector, however, came with the SupremeCourt delivering its verdict late last year on the contentious adjusted gross revenue (AGR) issue, upholding the government’s view that the non-core revenues of the telecom companies would also have to be included for the purpose of computing statutory dues to the government. The total bill for a period of 14years: Over ₹1 lakh crore for Airtel, Vodafone Idea, and Tata Teleservices alone.
In our cover story this month, Aveek Datta and T. Surendar take a detailed look at how the cookie crumbled for India’s telecom sector and where it standsnow. With the Supreme Court refusing to budge on its verdict, the government finds itself in a bind: While the government must recover the dues and comply with the court order, letting Vodafone Idea collapse will have serious repercussions on the economy as a whole and send terribly wrong signals globally. The situation has the potential to reduce the sector to a duopoly, given Jio’s financial might and Airtel’s stated ability to cough up the AGR dues. The story is full of twists and turns, with new developments taking place every day.
Curiously, even as the mobile service providers struggle, handset makers have never had it better, particularly in the premium smartphones segment. Abhik Sen and Shishir Behera bring you the story of how smartphone makers like OnePlus, vivo, and others are lining up one premium launch after another in a bid to woo a generation of smartphone-crazy Indians hooked on data. And the interesting bit is, even as prices are inching up again, the market seems hungry enough to gobble up more. India never ceases to surprise.
(This was originally published in the March 2020 edition.)