The Indian telecom market is “brutally challenging” and has only seen the beginning of many disruptions to come, telecom secretary Aruna Sundararajan said on Thursday. This however, offers ample growth potential to not only draw massive investments but also ensure profitability, she added.
“While the Indian telecom market is vibrant and exciting, it is also brutally challenging. I think we have only seen the beginning of disruption and I am sure there will be many more disruptions to come but this is a market which is big enough, has enough growth potential for us to attract those kinds of investments and yet make investments profitable,” she said at a panel discussion on ‘digital infrastructure for transforming India' organised by broadband India forum.
Over the past few years, India’s telecom market had become cut-throat where nearly a dozen players jostled for market share, pummelling call rates to amongst the lowest in the world. Competition has only intensified since 2016, when Reliance Jio Infocomm, owned by Mukesh Ambani, stormed into the market and offered free calls and dirt cheap data. This triggered consolidation in the industry.
Recently, finance minister Arun Jaitley also expressed concern over intense competition in certain sectors killing the ecosystem.
The results of the tariff war on the financial health of the sector are evident. Vodafone Idea chief Kumaramanagalm Birla is seeking a 2-year extension — from 16 to 18 years — for payment of spectrum dues. Earlier this month, at its maiden earnings announcement as a joint entity, the firm reported a consolidated loss of Rs 4,973 crore for the Sept. quarter and announced a fund infusion of Rs 25,000 crore to help it take on competition.
Bharti Airtel too has reported a drop in consolidated net profit for the 10th straight quarter as losses on mainstay business widened due to pricing pressure from aggressive competition. Overall, its consolidated net profit of Rs 118.8 crore in July-Sept. represented a drop of about 65 per cent from Rs 343 crore in the year ago period.
Airtel’s loss from India operations (before exceptional items) mounted to Rs 1,646.4 crore in the second quarter of the current fiscal compared to about Rs 940 crore in the preceding three-month period. In fact, Moody’s investors service recently placed Bharti Airtel’s rating on review for downgrade, following low levels of profitability and expectation of weak cash flow.
Sundararajan said that $100 billion sectoral investment enshrined in the national digital communications policy is not an overestimate and may well turn out to be less-than-adequate in the wake of new age technologies and advent of 5G.