The Telecom Trepidation

|THE DEN|

India’s telecom industry has always been the realm of the big guns of the country. From Tata to Birla, everyone has given it a shot. The industry catering to a market of 1.38 billion wit multiple connections is a gold mine. Airtel, Vodafone & Idea have reaped the fruits of telecom since decades but it all went into a state of turmoil as soon as India’s richest man set eyes on it.

“Mukesh Ambani led Reliance industries entered the telecom industry with its Jio network in September 2016 offering free services for a while. It created a ripple effect sending others the telecom giants into hefty losses and mergers in order to survive.

Vodafone-Idea Merger

Entered India in 2007 adopting the pug and introducing the Zoo zoos acquiring the Hutchison Telecommunications International Ltd's (HTIL) stake in Hutchison Essar Ltd (HEL), Vodafone changed the dynamics of the industry.

​ Taking market by a sweep, Vodafone was one of the three that ruled the telecom sector.

Founded by Kumar Mangalam Birla in 1995, Birla Communications Ltd. went through a lot of name transitions after mergers and joint ventures with multiple players including Tata & At&t finally settling on !dea and becoming a part of Aditya Birla Group.

In 2010 3G spectrum auction, Idea paid ₹57.68 billion for spectrum in 11 circles. After the launch of MNP in India, Idea further strengthened its customer base with most net port-ins.

In the past year, Vodafone Idea has lost over 51 million subscribers while Reliance and Airtel gained 62 million and 21 million subscribers respectively.

​Losing to Jio, Vodafone and Idea announced a merger in March 2017 in order to survive the market. After various approvals from Department of Telecommunications and National Company Law Tribunal, the merger was completed on August 31, 2018.

The merger created the largest telecom network in the country by revenue and subscriber base. But, inspite of that the company is still in downfall losing subscribers as well as revenue with low cash balances and large AGR dues and upon that resignation of Kumar Mangalam Birla from the board as the non-executive director and chairman of Vodafone Idea.

Upon Kumar Mangalam Birla’s resignation, the investors and all involved parties lost all hope of the company’s revival leading to 45% fall of stock prices within a week of repeated bad news’.

When all hope was lost, the government lit a candle in the dark that could give the push, the company needed for revival.

Finance Minister Nirmala Sitharaman introduced The Taxation Laws (Amendment) Bill, 2021 in the Lok Sabha on August 5, 2021 to withdraw tax demands of 22,100 crores plus interest made using a 2012 retrospective legislation on indirect transfer of Indian assets

prior to May 28, 2012 leading to a 19% rise in Vodafone Idea stock.

Airtel’s Resiliency

The biggest hurdle that Jio never expected facing was Airtel’sresiliency against Reliance capturing the entire market. Incurringhefty losses and losing its market share, Sunil Mittal’s Bharti Airtelkept going thankfully to increasing revenue from Airtel Africa.

After continuous years of incurring losses, “Fiscal 2021 belonged to Bharti Airtel Ltd”, according to brokerages. With, 37.7 million subscriber increase, it is closing the gap with Jio partially due to Vodafone Idea losing its subscriber base which trend is expected to

continue in the near future.

​Thanks to Airtel, Indian telecom sector is away from a monopoly by Jio which would lead to unchecked prices in the industry.

Jio’s Crown

Mukesh Ambani led Reliance industries entered the telecom industry with its Jio network in September 2016 offering free services for a while. It created a ripple effect sending others the

telecom giants into hefty losses and mergers in order to survive.

Reporting a net profit of 3,508 crores in first quarter of 2021 and 427.6 million subscribers, Jio is in fact the market leader and takes the crown.

The only hindrance in its way is Airtel that is competing and closing the gap in the sector. Owing to anti-government sentiments and alleged Mukesh Ambani’s benefit in farm laws, Jio lost some of its subscribers to Airtel.

The sector cannot be foreseen turning into a monopoly although, it can be expected to turn into a duopoly especially after ₹1,037.6 crore deal plus absorption of ₹459 crores of Airtel’s liability by Jio for airwaves in 800 MHz.