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IMC 2020 Highlights: Jio and Airtel Differ on 5G Rollout, Vi Calls Out Tariffs, Taxes and Spectrum Pricing

Editor, TRANSFIN.
Dec 10, 2020 4:40 AM 4 min read
Editorial

Day One of the India Mobile Congress (IMC) 2020 ended yesterday. As anticipated, it was dominated by the leaders of India’s top three telcos - Reliance Jio, Bharti Airtel and Vi (formerly Vodafone Idea).

Here are the top takeaways so far.

FYI: This is the fourth annual edition of the IMC, which has become the largest technology forum in South Asia. The theme this year was “Inclusive Innovation - Smart I Secure I Sustainable”. Running from December 8th to December 10th, the virtual event is expected to see participation from over 50 companies, 110 global speakers and over 15,000 visitors.

5G Rollout

Reliance Chairman Mukesh Ambani said that India would be ready for a rollout of 5G technology by the second half of 2021. With the required “policy developments” in place, Jio would “pioneer the 5G revolution in India”.

Jio has been working on an indigenously developed 5G network for some time now. At RIL’s recent AGM, Ambani claimed Jio had developed a “100% home-grown technology and solution”. Its US-based subsidiary Radisys has already started selling 5G infrastructure to foreign companies.

Its pitch to develop made-in-India 5G has significant ramifications on geopolitics, let alone the telecom sector.

The timing of Jio’s impending 5G rollout is important, because the company is known to have a proclivity for disruption. In 2016, it entered the 4G scene with dirt-cheap prices, forcing its competitors to slash their own rates even as many went bankrupt and the sector faced major consolidation and mounting debt.

Four years later, Jio is Telecom Tsar with only two competitors. And while Airtel has managed to stage an impressive comeback in recent quarters, Jio still has the potential to increase its market share further with its 5G lure.

Speaking of Airtel, its Chairperson Sunil Mittal differed on Ambani’s viewpoint at IMC 2020. He argued that the domestic telecom market is not mature enough and that it might take two-to-three years for a 5G rollout. Furthermore, he pointed out that the cost of spectrum is sky-high and that this may force (some) telcos to sit out of the auction process altogether.

 

5G Rules

While Ambani touted Jio 5G’s indigenous roots, Airtel CEO Gopal Vittal said pursuing an India-specific 5G standard would be an “existential threat”.

Instead, he batted for an open ecosystem that could boost innovation and exchange of ideas, so that the best possible solutions could be developed.

Meanwhile, Facebook VP Dan Rabinovitsj told attendees that the social media giant is open to working with Indian telcos in the transition to 5G. This is an interesting point, not least because Facebook owns 9.99% of Jio Platforms, which is also developing 4G and 5G smartphones with Google, which happens to be Facebook’s competitor.

 

Shift from 2G

Ambani again called on the Government to “urgently work on policy steps needed to ensure that underprivileged people on 2G network shift to affordable smartphones so they too can...actively participate in the digital economy”.

Again, this is a point of conflict between Jio and its competitors. The former’s calls for a “2G-mukt” India suit it well - it is a 4G-only service provider while Vi and Airtel have a lot invested in 2G.

Jio has a goal of reaching 500 million users in three years. For this to happen, it needs to target the user base of its two main rivals, who between them have over 300 million 2G users. And in an era of low ARPU, discounted tariffs, mounting debts, AGR fines and sky-high competition, every user counts. (More on Jio’s anti-2G crusade here.)

 

Tariff Torrents

In 2020, “telecom” and “debt” are practically synonymous. And the biggest victim of titanic dues is probably Vi, which was the worst-affected telco by the AGR verdict and still has ₹50,400cr ($6.8bn) of statutory dues outstanding. (Although, it did score a goal against the Government in a recent international arbitration case.)

No wonder, then, that the telco’s MD - Ravinder Takkar - used the IMC 2020 platform to highlight “challenges related to tariffs, taxes, levies, spectrum availability and pricing”. All three major telcos increased data tariffs recently, but ARPU is still too lacklustre to compensate for taxes and penalties.

However, Takkar also said that the industry now had the “right structure with...adequate competition”, adding that Vi remains committed to being a Digital India partner for the “long term”. That’s good news coming from a telco which only months ago was rumoured to be considering exiting India and in September termed its business as a “growing concern”!

 

Blowin’ in the Macro Wind

Beyond the stiff competition between the three telecom giants, some macro realities remained omnipresent, even if not sufficiently acknowledged.

Firstly, 550 million Indians have only very basic mobile phones while 300 million Indians have no connectivity at all. That’s a vast untapped market - which is an opportunity or a challenge, depending on how you look at it. It gives telcos more room for expansion, but it also paints a stark picture of a small minority of mainly-urban consumers being welcomed into the 5G era even as vast swathes of the populace are stuck to 2G - or to no network at all.

Secondly, the cloud of the pandemic continues to hang on every sector’s back. Telcos need revenues to sustain, which means increasing tariffs or possibly getting some debt relief. The former may backfire - after all, they’d be asking consumers to pay more amidst a literal recession. And the latter may be a dead-end, since a fiscally strained Government might be in no position to reduce dues, let alone forgive them.

Thirdly, the spectre of consolidation looms large. The telecom sector today is a fraction of the multiplayer industry it was pre-Jio. And neither Airtel nor Vi have the war-chest of Ambani’s oil-to-chemicals conglomerate. Unless its competitors put up a good fight, further domination of Jio may turn the present three-player sector into a monopolistic one. Which is never good news.

Meanwhile, for lack of a better paraphrase, the IMC must go on!

FIN.

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