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Telecom on growth track this year, courtesy consolidations
Mobile data consumption in India surpassed the combined usage of the US and China in 2017, a year that saw the landscape of the telecom sector being altered with bitter competition and setting-in of the much awaited consolidation phase.
With latent demand for data fuelling the digital economy, 2018 could be the growth year for the sector where investment of around Rs 3 lakh crore is estimated to be made in next two years.
In what could be considered as a transformational year for the Indian telecom sector, 2017 saw telcos consolidate like never before, leaving just three major players in the market by the end of the year. It only proved that telecom sector has become a money guzzler where only those with deep pockets can survive.
While the mighty house of Tatas gifted away their telecom business to Bharti Airtel, billionaire Mukesh Ambani's Reliance Jio Infocomm acquired spectrum, mobile-phone towers and fibre assets of his brother Anil Ambani's Reliance Communications Ltd.
On the other hand, Vodafone India and Idea decided to merge to become the country's largest operator. Airtel bought Telenor's ailing Indian subsidiary, Telenor India, as also Tikona Digital Network.
“This year was of consolidation for the sector. Next year will be a year of growth for the sector,” Telecom Secretary Aruna Sundararajan said, summing up the macro scenario of the sector for 2017 and 2018.
And what a year it has been! The Indian telecom sector — second only to China with its massive subscriber base of 1.1 billion users — saw severe bloodletting for most part of the year as free voice calls and dirt cheap data ushered in by Reliance Jio reined in tariffs, cheering consumers.
Jio propelled India to the top position in terms of mobile data consumption with 150 crore gigabytes per month, surpassing the combined 130 crore gigabytes mobile data consumption of the US and China.
The competition forced market consolidation as nervous, smaller players bailed out and biggies joined hands to cement their position. Consolidation led to fewer players and fewer jobs.
“With consolidation and the poor financial health of the sector, the telcos are being forced to cut their staff strengths significantly. We expect that around a third of the four million employed directly and indirectly by the sector will be out of a job,” industry body COAI's Director General Rajan S Mathews said.
That said, once the consolidation concludes, telcos may be better placed to invest in new technologies and recruit skilled hands, boosting job prospects.
For years, Airtel has enjoyed pole position in the market, but that pecking order will change soon as Vodafone- Idea combine will have over 400 million subscribers by next year.
Embattled Reliance Communications (RCom) completed merger of Sistema Shyam mobile business with it but failed to proceed with the merger deal with Aircel. RCom announced closure of voice business, and Aircel is closing services in six circles.
“With consolidation, the telcos will get the benefit of synergy amongst their operations and the overall cost of operations are likely to come down, leading to increased margins,” Mathews said, adding that the pricing power of companies could return enabling longer-term sustainability.
The year 2017 saw Idea and RCom reporting their first ever consolidated loss (for the quarter ended December 2016), and Bharti Airtel sustaining steep fall in profits. The telcos blamed Jio's free offers for the haemorrhage.
Mathews says fundamental changes would be critical for the sector. The industry, he estimates, will require an investment of Rs 3 lakh crores in coming years for innovation and infrastructure expansion.
The government is finalising relief package for the sector which includes proposal to give more time to telcos to make spectrum payments.
These measures are based on recommendation of an inter-ministerial committee and are expected to materialise by early 2018 along with a new National Telecom Policy — both could prove to be a lifeline for the industry. Or, at the very least, offer a breather to players saddled with loans.
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