Telecom Relief Package - Celebration for Telecom companies

Telecom Relief Package
16/09/2021

Even as the heads of telecom companies celebrated the Telecom Relief Package, Sunil Bharti Mittal of Bharti Airtel laid out the agenda for the next level. Mittal has called the three major telcos in India viz. Reliance Jio, Bharti Airtel and Vodafone Idea to work more closely in cooperation with each other. He indicated that the price undercutting in the last few years had grossly compromised their ARPUs and profitability.

On Wednesday, the government had announced a rather far-reaching telecom relief package. This included 4 year waiver for AGR and SUC payments, removal of non-telecom revenues from future AGR calculations and rationalized levels of SUC or Spectrum Usage Charges. There were also some bold reforms in the form of 100% FDI in telecom through the automatic route, spectrum allocation for 30 years and the freedom to sell unused spectrum after a period of 10 years.

Read: Outcome of the Telecom Committee Meeting

The relief package provides an immediate lifeline for Vodafone Idea and prevents the industry from becoming a duopoly. However, the suggestions of Sunil Mittal are a lot deeper. He has promised to talk to Nick Read of Vodafone Idea and to Mukesh Ambani of Reliance Jio to work closely together as an industry. What does this cooperation really mean for customers and for the telecom companies.

One clear implication is to stop the undercutting. For example, when Bharti and Vodafone were trying to pitch for higher ARPUs, Reliance Jio had continued to hold rates low. Also, their focus on the JioPhone Next to focus on transmigrating the 2G customers into 4G customers will hit at entry level clients of the entire sector. It is this business loss that Mittal wants to prevent.

Check: Sector Update - Telecommunication

One implication is that ARPUs could gradually inch higher as tariffs become steeper. In the last 2 years, there has been a surge in data usage and the telecom sector wants to prevent further bleeding. Mittal may have just come with a cooperation formula to address the issue.

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