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02 Dec 2019

Indore: The cut-throat competition between telecom companies in India might have been a good news for the users. However, the companies in the sector are bleeding and have faced loss which have also resulted in many companies deciding to shut shop. Vodafone merging with Idea, and speculation of the companies closing down is just one of the many problems that the telecom companies in India are undergoing.

Keeping this in mind, companies are planning to boost up the rate at which the services are being provided to the users. There is an urgent need for companies to adapt to the disruptive technologies which are affecting the markets and also for the government to step in and help the sector which like many other is under stress.

So let us look at the various recent happenings which have affected the sector and caused the outcome we see coming soon.

1. Merging of BSNL and MTNL and offering VRS to employees: In a bid to cut down on the losses which the two operators- BSNL and MTNL have been facing over the past decade, the government had decided to merge the two and had also announced other steps such as monetizing the assets of the two companies, giving VRS to the employees and offering Rs. 69,000 crore revival package to the two.

2. All telcos increasing tariff: Reliance Jio has decided to increase tariff rates for its services from December 1. While Jio had for the past many years not interfered with the pricing of the tariffs. However, this time around, the company has also been facing pressure from the government to set a floor price of tariffs. This has led to Vodafone Idea as well as Airtel announcing their hike in tariffs as well.

3. The reported loss of revenue: India’s Telecom Minister Ravi Shankar Prasad on November 27 announced that the telecom sector’s gross revenue had fallen by about Rs. 41,000 crore over three years on account of dip in the tariffs by the companies. This indicates to the losses which the companies have been facing over the past three years, despite the increase in the subscriber base of the companies.

4. AGR benefit: The government after looking at the distress for the telecom companies also announced a relief to them that the spectrum payments to the government can be made by the 2022-23 fiscal year. The two-year moratorium that the government offered to the companies was expected to bring in a relief of up to Rs. 42,000 crores to Vodafone Idea and Bharti Airtel who had been posting losses. However, the impact of this on the stocks and shares of the companies is still not clear.

In the next step for the sector, the 5G spectrum allocation is due and companies are preparing themselves to participate in the auction. However, poor revenues might prohibit certain companies from getting the spectrum and from participating in the auction. The government in its bid to make the sector flourish is planning more strategies for its revival, without which the 5G spectrum allocation also has a bleaker outlook.

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