Trai Says Only Two Private Telcos in Industry is a Risky Affair

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Trai Says Only Two Private Telcos in Industry is a Risky Affair

As per the Telecom Regulatory Authority of India (Trai) and one of its top officials, a situation where there are only two private telecom operators leading to a duopoly could be a dangerous situation for the industry, ET Telecom reported. The Trai official who decided to be anonymous added that Trai has already suggested some of the relief measures to the government which include a reduction in Spectrum Usage Charges (SUC), and USOF very long back. But, until now, no step has been taken from the government. The official added that three private telecom operators, with a government, backed player in the industry would be appropriate to cater to a billion subscribers, anything less than that is likely to be too risky.

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Risk of a Duopoly Market

The risk of a duopoly comes after the verdict of the Supreme Court on the Adjusted Gross Revenue (AGR) issue which said that the calculation of the AGR would include non-core items as well for the telecom companies. This put massive pressure on the telecom operators. The worst-hit of the telecom companies are Bharti Airtel and Vodafone Idea who have to pay Rs 90,000 crore combined to the DoT for the dues. Vodafone Idea individually owes Rs 53,000 crore worth of dues to the DoT, but there are concerns about the health of the telecom operator over whether or not it would be able to pay the dues. The chairman of Vodafone Idea, Kumar Mangalam Birla, has already remarked once that the company might have to shut shop if no relief comes its way.

Telecom Industry Still a Good Investment Opportunity: Trai Officials

As per the Trai official, however, the Indian Telecom market presents a lucrative opportunity for the investors with such a large subscriber base and a surging data demand, which makes it a good business case. One of the two officials also added that the total subscriber base of more than a billion is a huge one for the three operators. Approximately, every operator boasts of having a little more than 300 million subscribers, thus pushing the total subscriber count to over a billion.

Negating the sentiments expressed by Kumar Mangalam Birla and the Vodafone Group, the Trai official said, “With the Internet becoming pervasive, India is becoming a very attractive market, and if somebody argues that the sector was not worth investing, it is merely a fallacy.” It is worth noting that Vodafone Group Plc and Aditya Birla Group has decided not to put any more equity to Vodafone Idea.

Trai’s Suggestions to the Government

The officials from Trai also reiterated that the sector regulatory has already recommended some of the measures to the government, but there has been no action on them. The Trai had recommended that the USO levy be brought down to 3% from 5% which is part of the license fee and along with that, it had suggested reduction of the SUC down to 1% over time. Right now telcos have to pay 8% as license fees and 3-4% as SUC. Although the DoT had also forwarded these suggestions to the finance ministry, at the upper echelons it was turned down citing that it would affect the government revenue. Worsening the situation for Vodafone Idea is its subscriber churn which is happening at a very fast rate. In the November month, the telecom operator lost a massive 36 million subscribers, thus making it lose subscriber market share. In the July-September quarter, Vodafone Idea had posted losses worth Rs 51,000 crore.