Consolidation in Domestic Telecom Industry Will Create a More Rational Pricing Environment: Report

The issues dogging the telcos are unlikely to subside near-term even though consolidation offers some consolation from a long-term perspective, says a report. Consolidation in the domestic telecom industry will create a more “rational” pricing environment which is a long-term positive, global ratings agency Moody’s Investor Service said in a report Wednesday. It can be noted that the entry of the deep-pocketed Reliance Jio in September 2016 has put tremendous pressure on entrenched players like Airtel, Vodafone, Idea and RCom to consolidation, asset sales, job cuts and also bankruptcies.

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While falling income and profits along with rising debt forced Vodafone and Idea to merge and create the largest telco as Vodafone Idea last year, Reliance Communication was forced to quit the consumer side of its business. The Anil Ambani company which owes over Rs 45,000 crore to banks has been dragged to bankruptcy courts by many of its creditors.

All the entrenched players have suffered reverses in their earnings since the entry while Jio has upped its subscriber base to over 252 million quickly driven by loads of freebies and other discounts. It has been reported that the sector may cull over 60,000 jobs in the near-term.

The irony is more for the Vodafone, as India was for long the most promising unit of the British major, helping it weather the global financial crisis of 2008 and the resultant pains in its other markets. For the first time in over a decade, Airtel reported losses in its home market in the June quarter and was bailed out by its African units.

The falling revenue has even led to poor voice and data quality as the operators are not healthy enough service all their networks. “Consolidation points to a three-four player market with a more rational pricing environment emerging in the longer-term, but no near-term catalyst for a rise in Arpus,” Moody’s said in the report.