he troubles of the telecom sector have proven to be the last straw that broke the back of Reliance Communications. Anil Dhirubhai Ambani has finally quit chairmanship of the company, along with four other directors, acceding to insolvency proceedings initiated last May. The tower and spectrum owned by RCom have also started receiving bids under the insolvency process. Although the telecom sector was expected to expand at a very high rate, given the penetration of mobile telephony and Internet services, several factors have worked to its detriment.
One of the chief disruptors in the sector was Reliance Jio, the communications giant owned by Anil’s elder brother Mukesh, which has beaten other players in the field to the top spot. The entry of Jio in the sector saw even the likes of BSNL suffer shrinkage in its subscriber base. BSNL had enjoyed a large subscriber base by virtue of it being a government-owned company. Jio, in turn, has amassed a huge subscriber base by dangling the lure of Internet at high speeds for almost nothing for more than a year. Although things are changing with time, Jio has beaten the competition hands down by muscling into the sector like a bull in a china shop. The other players in the field have felt the pinch also from regulations that were brought by the government. Bharti Airtel, which had once enjoyed almost monopolistic presence in the sector, along with the much talked about merged entity Vodafone-Idea reported historic losses in the second quarter of this fiscal. While Vodafone-Idea declared loss of Rs 50,922 crore, Bharti Airtel reported loss of Rs 22,830 crore owing to the provisions both companies had to make in the wake of an adverse Supreme Court verdict over the definition of ‘aggregate gross revenue’. They have sought relief from the government to see them out of the situation and have indicated that they would collapse in the absence of such relief. A huge blow to foreign investment in India would be the exit of Vodafone, something the company has hinted at under the prevailing circumstances.
It is also worrying that sector after sector needs the government’s support to get it off rough patches. And ultimately, all the money is being coughed up by the taxpayer, who is left with barely anything to spend on. It is unclear for how long the government will have to handhold sectors in such a manner. The pressure on the treasury is bound to mount further in due course. The government cannot loosen its purse strings forever. It has already looked every which way for resources to tap after grossly misreading the flow of revenue. In the absence of adequate revenue, it is unable to meet expenses and has already started struggling to keep its act together. A recent news that Central Revenue officers were quitting their government posts due to tremendous pressure to increase tax revenues along with unclear instructions is an indication of the Union government’s confused state of thinking.
The telecom industry is vital to all the current and future plans the government may have for the digitalisation and development of the country. It, therefore, cannot ignore the industry without paying heavy costs. It also cannot allow monopoly of any company in this sector. The government will have to resolve this catch-22 situation, among all the other things that are dragging the economy down.