No Airwaves Sale Likely Till Telcos are Fighting Fit
Rel Jio-induced competition has left telcos with no spectrum appetite
New Delhi: The government won’t hold any spectrum auction until there is a turnaround in the fortunes of telcos currently struggling to make profits due to cut-throat competition triggered by Reliance Jio Infocomm, two officials familiar with the matter said.
While the telecom department (DoT) is keen to sell airwaves that remained unsold in the previous auction last October, officials said it will be done only after the industry returned to profitability.
“The current state of the sector, where we are seeing profitability erode is only a matter of time. We expect this to subside in sometime and profitability to return to the sector. Until then, there is no case for holding any spectrum auctions,” said a senior government official. Another official said it’s difficult to say at this time if an auction could be held in the next fiscal year starting April.
The sentiment is echoed by the industry. The current situation of intense competition is already leading to consolidation and at this point of time telcos would not want to spend thousands of crores on spectrum.
“Look at the latest quarterly filings of telecom operators. They need to brace themselves and consolidate to face competition,” a senior industry analyst told ET. “Telcos have bought enough spectrum in the past few auctions and neither is there a need for more bandwidth nor financial resources to purchase more bandwidth,” said the person who requested not to be identified.
Reliance Jio made a dis- ruptive entry into the telecom sector last year, offering free voice calls throughout the country and offering 4G data at almost one-fifth of existing market prices. The company also announced free data for the first three months as an introductory offer. Since then, it has extended the free data offer till March end.
This forced incumbent telcos such as Airtel, Vodafone and Idea Cellular to slash prices to retain their customers and attract new ones, which took a toll on their profitability. Market leader Bharti Airtel reported a 55% year-onyear fall in its net profits for the quarter ended December 2016, a period in which Idea Cellular reported its first ever net loss since listing in 2007. Vodafone India’s service revenue also fell on year in the third quarter. And all the three reported sharp dips in data revenue growth.
Rajan Mathews, director general of GSM industry body Cellular Operators Association of India told ET that telcos are looking to consolidate their positions and put resources to battle the intense competition rather than pile up more spectrum.
Jio’s price war forced incumbents to slash rates to retain their customers which took a toll on their profitability