No Air­waves Sale Likely Till Tel­cos are Fight­ing Fit

Rel Jio-in­duced com­pe­ti­tion has left tel­cos with no spec­trum ap­petite

The Economic Times - - Companies: Pursuit Of Profit - Anan­dita.Manko­tia @times­group.com

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

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