Wel­come Merg­ers in the Tele­com Space

Af­ter the ini­tial pain, tel­cos will gain, too

The Economic Times - - Breaking Ideas -

Voda­fone in In­dia is merg­ing with Idea Cel­lu­lar. Bharti is ac­quir­ing Te­lenor’s loss-mak­ing op­er­a­tions in In­dia. Re­liance In­fo­comm has merged with Air­cel and MTS and is in talks to bring Tata Te­le­ser­vices into its em­brace. In­dian tele­com is con­sol­i­dat­ing at a rapid pace, thanks to the dis­rup­tive en­try of Re­liance In­dus­tries’ Jio, which fan­cies it­self as a dig­i­tal em­pire in the mak­ing rather than as a tele­com com­pany, and is, thus, pre­pared to of­fer voice ser­vices for free and data ser­vices at an ul­tra-low rate to fa­cil­i­tate all kinds of dig­i­tal com­merce. Dis­rup­tion is bad, at least in the short run, for the com­pa­nies be­ing jolted out of their tra­di­tional mould but prob­a­bly good for the con­sumer and for the in­dus­try as well.

The con­sumer’s ben­e­fit is hardly ob­scure. Tar­iffs have fallen sharply: calls are free and data has be­come cheap, once you be­come a sub­scriber for a nom­i­nal fee, which is zero for Jio alone till March. But this would prove tran­sient, if the ser­vice providers did not re­or­gan­ise their busi­ness to make these low tar­iffs vi­able. The on­go­ing con­sol­i­da­tion in the sec­tor is part of that or­gan­i­sa­tional re­struc­tur­ing. Larger sub­scriber bases, es­pe­cially those in un­der­served ar­eas, would al­low mar­gins to grow thin­ner, with­out the com­pany turn­ing sick. Shared re­sources of the merg­ing com­pa­nies would al­low cost sav­ing. Larger pools of spec­trum will al­low op­er­a­tors to fi­nally op­ti­mise the net­work in a man­ner pro­hib­ited hith­erto by the sliv­ers of dis­parate spec­trum they had to make do with. Larger dis­tri­bu­tion net­works will come in handy when tel­cos fully op­er­a­tionalise their pay­ment banks. Con­sol­i­da­tion will cre­ate a leaner, more ef­fi­cient in­dus­try.

The Com­pe­ti­tion Com­mis­sion of In­dia, rather than the tele­com reg­u­la­tor Trai, should oversee com­pe­ti­tion in the in­dus­try. There is no con­tra­dic­tion be­tween hav­ing a sec­toral reg­u­la­tor and en­ti­ties op­er­at­ing in the sec­tor be­ing reg­u­lated for a par­tic­u­lar pur­pose by an­other reg­u­la­tor. For ex­am­ple, just be­cause a com­pany of­fers tele­com ser­vices and, thus, comes un­der the reg­u­la­tory re­mit of Trai, it will not cease to be reg­u­lated by mar­kets reg­u­la­tor Sebi when it comes to a pub­lic is­sue.

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