Disruptor Jio shakes existing operators

The Mukesh Ambani–owned Reliance Jio is surely a disruptor in the country’s telecom market, forcing the established players, including leader Bharti Airtel, to match the freebies and lucrative offerings, at the cost of their balance sheets which carried huge debt burden. Sharing the data in Parliament, Finance Minister Arun Jaitley said the banks have an exposure of Rs 97,681 crore in the telecom sector, of which Rs 63,415 crore was from the public sector banks. It clearly means any further pressure on the telecom firms would translate into a dent on the lend-ing of the banks which are already battling non-performing assets of a mammoth order. Ruing the disruption from the deep-pocketed Reliance Industries, the Bharti Airtel reported a slump of 75% in its consolidated net profit for the first quarter of the current fiscal, blaming it all on the “new operator.” The finance minister quoted State Bank of India Chairperson Arundhati Bhattacharya as saying that the stress in the telecom sector has reached “unsustainable levels.”

Telecom has been a great success story for India with over 90% tele-density while the mobile data subscribers base is expected to reach 900 million by 2022, according to a Crisil report. Most of the government’s flagship programmes like Digital India and e-governance depend heavily on a continuous success of the sector which should be allowed to work in a competitive market but must play by the rules of the game. These rules to be framed and overseen by the regulator, Telecom Regulatory Authority of India (Trai), should be fair to both the users as also the industry, which must not be made to suffer heavy government levies, requiring rationalisation in spectrum and other charges. Realising the critical importance of the sector, the government and the regulator are working on providing some kind of a relief to the operators.

While it is nobody’s case to give any extra elbow to Reliance Jio when it comes to the Trai guidelines, the existing operators must shake themselves out of a smug attitude towards customers who continue to face call drops, among other quality and billing issues. The Jio, to its credit, is reaching out to a vast unserved base of feature phone subscribers who were paying for 2G services a price of 4G, in a market that thrived on voice and exclusivity of better-off users. The biggest challenge is for the incumbent players. As regards Jio, it remains to be seen how long it can sustain the tempting offers without a red spot on the balance sheet of the parent company.