For consumers, the telecom party seems to be over. A few days ago, two of the three largest mobile operators—Vodafone-Idea and Bharti Airtel—announced that they will be hiking tariffs from December 1. They have not announced the step-up but it could be in the range of 5-10%. Reliance Jio, the third and cheapest of the three, also blinked and has said it too will be upping charges soon. It’s been a great run for cellphone users ever since Reliance Jio entered in 2016 with next-to-nothing tariffs, forcing older competitors to slash their rates. But this no-holds-barred campaign has made the industry an unviable business.
Collectively, Airtel and Vodafone have reported a second quarter loss of over `74,000 crore. Vodafone has notched up a debt of `1.2 lakh crore over these last few searing years; and Airtel is not far behind with `1.16 lakh crore of debt. Reliance Jio, which claims it is not in the red, too has run up over `1 lakh crore in debt. Part of the reason why Vodafone and Airtel have run up these humungous losses is the outrageous way the licence fees and spectrum usage charges have been pegged. These companies have been taxed not just on their telecom operations but on every stream of revenue including interest income on deposits and sale of assets.
Part of the reason the three companies have decided to hike tariffs is the government warning to stop the destructive price war and the telecom authority possibly bringing in a minimum floor price. However, why did it take three years for the government to realise that such a vital consumer service was on a course of destruction? Or did it deliberately turn a Nelson’s eye for so long? If anyone is to be blamed for unsustainable prices it is Jio, which was determined to drive competition out. But, well, better late than never! The government has stepped in finally to clean up the mess. And, hopefully for the sake of the consumer, more than just one telecom operator will survive.