India continues to be an economy where currying favour with the government can ensure significant and enduring benefits. To outlive and flourish, the government must be gratified. And Reliance has been a textbook case.
On 1 July 2015 when Prime Minister Narendra Modi moved into the amphitheater of Indira Gandhi Indoor Stadium in Delhi, the crowd erupted. Many did not know the overall objective of the gathering. Mukesh Ambani went first and praised the action of the government extensively. He promised to invest over Rs.250,000 crore to support the government’s project. With that, the celebration of the birth of Digital India began.
A year later Reliance Industries formally launched Jio. Indians woke up to front-page advertisements of numerous newspapers featuring the prime minister sort of endorsing the new product. The media was busy in proclaiming the billionaire and sidelined the valid questions of citizens of India. Many experts are of the opinion that suspicious alterations in the regulation of Telephone Regulatory Authority of India (TRAI) made the Jio’s honeymoon extremely pleasant. The TRAI also came under piercing condemnation for sustaining anti-competitive activities. However, the TRAI refused to entertain the accusations and said that Jio is
doing an admirable job.
Jio opened gateway for m&A…
Though Jio has superbly expanded India’s data market, the telecom industry is in a hazardous situation. The giveaway price structure of Jio compelled other players to drop tariff drastically. This resulted in mounting corporate debt. Telecom insiders are worried about other hostile effects on the broader economy.
Jio’s entry has opened the gateway of mergers and acquisitions. Before the formal inauguration of Jio there were around ten private segment wireless-service providers and today there are effectively three. However, the government stated that the number of operators would not reduce further. Everyone does not believe this. Not even the Ambanis!
Until October 2017, a telecom company had to pay the competitor 14 paise for every minute that their customers called someone who subscribed to the competitor’s network. But Jio refused to pay this and said that these payments were advantageous to the companies who have a wider customer base and technologically advanced network. Many operators including Airtel and Vodafone argued that the fees were necessary and reasonable compared to the costs incurred to maintain their infrastructure. The TRAI sided with Jio and decided to reduce the price from 14 paise to 6 paise. It also announced that the fees structure would be eliminated entirely by 2020.
Sau Saal JIO!
Reliance Industries is a pet of the government. The government’s decision to allow RIL to offer free voice services over wireless broadband spectrum it had won in 2010, brought an unjustified benefit of Rs 3368 crore to the company. The company paid a Unified License Entry Fee of Rs.15 crore and additional migration fee of Rs 1658 crore in Aug 2013. This immigration, allowed at prices prevalent in 2001, resulted in the undue gain. This indicates the favouritism enjoyed by Reliance Industries and lack of due diligence in auction, of spectrum.
The company also got permission from the telecom department to drift from being an Internet service provider to full-service provider at a lesser cost compared to current market prices. RIL is the only entity to have a licence for pan-India broadband wireless airwaves.
As a final remark, before politics damage, the telecom industry unbiased regulators have to take the plunge and assure Airtel and Idea-Vodafone about regulatory certainty. Their question ‘whether it is India filled with Reliance or Reliance filled with India?’ should not remain unanswered. Or else, the Ambanis will discover their own way of flourishing in the industry. Mukesh Ambani will smilingly dance his way around the stage. And whether we like it or not, we have to cheer and say ‘Jug Jug JIO mere Laal.’