Indian Telecom industry is fast moving towards duopoly( from a free market with over 10 players).Samuelson did not teach us Duopoly being good for the market and customers. The whole sector is in the doldrums.
The leading telecom operators in India pay the largest share of their aggregate revenue for airwaves at 7.6%, followed by Thailand at 7.3% and Bangladesh at 7%, according to Moody’s Investors Service.
The next few weeks could be critical for the company, as prime minister Narendra Modi’s government decides on relief measures for the sector stung by a recent supreme court ruling. There is no question that this is bad news for the telecom industry.
As per the Supreme Court direction to the managing directors and directors of telcos and other firms to explain why contempt action be not taken against them for non-compliance of its order to pay adjusted gross revenue (AGR) of Rs 1.47 lakh crore to the Department of Telecommunications.
Reliance Jio, Vodafone Idea, and Bharti Airtel account for nearly 90% of the country’s mobile phone subscribers, whereas ailing state-owned BSNL and MTNL, which once pioneered Indian telephony, have been consigned to the margins. Over the years, many foreign players-Norway’s Telenor, Russia’s Sistema, and Aircel, owned by Malaysia’s Maxis, to name a few-too, have exited the market that was once seen as a hotbed for foreign investment.
Telecom firms pay 8% of their AGR as licence fees and between 3% and 5% as spectrum usage charges (SUC) to the government. The industry’s long-held argument that non-core revenues do not constitute AGR was dismissed by the apex court.
The ruling has created a Rs92,000-crore liability for the sector, which must be paid up in three months. This may rise to Rs1.4 lakh crore if the government raises a demand for shortfall in SUC as well.
Airtel and Vodafone Idea are estimated to face a combined hit of Rs82,000 crore. BSNL and MTNL together owe around Rs5,000 crore, while three-year-old Reliance Jio owes roughly Rs14 crore. The rest is owed by Telenor, Sistema, Tata Teleservices, Aircel, and Reliance Communications (RCOM), all of whom have exited the market.
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