NEW DELHI: The worst may be over for India’s debt-laden telecoms sector, but there is still a tough fight ahead for a full recovery, analysts say.
Three private telecom operators are left standing, compared to about a dozen companies a decade ago, after fierce competition triggered price wars, mergers and some calling it quits, report agencies.Now, the remaining bruised companies are striving to weed out low-paying customers in order to boost revenues as they continue to battle for survival.
“Early indicators are promising ... suggesting that the worst is over,” says Ravi Menon, vice president, IT services, telecom, and Internet, at Elara Capital, a Mumbai-based investment banking firm. “It’s still an uphill battle to revive industry revenue. But current tariffs are unsustainably low and are expected to increase significantly over the coming couple of years.”
The stakes are high. India is the world's second-largest telecoms market after China, with about 1.19 billion subscribers as of October 2018, according to the India Brand Equity Foundation. Smartphone use, too, has massive growth potential. India is the world's fastest growing major economy, and its number of smartphone users is expected to double to 829 million by 2022, according to technology conglomerate Cisco.
“By 2022, smartphone data consumption will increase by five times in India, which proves the dominance of smartphones as the communications hub for social media, video consumption, communications and business applications, as well as traditional voice,” says Sanjay Kaul, Cisco’s Asia Pacific president. It was the launch of operator Reliance Jio in September 2016 by the oil-focused conglomerate Reliance Industries - controlled by India's richest man Mukesh Ambani – that most upended India's telecom sector, and which still wields outsize influence today. Jio stormed the industry with cut-price data packages and promises to customers of ‘free calls for life’, angering rivals which hit back by raising concerns over unfair trade practices.