From an industry that had a profit after tax of 15% of its revenues in 2007-08, its losses hit more than Rs 180 bn in 2016-17 even though the revenues doubled in the same period.
Business News India : For a customer using a mobile phone since 2007, it has been a dream run with voice calls now becoming free and unlimited compared to Rs 1 you had to fork out in 2007. Now you pay only for data at rock-bottom prices and monthly bills have dramatically halved in the past 18 months.
Yet in stark contrast, the story of telcos in the last decade has been a topsy-turvy downhill battle, bruised by cut-throat competition, policy paralysis and Central Bureau of Investigation probes, high spectrum prices, and the stick of the Supreme Court, which cancelled over 122 licences. But the incumbents have also faltered, misreading the dramatic change which 4G data would unleash, thanks to the entry of Reliance Jio.
From an industry that had a profit after tax of 15 per cent of its revenues in 2007-08, its losses hit more than Rs 180 billion in 2016-17 even though the revenues doubled in the same period. And its debt burden just went through the roof, increasing five-fold through the decade, which is close to double its overall revenues (see chart). As a result, many telcos like RCom that were unable to pay back loans sold their assets or, like Aircel, filed for bankruptcy.
The inevitable impact was that as many as eight companies such as STel, Loop, and Etisalat closed down operations, some like Telenor and MTS, which tried once again by acquiring the licence for a second time, failed miserably again. And desi players like Tata Teleservices and RCom that could not take the heat of competition unleased by the entry of Jio also called it a day. Together, estimates say, they lost more than Rs 1,500 billion in cash.
Jio hastened the consolidation by its disruptive pricing, and now analysts say there will only be four players — Bharti, Vodafone-Idea, Jio and BSNL.
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