Date: 09/02/2023

Relevance: GS-2: Government Policies and Interventions for Development in various sectors and Issues arising out of their Design and Implementation.

Relevance: GS-3: Infrastructure: Telecom Sector, 5G Technology.

Key Phrases: Telecom Sector, Youngest youth Demographics, Digital platforms, Adjusted Gross Revenues (AGR), Competition Commission of India (CCI), 5G Technology, Telecom Regulatory Authority of India (TRAI).

Context:

• Vi (Vodafone Idea) has been steadily losing subscribers.
  • As per data from TRAI, from June to September 2022 alone, Vi has lost around 7.5 million subscribers.

Key Highlights:

• According to Telecom Regulatory Authority of India (TRAI), India is currently the world's 2nd largest telecommunication market with an overall tele-density of 85.11% (July 2022).
• Following the Supreme Court’s judgment on the matter of adjusted gross revenues of telecom operators, the government had in late 2021 announced a relief package for the beleaguered telecom sector.
  • The terms of the package allowed for the conversion of the interest on telecom firms’ deferred AGR and spectrum dues into government equity in telecom operators.

Government : Single Largest Shareholder of Vi

• Vodafone Idea opted for the interest-equity conversion option in early 2022.
  • Now, about a year later, the Union government has approved the plan to convert interest dues of more than Rs 16,000 crore into equity.
  • Following this transaction, the promoters’ holding will fall from 74.99 per cent to around 50 per cent.
• The government will now hold around 33 per cent in the company, making it the single largest shareholder in Vi.

Challenges for Vi Telecom:

• This move alone will not translate into a complete turnaround in the fortunes of the Vi telcom.
• Its average revenue per user is much lower than that of both Jio and Airtel.
• It also has a lower share of high-paying 4G subscribers and has fallen behind in capital investments.
• Vi has a sizable debt burden which is a negative sign for the financial health of the company.
• There is uncertainty over the rollout of Vi's 5G services in the country.
  • On the other side, Airtel's 5G rollout is on track to cover all towns and key rural areas by March 2024.

Way Forward:

• In a market that is populated by behemoths such as Jio and Airtel, who are in a stronger financial position as compared to Vi, for the latter to remain competitive, it will be critical to raise money.
• It is possible that investors were waiting for the government to first exercise its option before committing further funds.
  • On its part, the government should have exercised the option of converting its dues to equity earlier, and put an end to the uncertainty surrounding the telco.
• The government has received assurances from Vi’s promoters that they would infuse additional capital in the company.
  • Though to what extent either of the promoters will infuse the much-needed funds in the current economic environment remains to be seen.
• An inability to raise the required resources to compete effectively against Jio and Airtel will risk transforming the sector into a duopoly.
  • This will have adverse implications for consumer welfare.
• Government policy should be guided by the objective to ensure robust competitiveness in the sector.
• As the sector’s dynamics continue to evolve, it will also keep bringing up new challenges of competition regulation and enforcement.
• The telecom sector in India is going through a new phase of development.
  • As its priorities shift from traditional telecom services to high-quality internet access, the policy and regulatory framework must also respond accordingly.

Conclusion:

• India’s digital ecosystem will benefit from greater and healthy competition among the telecoms.

Source : Indian Express

Mains Question:

Q. “A greater and healthy competition among the telecoms will benefit the digital ecosystem of India”. Critically analyze the statement in light of Vi's position in the telecom sector of India. (250 Words).