 Hello and welcome to NewsClick. Today we are going to discuss again the telecom issue. We have discussed this issue about the telecom industry being in a big crisis and we have talked about both the revenue share, the spectrum charges which the government was trying to recover from these companies for quite some time and then on the price wars which effectively Jio was waging against the other parties and they claimed planetary pricing. Now two things, one the government having waived or at least given them a moratorium on the spectrum usage charges and the second is all of them seem to have come together and the stocks have been going on for some time and raised significantly the voice as well as the data rates. Correct. On Sunday almost simultaneously, not exactly simultaneously it was idea followed by Bharti et al and then Sri Lankan Jio. All the idea would have been vote of phone. Idea vote of phone, that's now one entity. All three announced that voice and data charges would go up by proportions that would vary between 40% and 50%. So this is the biggest hike in tariffs, voice and data tariffs in the telecom industry since the private sector came in way back in 1994. So that is very, very significant that this has happened because what was clear to everybody was that this whole thing, there is no free lunch, this whole business of underpricing or giving everything free just couldn't have lasted forever. It has now become reality and what is also very clear is the changing equations, the power balances that are now taking place in the industry. Since Reliance Jio entered in September 2016. By the way, for both Bharti and vote of phone, they have stopped increasing their tariffs even before that. So it's been almost four years since they increased the tariffs. So if I can tell you a little bit about how the equation has changed, even a few months ago, Jio, Airtel were more or less on par 27, 28% of total subscribers. Idea was a little ahead of them. MTNL BSN came in last. Now it is clear. It came in fourth and effectively only four players are left now. Correct. And then all in their base. That's right. If you put BSNL and MTNL together. Yes. Because MTNL is only there in Delhi and Mumbai. Now the numbers are very, very clear. In terms of crores, the number of subscribers Reliance Jio has now emerged as the market leader. It has roughly as we talk, possibly close to 35 crores. That's 350 subscribers. 34.8 was there. But it's almost 35. I mean, perhaps as we are talking, because a number of subscribers moved away from their competitors. In second position comes idea of vote of phone or vote of phone idea, little over 31 crores. Third position is Bharti Airtel with 28 crores. And fourth is BSNL and MTNL with roughly around a little, little over, I would say 12 crores. So it is clear that having become the market leader now Reliance Jio knows that if you go by the rules of the competition commission of India, it can actually be accused of predatory prices. Because earlier it was predatory behavior, not predatory pricing, the fine print of the law. Now it's clearly the market leader. And now it seems all three private players have come together to increase prices. So that free lunch is over. You know, for a joy, this has been argued that if for instance, three of the leading players who constitute almost as much as 75% of the subscribers, in this case even more, raise their prices almost the same day. The same day. Then that case, this would be considered, considered collusive behavior. Absolutely correct. It's not that you did it one day, then the other followed it after a week, after 10 days you can say these are market signals forcing each of them or encouraging each of them to do the same. This is really, shall we say, industry-wide talks held between these three companies, private companies. And now their acceptance that Jio is indeed the one calling the shots. And Jio now is settling a price level, which after negotiations all of them think they will make money. You know, you're absolutely correct. You can call it collusive behavior. We don't know who spoke with whom because that's not in the public domain. But the fact that the price increases were announced literally within hours of one another clearly indicates not only what you say the cartelization of the industry, three players. And we don't know which one out of the two weaker ones will survive because the former chairman of the telecom regulatory authority of India, Rahul Kullar has even wondered whether we are going to move towards a duopoly. But not only have you established the cartelization of the industry, the big player is now calling the shots. And this whole thing, how customers are happy because we have the lowest tariffs in the world, data tariffs, call tariffs. Those days are going. Those days are over. Let me put it this way because from the 4th of December, Tuesday, Bharti Airtel and Vodafone ideas tariffs go up and from the 6th of December, the Relangio tariffs go up. Of course, lot of this issue about the lowest tariffs does not take into account the fact there have been huge technology changes in the industry. And most of the industry which does do what is called voice calls, those voice calls are backbone is really the back end of it is really become data. So they charge voice rates from the consumer or they used to till you entered the fray. The reality is a lot of that traffic is really no longer voice traffic or what was to be called the switching network. But really the data network which voice over internet protocol, what is the back end? So it's not visible to the consumer. And GEO has really changed this because it said, well, it's all data. So we will do only as data. And if I can add a little bit to what the opposition has been saying, the Congress leaders of the Congress party, including the former telecom minister Kapil Sibal, he's pointed to the fact that the sector is deep in debt, excess of 8 lakh crore rupees. And another MP, Congress MP Patap Singh Bajwa, he's gone to the extent without naming names is that these companies are behaving like the East India Company. He's described them. But the fact is after the judgment of the Supreme Court on AGR or adjusted gross revenues, what is very, very clear? We are not clear as now as to how that problem will be resolved. You know, whether there will be a review petition, whether those payments will be staggered. But the total amount after the judgment that was owed by the telecom sector to the government was 1 lakh 35,000 crores. So of that amount, roughly 42,000 crores were in the former spectrum usage charges. Now the government has said moratorium for two years, that's correct. So we are now seeing the new phase, if you like, of the telecom industry in India. The days of cutthroat competition are over because having established dominance over the market. Now I would expect prices would be more or less the same. And at the end of the day, the consumer pays. You know, we already went on that but the interesting point would be that when you talk about 8 lakh crore NPAs or debts, which could turn into NPAs, significant money. We don't know that yet. We don't know that. But this includes also debts of companies which have virtually liquidated themselves. They bought, they got licenses, they borrowed money from it. The banks shelled out a large part of those license fees. But leaving that out, the question is, one is that there are debts which have to be paid. So allowing these companies to raise rates, the government winking at it in regulatory terms could be also bailing out these companies from the banks because otherwise the banks will be left holding bankrupt companies low. You're right. You know, some of them have merged. Now the Supreme Court judgment impacted 15 telecom companies. They were served. I mean, they were directly impacted. But that, today, only three remain because of mergers. Others are going through bankruptcy proceedings or just shut down. Only two because out of that, GEO was really not there. That's correct. So now what we are seeing is let's see how the new committee which has been set up by, under the cabinet secretary Rajiv Goba includes the telecom secretary Anshu Prakash, the finance secretary Rajiv Kumar and the law and justice secretary Anu Kumar Mendiratha, how they work out. It was expected there would be a two-year moratorium on spectrum payment. Now, we have to wait and see what the remaining aspects of the bailout package will be. We have to just wait and watch for that. But it's clear that one of the ways of bailing them out would be of course the payments, looking at the banks and so on. But the other part would be allowing them to raise money and raise basically the charges on the consumer and therefore become more profitable, which is what the company seemed to be doing. And TRI has not stepped in a collusive pricing issue. Earlier it had not stepped in on predatory pricing, which is what the two other companies, Golapur as well as Airtel, had alleged they had not stepped in there. And now they're not stepping in when all of them are behaving. What would we see in a collusive fashion? Now, you see, I completely go along with you. What is clear is that the silence of the regulator is deafening as they say. But what has happened if you look at the disputed amount on what was adjusted gross revenue? The original disputed amount was only 23,000 crores. You levied interest on top of that. There were penalties on top of that. So that's 43,000 crores, another 11,000 crores. And then you had interest on that interest and penalty. So it's possible that the government could also reduce the amount. And the total amount that's due, which is 93,000 crores, could come down. These are possibilities that would happen now that we literally see three players left in a market which once had 16 players. It's an interesting question. These payments which they're supposed to receive, have they entered the budget already? In terms of money, they should have received them therefore as the receipts of the government? I can speak on behalf of Airtel and Bhakti. On the private company side, they've made provisions. But these provisions... No, no, no. But not on the budget? No. Because the government included them? Or will it actually increase their so-called deficit? It is certain to increase the deficit of the government. Absolutely. If you look at the budget, the numbers of the budget, the government is certainly not going to get the kind of revenue it presumed it would have got from this sector. You must remember another thing, that the revenues that the government have been obtaining from this sector peaked some years ago. And I'll give you that exact year in my notes. It was really 2015. And over the last four years, it has been steadily coming down. It peaked at over 2,37,000 crores in 2015-16. And since then, it's going down. But what is also very clear in that in the coming budget... I mean, when this financial year is over, you can be sure that the government would not be able to meet the government, the budget estimates. That's correct. But what we are, again, not very clear is these loans are huge. But what could the government do in these packages to what... Because it would have, as you say, a ripple effect on the banks and the non-performing sector, how that would be contained. And one way could be to give, wave off some of the dues. That would mean going back to the Supreme Court. The other way that could be done is the Supreme Court deadline, the 90-day deadline, which would get over at the end of January. The review petition could call for an extension of that deadline. And the venture, which was headed by Justice Arun Mishra, may go along with the government. Let's for the time being park the question of the Supreme Court, because that's really... And it's not a part of policy. But now the only issue that is left is what is the protection to the consumer. Because now suddenly the rates have been raised by significant amounts. 40% hike in data rates. Just a minute. The only protection, if the regulator doesn't step in, the regulator seems to be quite sleepy at the moment. What we have seen both in predatory pricing and what could amount to collusive pricing. The only protection is really MTNL BSNL. And that could act as a break if the government allows it to function. And also refinances its huge losses. We'll have to wait and watch. Two points need to be underlined here. One is so far all the hikes pertain to what are called prepaid customers. And then they account actually for the bulk of the customers in this country. They use prepaid services. What Rilan Jio has claimed that though voice and data tariffs could go up to 40%, they are claiming at least that the customers would get more benefits. They're claiming 300% more benefits. And they're also talking about fair usage policy on outgoing calls. So we'll have to wait and watch what was very, very clear that Rilan's really was in a situation where it realized that they couldn't, I mean the others couldn't continue to take advantage of the free plan. Because simply what was happening at one stage, every day virtually every day Rilan's network, Jio's network was getting between 25 to 30 crores of missed calls. And subscribers would call back. And so that regime was clearly not going to continue and it hasn't. And now the picture at least. That was from the beginning clear that these were the ways to get Jio a subscriber base. And one of the reasons they could do it is because the infrastructure was literally funded by sister companies. And therefore it didn't really have the kind of economic financial pressures that other companies had. And it's interesting that the same Rilan's Jio which you could argue has greatly benefited by the way in which the telecom regulatory authority of India has worked. In the recent past on the 9th of October claimed that due to undergoing regulatory policy changes for mobile call related charges, Rilan Jio was quote unquote compelled to recover interconnect usage charges, a charge which is paid by one mobile operator to another mobile operator for connecting calls. And that was to increase at 6 minutes, sorry 6 by sub per minute for voice calls. But now this will pale into insignificance because you're now tariffs are going to go up by up to 40%. So that's the big picture. So thank you for being with us, telling us how the telecom sector may come out of the crisis of the NPS with the banks, may come out because the government will be kind to them on the issue of recovering what is the spectrum user charges and what is the adjusted revenue portion which was really could not debate it but litigated in the Supreme Court. But net power result is what we seem to see is a return of cartilization in the telecom sector, which used to be what was argued in the N90s. If you remember this used to be quite the game that two or three big players would get together, set the charges and we seem to be seeing return of those days, not surprisingly because there's so few players now left. So this seems to be much easier to do. Do keep watching news click and visit our website.