What the Future Holds for Private Telecom Service Providers in India

By Nitin Abbey

Cover Image Attribute: A Vi store in Mumbai, Maharastra, India / Source: Forbes India

By Nitin Abbey

The very recent news of the Indian government holding 35.8% shares in Vodafone Idea (Vi) has opened a floodgate of discourses along the alleys of the Indian telecom industry. The decision came after Vi decided to opt for the interest-to-equity conversion scheme of the Department of Telecommunications (DoT) as an aid to counter their debt-laden state of affairs. Industry reports reveal that Vi is currently in a massive debt burden which amounts to over 2 lakh crore. So this has come as a breather for the third largest telecom operator in India, but the ripple effect of this move might run a course longer than this shareholding shift.

Industry experts believe that Vi might face a hard time attracting investors due to this paradigm shift. The fact that Vi opted for such a major equity handover might project them in a weak light in an already struggling telecom industry. And it has some strong grounds as the shares of Vi took a nosedive immediately after the news broke. After a 21% dip, the shares bounced back by 8.5% after Vi announced that the government would not play any role in the company’s operations. But despite this, the fact that a major telecom service provider had to let go of such a significant percentage of shares is definitely indicating major changes in the coming days.

The Indian telecom industry is a competitive space where giants like Bharti Airtel, Reliance Jio, and Vi itself are in a close race to flex their user base. The recent tariff hike by these major players has already given a glimpse of the future where the internet in India might not be as pocket-friendly as it used to post the Jio market upturn. The Indian telecom industry is growing at a rapid pace when it comes to a subscriber base, but the price-sensitive nature of the Indian consumers is something that the telecom service providers have to keep an eye on. And under these circumstances, even the major players are in for a tough task. But when private operators were hiking the tariff, government-run BSNL came up as an underdog with a relatively cost-effective plan for its users.

We should also remember that, though it locked horns with Reliance Jio’s then dream run as a free-of-cost network provider, Bharti Airtel is also feeling the heat. So far, the company has held that they wouldn’t be choosing the equity conversation option. But this was also expected from Vi till the time it proved the industry speculations wrong. The idea behind the government’s equity conversion scheme is to offer relief to the telecom industry players, and if a company opts for this to stay afloat in the market, it is just business for the company under discussion. 

Another section of the business analysts holds that after the Vi move, other players like Bharti Airtel and Reliance Jio might come up with innovative solutions to stay in business without having to accept government support. The future might see telecom service providers focusing more on quality service and wider network coverage as these are areas where customers are willing to shed a few bucks. Also, Airtel and Jio might shift their focus from price war as Vi might have the edge over them, courtesy of the government involvement and its financial support.

All in all, the Indian telecom industry is on the verge of some major changes as the differentiator between public and private players might get very thin very soon. 

About the Author:

Nitin Abbey works as Senior General Manager (Content) at a Delhi-based Digital Marketing agency, Techmagnate. He studied English Literature at Delhi University's SGTB Khalsa College and later completed his Master's in Mass Communication at the Rajendra Prasad Institute of Communication and Management. Over the last 14 years, the power of the written word has made him dabble in everything from theatre and publishing, to journalism and content creation.

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