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We wish India's telecom saga would be a Bollywood movie, with a happy ending. But what we have witnessed since the May of 1994, when India began slowly easing the state grip on telecoms to usher in everything from private players to mobile phones to the Internet, is a long-winding soap opera. In line with the spirit of the saas-bahu nation, we can announce that Reliance Jio is the much loved and hated new bahu (daughter-in-law) in this opera, impressing everyone and upsetting the older order. If you are looking not for entertaining conflicts but deep wisdom, it is this: India's taxpayer has won in a war on corruption, but may well be losing an equivalent money again as a consumer, or likely, as a taxpayer. Does it matter if someone picks your right pocket instead of left to take out the same amount of money? Last fortnight was eventfully momentous. Airtel swallowed up Tata Teleservices in the latest episode of industry consolidation, even as Idea Cellular's shareholders formally approved its acquisition of Vodafone. Reliance Jio, the Mukesh Ambani-led entity strangely representing a mix of new entry with old behemoth power, signalled it was walking to profit earlier than expected after its big-bang entry with cut-rate mobiles and data packs. It is already showing operating profit while established giants struggle to keep customers. It has nearly 140 million customers and more than Rs 7,000 crore in quarterly revenues, and is not yet one year old. But you should be looking beyond these big headlines at what the saas (established mother-in-law) is doing in this soap opera. Vodafone, even as it merged with Idea Cellular, quietly went to court against the recent order of the Telecom Regulatory Authority of India (TRAI) that slashed interconnect usage charges that clearly aided Reliance Jio. The IUC cut is being described as both unconstitutional and against the TRAI Act, this is a serious challenge. And why not? Established incumbents spent years building towers and other network equipment, and then spent huge amounts buying up spectrum. Reliance Jio has spent relatively less on spectrum as a direct 4G entrant with a shrewd strategy that was focused on the long-term future and the complex dynamics of the mobile Internet market. Like a kangaroo jumping over others in a race of goats. Former TRAI head Rahul Khullar, a respected civil servant with a strong grounding in economics, is quick to point out about Rs 150,000 crore of telecom loans are stressed out of a total of Rs 500,000 crore that telcos such as Bharti Airtel, Idea and Vodafone borrowed to cough up for the spectrum auctioned in the wake of the 2G scam that brought Narendra Modi to power as an anti-corruption crusader.
The Modi government itself red-flagged telecom debt in its mid-year economic survey two months ago — explicitly mentioning the Jio challenge.Jio is cutting into the incumbents' revenue growth and profits. What option do old giants have but to run into each other's arms for mergers and/or acquisitions? Worse, that signals more borrowings ahead for them. Idea Cellular's parent Aditya Birla Group's chairman Kumar Mangalam Birla is not ruling out share or bond issues. Mergers and acquisitions typically result in more borrowings -- and their prime purpose is cutting costs, increasing pricing power in the face of competition and paring debt. This, dear telecom consumer, means you pay more as you go forward. Birla talks of telecom tariffs "stabilising" at some point. This is nothing but a phase in which Jio may stop cutting prices to woo lower-end customers while Airtel and Idea, as is likely, will go for higher value-added services and/or raise tariffs to keep or grow their juicier customers. Two things are certain. One, if you are a taxpayer, and therefore likely to be in the higher range of telecom consumers, you may be draining out your pocket to indirectly pay for the spectrum that Airtel, Idea or Vodafone borrowed to comply with Supreme Court norms that ushered in a new regime. Second, if you are a taxpayer, some of the money that the government will use to recapitalise ailing public sector banks hit by bad loans will come from your pocket again. The erstwhile Comptroller and Auditor General (CAG) of India had totted up a questionably fancy figure of Rs 176,000 crore as the loss to the exchequer from not properly auctioning 2G spectrum, resulting in a scandal that helped bring the Manmohan Singh-led UPA government down in the elections that followed. Now, isn't that figure suspiciously close to the Rs 150,000 crore that Khullar talks of in stressed loans? The moral of the story, or call it poetic injustice, is this: when the taxpayer gains as an anti-corruption beneficiary, she loses either as an upscale consumer or bail-out angel in an economy creaking under bad loans. Soap operas invariably mean tearful continuity, not happy endings, no?
(The author is a senior journalist and editor who has worked for Reuters, Business Standard and Hindustan Times. He is currently an independent media entrepreneur, consultant and columnist. He is listed among the top 200 Indian influencers on Twitter. He tweets as @madversity)