Jio's Summer Surprise scheme: Trai brings the curtain down on free services

Reliance Jio has scrapped its “Summer Surprise” scheme, which promised complimentary services for three months. But the action came only after it was “advised” to do so by the Telecom Regulatory Authority of India (Trai). The offer was open to all subscribers of Prime, the network’s inexpensive data plan — voice calls on the network are free — which was to end on March 31. Trai’s latest intervention should help reduce the unease in India’s telecom sector; after all, the incumbent companies have been crying foul over Jio repeatedly extending its initial offer. However, what is odd is that Trai did not issue a press note on the “Summer Surprise” offer, and it was left to Jio to announce that it was withdrawing the offer on the regulator’s advice. On Friday, a senior Trai officer told reporters that the “Summer Surprise” did not fit into the regulatory framework. The officer also said that Jio did not file a tariff plan, though it had launched the offer on March 31. By acting against the Jio offer, Trai has hopefully brought the curtains down on free services. 

But the regulator’s action has clearly come late in the day. Thanks to the Jio giveaways, the industry as a whole is reported to have lost 20 per cent of its revenues since Jio’s launch. Only one of the four listed networks, Bharti Airtel, reported a profit in the December-ended quarter. The combined debt of the industry is over Rs 4 lakh crore. In fact, the debt of the listed networks exceeds their valuation. Banks are increasingly worried about their exposure to the sector. Analysts expect the bloodbath in the markets to continue for at least two more quarters. Much of this pain could have been averted had Trai decided to act early. After all, Jio launched services on September 5, 2016, by offering free services to all customers until December in a “Welcome Offer”. When this offer ended, it came out with another free offer called “Happy New Year” offer in which subscribers got free voice and data services. However, free data download was limited to 1GB per day. For most customers, this was as good as unlimited data. This meant that Jio offered promotional plans for about 200 days, much more than the 90-day limit. 

The other side to the loss of viability among incumbent players is the hit on government revenues. Former Department of Telecommunications Secretary J S Deepak had written to Trai in February, drawing the regulator’s attention to the fact that the extension of the free offer had started to hurt the government’s revenue. Both licence fees and spectrum user charge, which the government collects from the networks, are learnt to have fallen sharply in recent months. While licence fees have slumped from Rs 3,165 crore in the third quarter to Rs 2,300 crore in the fourth quarter (according to the provisional data), the spectrum user charge has fallen from Rs 1,553 crore to Rs 1,416 crore during the period. There is also a question mark on how much the government will mop up in its next round of spectrum auction. In that context, it was hard to understand why Trai delayed its decision on Jio’s promotional offer and kept on harping that its focus was on “affordable telecom services” and “not maximisation of government revenue”.