WHY WE, AS CONSUMERS, MUST SUPPORT VODAFONE IDEA AND BHARTI AIRTEL’S TARIFF HIKE

Prior to Reliance Jio Infocomm’s entry in September 2016, there were more than ten wireless providers in India. Unfettered 4G data service, free voice calls and low data tariffs by Jio, saturated the Indian telecom industry market to roughly five players. Two of these players, BSNL & MTNL are sick public sector units. Vodafone Idea Limited, two entities which merged in 2018 to counter stiff competition posed by the new entrant, reported an unprecedented net loss of Rs. 50,992 crore for its September quarter while Bharti Airtel posted a record Rs. 23,045 crore. These colossal losses account for the setback suffered by the Supreme Court’s judgment in October this year, which ordered telecoms to pay license fees and Spectrum usage charges on higher adjusted gross revenue base compared to earlier. The claims made by the Department of Telecommunications against these companies as per reports are, Rs. 217 billion for Bharti Airtel and Rs. 283 billion for Vodafone Idea, with the latter probably the worst hit. With no foreseeable relief from the government and a deadline by the telecom department to pay up the dues within three months of the Supreme Court’s orders, rumours are rife that the Vodafone Group may exit Indian operations.

We, as users have benefitted from declining prices until now. However, if major players were to exit the market, this would be a short-lived gain. The central goal of antitrust is to ensure that the only way firms can get ahead is to make a better product or make it more cheaply. Competition brings consumers high quality innovative services at the lowest possible prices. Each firm in a competitive market has a unilateral incentive to destabilize its rival’s price slightly and capture the whole market. Given the tumult faced by the sector, if it was to be reduced to just one private operator, the fear of consumer exploitation may loom large. As significant scale economies are present in the telecom industry, such operators will typically have cost advantages which shall further prohibit the entry of smaller rivals in the future. Given recent aggravating factors, we must be mindful that a hike in tariffs by the incumbents to sustain their operations shall ensure that the market shall function in a healthy, competitive manner in the long run.