scorecardAmid concerns of Jio-Airtel duopoly, analysts suggest new telecom bill empowers govt to maintain competition
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Amid concerns of Jio-Airtel duopoly, analysts suggest new telecom bill empowers govt to maintain competition

Amid concerns of Jio-Airtel duopoly, analysts suggest new telecom bill empowers govt to maintain competition
Business3 min read
  • The government has released the draft telecom bill that seeks to replace three old bills, one of which is over a century old.
  • The new telecom bill’s primary focus remains on safeguarding consumer interests and ensuring competition in the industry, at a time when concerns of a Jio-Airtel duopoly are rife.
  • Analysts suggest that while the draft bill empowers the government to ensure the industry remains competitive, Jio and Airtel are still likely to dominate the 5G roll-out.
The Indian government has floated a draft of the new telecom bill that will replace three existing laws, one of which is over a century old. Analysts suggest that this new bill will help the government ensure that the Indian telecom industry remains competitive amidst concerns of duopoly.

There is a growing consensus in the Indian telecom sector that Reliance Jio and Vodafone Idea will dominate the 5G rollout – the spectrum auction results lend credence to this argument. This, according to analysts, will lead to more consolidation in an industry where Jio and Airtel account for ₹3 out of every ₹4 in revenue.

“India telecom is facing a new regulatory bill that gives the government added powers to ensure competition in public interest,” stated a report by CLSA.

However, on a cautious note, the report said that despite these new provisions, “5G led by RJio/Bharti will still be a catalyst for final sector consolidation.”


Safeguarding subscribers

The new telecom bill also proposes key safeguards to protect subscribers and the government in case a telecom provider goes bankrupt – in the current scenario, Vodafone Idea is the telco of concern.

While the telco has opted for the adjusted gross revenue (AGR) moratorium, this ends in FY27 when the government has an option to convert its dues into equity amounting to a 33% stake in the company.

“We believe these specific provisions are enabling ones that empower the government to deal with any eventuality over the longer term,” said a report by Credit Suisse.

According to the draft telecom bill, a telecom provider is allowed to continue its services even while it is undergoing insolvency proceedings – this is in line with the provisions of the Insolvency and Bankruptcy Code, which allows resolution professionals to continue the operations of the entity.


But beyond that, the government has also added a specific carve-out for the telco to continue using spectrum to provide services even in case it defaults on its dues.

“…may allow the licensee to continue to use spectrum subject to revenues being placed in an escrow, with licensee fees and other government charges having priority in terms of claim to this revenue,” said a report by Credit Suisse, quoting the relevant provisions of the draft telecom bill.

And if things get worse, the government has put up a safety net for subscribers – in case it is decided that the operations are to be ceased, then the government can direct other telecom providers to manage the operations of the company and ensure continuity for subscribers.

Additionally, the government has also added a provision to defer, write off, or convert any regulatory dues into equity – but for this, ‘extraordinary’ circumstances like consumer interest and competition concerns need to exist.


Not the first time

It’s not the first time a telecom provider has undergone insolvency and liquidation – during the telecom boom of the 2010s, telcos like Aircel have wound up their operations and their subscribers were forced to port out to Airtel and Vodafone.

While 6 million subscribers managed to port out in time, 8 million were left in the lurch – the new provisions to allow existing telcos to manage operations will come in handy in such situations, so subscribers do not experience difficulties in using services until the porting process is complete.

SEE ALSO:

Rupee headed lower as RBI intervention unlikely to be "aggressive"

Jio set to launch True 5G services across major Indian cities this Diwali

The economics behind Reliance Jio’s operations

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