RELIANCE JIO’S DESTROYED REVENUE SHARE OF OPERATORS: COAI DG RAJAN MATHEWS

In a detailed interview to Parul Manchanda, Cellular Operators Association of India (COAI) Director General Rajan S Mathews talks about key issues of the mobile sector, particularly the financial hardships incumbents are facing post the entry of Reliance Jio. He also talks about other relevant issues like 5G and cloud services…

Vodafone Idea Limited has sought a 2-year moratorium on annual spectrum payment of about Rs.10,000 crore from the Department of Telecom. Your comments?

Looking from an association’s perspective, we recommended that this should be done. One of COAI’s member, Reliance Jio objected as according to them this is not appropriate for the government to give this additional benefit to Vodafone but on the other hand Airtel and Vodafone are saying that as license fee and spectrum usage charge will be constant, we will be paying higher amount and thus the government will earn enough from the present value. In absolute numbers they will earn more. That’s why Vodafone Idea is asking for 2 more years over the remaining period of debt, they will obviously be paying a higher amount. It’s just for some initial period the telecom operator needs some relief.

Further, Vodafone and Idea combined has to pay more for the spectrum and that the debt too remains high.  After the Joint venture coming together, GST amount stuck with the government to the tune of Rs.30,000 crore. Vodafone Idea has asked government to free that money. In addition, Vodafone Idea is also under cash flow pressure. 

In November last year, COAI approached DOT Secretary Aruna Sundararajan for an additional 2-year moratorium period on payment of instalments for spectrum won in auction and interest rates imposed on instalments. Has DoT reverted to COAI on this?

Telecom Secretary has said that she will take this to the Finance Ministry because they are the key decision makers. As of now COAI hasn’t got any official feedback from Ms. Sundararajan in terms of what they will do that or what they will not do. I think it is being considered by the government and we will wait to see what will be the government’s decision. 

As of now, telecom service providers have sufficient spectrum available to offer services, what should they do to provide better services at reasonable cost to the people?

Right now people are getting voice at free. Now-a-days people are willing to pay more but they want good quality. On the other side, operators cannot invest in quality as to invest in a network is all going to government. 30% of every rupee goes back to the government and this causes cash flow problems for the operators. Paying license fee and spectrum usage charges are big problems. Reliance Jio’s entry has further destroyed the revenue share of operators.

Since last 3 years Reliance Jio has been continuously showing a very healthy balance sheet and on the other hand, Bharti Airtel’s revenue is declining. What is your take on this?

Reliance Jio has a benefit of a new operator. Airtel and Vodafone started with 2G GSM network and are shifting to 4G, it’s a difficult task. Jio has bought the 4G spectrum first and was able to leverage the benefits, while other competitors had a hard time managing it.

Further, I think we have to look at two things. What we have seen is an explosion of usage. Voice traffic hasn’t come down and data usage has increased. The problem is tariffs. We all understand that because of the new entrant, tariffs have taken a big hit. That is also partially responsible for the increase in the data usage. It is consistent with global trends. Even though, internationally the prices are not as cheap. International tariffs are increasing. 

Do you think telecom industry needs urgent intervention from the government to bring stability in balance sheets of the telecom operators?

Yes the industry needs intervention because 30% of every rupee goes to the government and doesn’t come back to operators. With high levies on the industry, it is time for the government to lift some of these levies and bring it back to international standards. Internationally, countries around us like Singapore, Pakistan, Sri Lanka, Vietnam do not take more than 3-5%, but Indian government charges 30%. The profitability of operators is under stress plus with the debt incurred in buying the spectrum has added more financial stress for the industry.

It’s time for the government, the primary beneficiary of all the profit to start looking at how they can reduce government levies on telecom operators.

The CAG had observed that backhaul spectrum management by the DOT had led to a loss of Rs 560 crore to the government. From where has this figure come?

I think, CAG doesn’t know what it is talking about. Telecom Minister Manoj Sinha is absolutely right. Operators pay for the access part in the auction. When the spectrum bands were put up in the auction, the backhaul was always bundled with it because without backhaul nothing can happen. They know they cannot dig up streets and put up fiber. If an operator pays for the spectrum, they pay a nominal royalty for the backhaul spectrum. 

According to me, CAG has got confused with the Supreme Court ruling that has said that all the spectrum has be auctioned but the “access spectrum”. Backhaul cannot be used other than for backhaul purposes. Backhaul spectrum is given to build a network, it cannot be used for commercial purposes. 

DoT has taken a tough stand on call drops. What is your view on this?

Yes, it is appropriate. Customers don’t want to pay for call drops. Call drops can be caused by poor handsets, by poor quality software but eventually, network should also be robust enough so that it does not have call drops.  Sadly, Our networks are not designed to provide coverage in several places like basement, lifts etc. The main problem that operators’ face is getting space to put a cell tower. The Biggest challenge is getting permission to put tower on the land from the government.

When do you think that 5G will be commercially launched in India? 

The person who heads 5G in India is Arogyaswami Paulraj, a professor in Stanford University. According to him, 5G is valuable for India, and the government which is currently working to advance regulatory regime, should also make airwaves affordable. He opined that at the earliest, 5G will start rolling out in 2020 in India. 

Do you expect multiple stakeholders to come together for 5G licensing?

Operators will be the primary people and they will be the partners. IoT, machine-to-machine, cloud computing all this means that there are opportunities for operators to invest in the technology. So yes, they will be coming together and will invest in the technology. 

US and European countries have banned Huawei from 5G technology test but contrary to this Department of Telecom has permitted them. How you see this considering the integrity issue of Chinese companies and India’s national security?

Arogyaswami Paulraj heading 5G said that origin of the equipment from any country doesn’t state that it is risky or not. India doesn’t produce any equipment on its own. Ericsson, Nokia, Huawei provides various equipments, which we use in our networks. If they are from China, that doesn’t mean that they are at a high security risk. The government will address all concerns through the testing process and make sure that it passes the test properly. If there are security reasons, government of India will look into this and make an appropriate call.

What are the future aspect of cloud services in India according to you?

Cloud services are already taking up and this will proliferate further across the country. Network is moving to an edge as we want to reduce latency and give higher speed. Customers wants to be able to access network anytime, any place. Cloud computing allows you to put everything at a place. It gives flexibility to the user. It offers lot of efficiencies, cost-saving, multiple operators can be located in the same cloud. It makes it more efficient and that’s why enterprises are moving towards the cloud computing.  


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