For Indian telecom companies it has been a rocky and disruptive ride since September 5 last year, when India’s richest man, Mukesh Ambani, announced the entry to market of Reliance Jio, along with a slew of predatory freebies. That triggered a mad scramble among price-conscious Indian customers, with long queues outside the operator’s newly opened outlets.
Reliance Jio had unhinged the prevailing market metrics and the existing players were forced to dole out discount offers to salvage their customer base. But still they could not match Ambani’s deep pockets and tempting offers. Now competitors are crying foul over the newcomer’s alleged violation of norms regarding freebies.
In the latest development Vodafone India has sought an “immediate intervention” from the Telecom Regulatory Authority of India (TRAI). The Hindu has reported that the company alleges Reliance Jio had still been “luring” customers to its “Summer Surprise” offer after the telecom regulator suggested it be withdrawn.
Vodafone India said the offer was in blatant violation of TRAI’s advice. “Such promotions to customers make the regulatory advisory meaningless,” the company said in a letter to the regulator.
Reliance Jio announced its decision to withdraw the offer on April 6 after TRAI “advised” it to do so, The Hindu reported. Since its launch it has been offering free services to users under two separate offers and was supposed to start charging them from April 1 onwards. That deadline was extended, however, with a “Summer Surprise” offer. For some customers, that meant they were eligible for free data and voice services for another three months.
The prolonged price war is taking a toll on the industry, according to the Managing Director (India and South Asia) of the country’s largest player, Bharti Airtel. Gopal Vittal said at the recently held ET Telecom India Mobile Congress that the industry’s financial health was at its weakest ever with a massive debt burden exceeding Rs 4.5 trillion (US$ 6.97 billion).
He pointed out that the return on capital for companies was as low as 1%. “You might as well instead invest in fixed deposits and make a much higher return,” he remarked.
On March 2, the Telecom Commission, the highest decision-making body for the sector, communicated to TRAI the “urgent need” to implement its directions on promotional offers, in letter and spirit.