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Vodafone, Government Equally To Blame

Things have come to such a pass for Vodafone, not just its local partner, in India that its exit from the country looks inevitable, but that will be bad news

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Vodafone, Government Equally To Blame

One of the most successful demonstrations of a free market in India, the telecom sector is struggling, thanks partly to the players’ inability to survive cutthroat tariff cuts and partly to odd laws of the state. From too many mobile service providers — so many that a few went to look for greener pastures in Africa — KM Birla has, with his request to the union government to buy ABG’s stakes from Vodafone Idea, shown a foreseeable future where once again there will be just two mobile service providers per circle as in the 1990s. If the company with a market share of about 24% vanishes from the private sector, Reliance Jio and Bharti Airtel will remain, with a high probability that they would form a cartel, as was the practice two decades ago in each of the 16 circles the country’s telecom territory was divided into. Nobody cares that BSNL and MTNL together hold about 10% of the market share too.

Squeezed by the AGR under the Narendra Modi regime after the awkward retrospective taxation introduced by the late Pranab Mukherjee, which the current government found technically too complicated to reverse, loss-making Vodafone and its promoters are not interested to invest more. While the remnants of socialism in India must be excised, the company’s plea of government guarantees like an administered floor price above the cost of services cannot be entertained. Such state intervention defeats the purpose of the existence of private players in the market, for their profits as well as losses must not be the concern of 100% taxpayers of the country, from whom the government would take the money required to accept the request. Of course, the Modi government has done it for NPA restructuring of banks and also in the case of saving Yes Bank that had fallen due to the mischiefs of a patently corrupt head of the business. Vodafone cannot cry foul about ‘predatory pricing’ either, as both Airtel and Jio have all the right to price their service as per their respective interests. If this leaves very little margin for operations, tough luck! Competition is the game each one of them had signed up for. The Indian state surely shares a part of the blame, with its socialist judiciary that enjoys punishing individuals and companies it perceives as rich only aggravating the crisis. The regulatory body Trai must, hence, provide a solution permissible within the framework of business ethics. Vodafone and ABG can, of course, take recourse to the Insolvency and Bankruptcy Code and chicken out. That will also save banks from a sudden surge in bad loans.

When about 97% of internet access is wireless, when the 4G network covers 98% of the population, this market cannot do without a fair contest, which is possible only when the number of competitors are too many and varied for a backstage trade entente. The political executive, on its part, must stop viewing the telecom sector as a milch cow alone. A few of the many levies on the companies may go. As such, the country is still struggling to graduate to 5G. That prospect should not appear bleak to potential investors and other stakeholders.

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