Reliance Jio Infocomm Ltd, which is held by the Reliance Group under the Jio Platforms banner, is in better shape than the other private players. However, the Reliance Group is raising cash to try and make itself debt-free. The chairman, Mukesh Ambani, has clearly stated that the group wishes to end the investment cycle in RJio. The group has raised around Rs 95,000 crore-equivalent for the unlisted Jio Platforms and it has had a successful rights issue in Reliance Industries, which will bring in another staggered Rs 53,000 crore. Therefore, it is close to wiping off net debt of around Rs 1.65 trillion and could be unwilling to invest further specifically in the telecom subsidiary, focusing instead on building retail, entertainment and other digital plays on Jio Platforms.
So, this in turn means 5G auctions and further to that, 5G network rollouts can be indefinitely delayed and India will fall behind the rest of the world in this technology. The government will also have to shelve its plans of raising money in a difficult year through these spectrum auctions.
If Vodafone Idea
pulls out of India, it would leave the sector in a difficult situation, quite apart from the bad optics it causes in terms of a failed MNC venture. In that case, the sector would become a duopoly with RJio and Airtel competing, if we discount the bankrupt public sector telco, BSNL–MTNL.
Voda-Idea has 332 million customers and over half of them are still on voice-driven 2G networks. Most of Airtel customers, and all Jio customers are on 4G. Taken together, the other two private players lack the capacity to instantly absorb 330 million new subscribers. Moreover, 2G users from Voda-Idea would have to change handsets, etc., to use RJio at all, which is a hardship since most 2G users are lower-income. In this scenario of a pullout, the two remaining players would need to take over Voda-Idea’s assets, including its spectrum, on an emergency basis. This would be complex in terms of the legalities as well as the financials.
Under the circumstances, investors have to wait-and- watch and hope for a favourable judgment eventually. If SC allows the government’s plea, the sector dynamics would look better. Otherwise, the government could cut the Gordian knot at some stage by legislation that retrospectively waives the dues, or allows for staggered debt servicing.
Devangshu Datta is an independent market analyst. Views are his own.
Disclaimer: Views expressed are personal. They do not reflect the view/s of Business Standard.