By Deepak Gopalakrishnan Feb. 28, 2020
Just like IT, the telecom story was built on a house of cards. Telecom companies are bleeding, having sunk in massive investments and struggling to make profits. As always, it will be the poor that will be hit badly. For many, the mobile is a source of livelihood and the only entertainment or even quality education they have.
A problem with many “success stories” in India is that while the headlines look impressive, an even cursory investigation exposes that much is left to be desired.
Take the poster child of Indian middle-class success over the first decade of the millennium – the IT boom. The headlines made for amazing reading: Largest pool of engineers! Record-breaking outsourcing numbers! Global acclaim! Cities showing off new gleaming IT parks! Alas, beneath all this lay a sad truth: India’s IT story was being built on the back of who could do donkey work the cheapest. So it should not come as a surprise there are frequent layoffs and slowdowns as clients will just shop for the next cheapest seller (like how we compare Zomato and Swiggy prices for the same restaurant). Plus, with no value add or innovation, clients feel less compelled to stick around.
The same rug could be pulled out from under another much-celebrated story: The Indian mobile revolution. The sector until now has been typified by up, up, up: Everyone is getting a mobile. Information and entertainment for everyone. India is becoming a powerhouse. You saw these takeaways everywhere: Headlines in local and international news. Reports from consulting firms and the Indian government itself. No doubt, it has made its way into the strategy slides of many ad agencies or app developer’s pitch presentations. A search for “Indian mobile revolution” reveals 107 million searches (alas, Sachin Tendulkar could muster only 28 million.)
The numbers are startling. We have 400 million mobile users and counting. We consume more data per month than China. No wonder then, that everyone was bullish on India’s mobile story: Netflix, Facebook, Google, and Amazon have all sunk in huge amounts of investment in the country.
Too bad though, that like IT, the telecom story was built on a house of cards. The truth is, telecom companies are bleeding, having sunk in massive investments and struggling to make profits – forget having the lowest prices in the world, around 35 per cent of their revenues had to be paid as taxes to the government, and they had to shell out a lot more for expensive spectrum. And this was before Jio, who strolled in, knocked the wind out of the sails of existing players and galloped on to become the largest player in the country on the back of Mukesh Ambani’s endless pockets and clout.
Proudly toting “mobile revolution” counts for nothing if all the companies are deep in the red. That’s not a revolution or a success story. That’s a lopsided, artificially inflated market which is going to eventually fall apart. By that token, we could become the gold capital of the world by selling the stuff for 3 rupees a kilo (maybe that newly found mine in UP will help).
If prices increase, then a good swathe of the population will revert to piracy for content, which will hit the entertainment industry further (hello pre-filled SD cards!).
Eventually, every game of pass-the-parcel needs to come to an end, and this time the telecom companies are left holding the offending box as the music metaphorically stops, replaced by a sombre funeral march tune. Vodafone-Idea, Airtel, and Jio owe a lakh crore (!) to the government. The first might even shut down.
In fact, the company pleaded with the Ministry of Telecom to set “floor pricing” for the sustainable growth of the sector. One alarming number in this: 35 rupees per GB. Yes. According to one of the most experienced telecom companies in the world, that is the minimum needed to get the sector out of the crisis. Chances are, you’ve not just forgotten how much data used to cost, but you don’t even bother checking how much “free data” you have (mine is 244 GB).
That amount doesn’t sound very outrageous if you compare it with the rest of the world, even adjusted for purchasing power parity: It would still be cheaper than most of Africa, Russia, and Latin America. But it could just be high enough to rain on the parade of an ecosystem built on the back of negligible rates. What are some possible outcomes?
Firstly, streamers will be all at sea. Unlike the US, most of Netflix’s consumption happens on mobile. Fair to assume that it’s the same with Amazon Prime Video, Hotstar, and Voot considering their emphasis on regional content and sports. As always, it will be the poor that will be hit the most. For many, the mobile is a source of livelihood and likely the only entertainment or even quality education they have.
Increased prices will have an impact on sectors dependent on abundant cheap internet, think Uber and Swiggy. Which means said companies will need to account for data charges, leading to either pissing off drivers further or raising prices/dropping discounts from users, as they are under pressure themselves to make a profit after Softbank’s fiascos. Other gig economy services too – like UrbanClap – could be affected.
Proudly toting “mobile revolution” counts for nothing if all the companies are deep in the red.
If prices increase, then a good swathe of the population will revert to piracy for content, which will hit the entertainment industry further (hello pre-filled SD cards!). We might see a preference for apps that can be used offline – such as games – rather than those that mandate streaming. Heck, maybe people will start watching television again.
People are likely to mill around WiFi zones more (perhaps Google shouldn’t have been so hasty about ending its Station WiFi programme). I can see more places offering free WiFi as a selling point, especially to the youth.
What of the sector itself? Even now, there will be less appetite for 5G spectrum auctions, which means India is likely to lag behind markets like the US and China (indeed, those countries are rolling out 5G while we’re staring at a 2024 timeline). It’s not just about faster video loading – the technology could bring with it benefits like remote medicine and improved supply chains, which the masses would benefit from.
And finally, one wonders what the impact of this will be on individual content creation. Will this stifle middle India’s newfound love (and celebrity) on TikTok? Will this mean possibly fewer rumour-mongering videos proliferating on WhatsApp? Or is that too optimistic, a corollary being fewer actual on-ground videos which make the country less aware of atrocities in Delhi and the North East?
These are all very real possibilities. Vodafone-Idea’s imminent exit will lead to a Jio-Airtel duopoly. Both players are likely to raise prices and work towards sustained profitability, bottom-of-pyramid and India growth story be damned. Hopefully, this crisis is a wake-up call for not just the telecom but any sector to place emphasis on sustainable growth rather than sexy headlines.
Deepak 'Chuck' Gopalakrishnan is a freelance writer and marketing guy who lives in Mumbai. He runs two podcasts (Simblified, The Origin Of Things) and a satire newsletter (The Third Slip). He used to work in advertising until his soul couldn't take it anymore, and now spends all his time annoying his cats, listening to prog-metal, cycling and writing bios of himself in third person. He has an irrational love for cold water and Tabasco.