Just about the time when TELCOS sighed a relief after Jio considered increasing its tariff, now it has come back with another discount run. The next round of disruption in the telecom space, by offering discounts to its current user base.
Probably this might have got triggered because of losing customer base once it moved to increase tariff. This move will again put pressure on the already ailing telecom businesses which has a cumulative loan exposure of close to 4.50 lakh crores, which will slowly move into default and further stress the bank NPA’s.
As first signs of default, RCOM closed its operations this month. AIRCEL is in the verge of filing for bankruptcy. RCOM’s bank exposure is 25K crores and of that close to 14K crores have got downgraded by CARE, where again SBI has the largest exposure. To note that, RCOM was started by Reliance before the brother’s split, it was the brain child of Mukesh Ambani, again came out with disruption in those days. Now, he has come out with disruption in a new avatar through JIO.
TATA DOCOMO accounts moved to AIRTEL, thus closing their operations. Looks like a lot more closures will follow. One side there will be consolidation of assets and a few operators will emerge finally.
The other side, banks will take a hit on their loan exposure, again our Government will think about a way to bail out the banks. Tax payers money is going to fund non-competent bankers and poor businesses.
Those who come in the form of disruption and discounts have never been successful. They only show up to the world that, they are doing some kind of a magic. While the reality is that, they all bleed cash and end up losers. Jio for that matter too, will stay afloat for a longer period because of deep pockets; it is actually throwing good money against bad money. In a few years from now, we will witness some drama from this company too.
There are talks that, DATA is new OIL and it will just pour money into the operator’s kitty. It will or may be a possibility, so long as the consumer is a fool. While the reality is not so, in this sector, consumers are more than kings, they will just keep moving to the provider who offers more discounts and enjoy his money.
So, for the consumers it is a joy ride. Same like start-ups, where venture capital and angel investors are throwing good money to acquire market share, which in the bargain has left the start-ups lose close to 2 lakh crores in the Indian markets. Consumers in the ecommerce space are the real beneficiaries. We had written earlier too, that there is free money available in our country; enjoy it, as long it is available. It is just distribution of money from where it got loaded to, those who don’t have; IT boom cornered all the money into a group of people’s hands, who got loads of cash, which they are splurging in the name of becoming entrepreneurs.
The same way, Reliance group amazed wealth by commanding the petrochemicals market, they were almost like dictators. Now, these retail plays where the customer base is a very large one, there is only chances of loss. Their plan is to kill competition by offering prices that none of them can operate. While the same holds good for them too, it may take some time to realize, while the outcome will be the same as that of RCOM. Only that, we will witness it probably in the next decade. For now it is very early to comment or come to a conclusion.
Money is available free; enjoy it as long as it is coming.