InvestorQ : What do you see are the biggest challenges for the telecom sector going ahead?
swati Bakhda made post

What do you see are the biggest challenges for the telecom sector going ahead?

Sam Eswaran answered.
3 years ago

Broadly, if you were to look at challenges for telecom industry, they are at 3 levels. At the company point of view, the telcos need to reduce their debt, pay up statutory dues and also invest in 5G which is the future of telecom. All three looks clearly incompatible with one another and that is the challenge at the company level.

Then there is the industry level challenge. Telcos need to increase ARPU from these levels but that is easier said than done in a highly competitive market. Secondly, Airtel has to plan a massive capital outlay to leverage the 5G technology shift in the next few years. It is not clear where the money will come from as it grapples with large dues to DOT.

But the biggest challenge is at a customer level if the sector becomes a duopoly. That looks very likely now, the way Vodafone Idea is being squeezed and the way customers are deserting the company. Here is the Catch-22 for VI. Vodafone Idea will need a sharp tariff hike to improve its ARPUs and have any chance of surviving on a viable basis.

However, while Airtel would be more than pleased with the idea, they will not go ahead unless Jio is also willing to play ball. That is not still too clear. ARPUs have gone up in the recent past but VI will need a series of price hikes to really be able to survive. Else, it would be an inexorable move towards a duopoly; and customers have rarely benefited from that.