About 9 months ago, one day, the writer's Reliance "Netconnect" dongle stopped working without any warning. The bankrupt Wi-Fi service of Reliance Communications (RCom) is one of many rumors that the 15-year-old Anil Ambani telecommunications company is on the road to oblivion.
Recently, RCom notified the stock exchange that because it failed to reach an asset sale agreement with Reliance Jio, it would file for bankruptcy with the National Corporation Law Tribunal (NCLT). After creditors and the Department of Telecommunications (DoT) objected to the transaction, RCom was in trouble.
The company hopes to raise 250 billion rupees through the monetization of its assets. Now, this will have to follow the transparent route of the Bankruptcy and Bankruptcy Law (IBC).
RCom's plight is not an isolated story. The telecommunications industry is in a serious crisis, and the interruption is almost entirely related to Reliance Jio's predatory pricing and strategy. On Valentine's Day, it attracted competitors with tweets: ‘roses are red, violets are blue; once you become a neighbor in SIM card slot 2, where are you? ’
evaluation result
Sunil Mittal, chairman of Bharti Enterprises, said in a media interview in Davos that the situation was "shocking." He said that most of the early participants-Tatas Group, Telenor, Aircel, and RCom-went bankrupt and wrote off $45 to $50 billion. Survival forced No. 2 and No. 3-Vodafone and Idea to merge, and now there are only three players left-Joao, Airtel and Vodafone-Idea. He admitted that the future direction of the industry will depend on Jio's pricing.
The news for those who are still in the game is bad. Vodafone Idea just announced a huge loss of Rs 50 billion in the third quarter, which is larger than the loss of Rs 4,974 crore in the previous quarter from July to September 2018. Bharti Airtel reported a net profit of only Rs 860 million for the quarter from October to December 2018. The tariff war is clearly paying the price, because this is the 11th consecutive quarter that Batty has reported a decline in profits.
On the other hand, the new entrant Reliance Jio seems unscathed. Soon after its launch, it showed a pre-tax profit of Rs 7.84 billion for the March quarter of 2018. In the quarter from October to December 2018, Jio announced its fifth consecutive profitable quarter, with a net profit of 831 crore, compared with 504 crore in the same period last year.
Market observers are indeed confused. So far, Jio has raised 40 billion US dollars (28 crore rupees). It has the cheapest prepaid and postpaid tariffs; it has huge marketing costs and the highest ongoing infrastructure burden.
Creative accounting?
The writer pays 232.42 rupees a month for the post-paid Jio package. His similar Vodafone post-paid connection price is 700 rupees, which is three times that of the latter. For the high-speed "Jio Giga" internet service at home, it is free, except for a refundable deposit of Rs 4,500 at the beginning. MTNL's fiber-to-the-home (FTH) price is relatively poor, with a monthly cost of Rs 3,200. So, how does Jio make money? Not just efficiency!
Between Vodafone-Idea and Airtel, there are as many as 80 million low-income users with a monthly recharge of less than 35 rupees. They were dumped and disconnected after December last year. Now, there are no prizes to guess where these out-of-connect guys are heading! How do they add anything to Jio's bottom line?
Some people say that Deloitte Haskins & Sells, Jio's auditor, did some creative accounting. As at the beginning, six months of income are shown during the three-month reporting period. Jio also burned some of the operating costs, including salaries, and these eyes have been shifted to the cost of capital, which is not shown in the income statement. This was discovered in the FY18 annual report. Even the interest cost worth 599.90 billion rupees was capitalized.
Knowing where Reliance Jio is going does not require special foresight. The promise of cheapness and the promise of easy-to-access data and smartphones aims to end competition. Jio has the ability to maintain, while others don't. But it is clear that the current price package cannot be maintained.
In the field of telecommunications, we only have three operators. There were too many things before. Too much competition has caused damage to the entire industry. However, if there is no competition, consumers will be losers when Jio starts raising tariffs. It is up to the government to resolve the issue of the unfair playing field raised by the Cellular Operators Association and make the industry sustainable.
No comments:
Post a Comment