India’s mobile connectivity traces back to July 31, 1995 when the then West Bengal Chief Minister Jyoti Basu made the first mobile call to Sukh Ram, the then Union communications minister, using a Nokia Phone.
“25 years ago, when the Indian telecom sector was liberalized and players, including Airtel emerged on the scene, no one had imagined we would come this far,” said Sunil Bharti Mittal, Chairman of Bharti Airtel in a report.
Back then, Indian consumers had to wait for months to get a landline connection. Today, in just a few hours, a consumer can buy a mobile and activate connection, allowing them to connect with people across the world instantly.
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In the last two and half decades, mobile phones, too, have moved categories, from a luxury gadget for the rich to a ‘must-have’ device for all people. The gradual drop in voice calling rates and handset cost have accelerated mobile adoption across sections of the society.
During this period, mobile tariffs saw a significant drop. Today, consumers enjoy free phone call, which used to cost Rs. 18 per minute 25 years ago.
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Licensing and mobile technology
In 1994, India gave license to private telecom players and allowed them to access the market. This move led to a mobile revolution - - one which made operators suffer heavy losses as they paid about Rs 27,000 crore for license. The government later changed the fixed-license fee to a revenue-sharing system to support the operators.
In 2002, Tata Teleservices, Reliance Communications Limited and Hutchison operated on Code Division Multiple Access (CDMA) based network, a second-generation telecom standard. They introduced CDMA to reach out to the low-budget sections.
In 2004, when incoming calls were made free. Also, for the first time, the number of mobile phone users in India surpassed the number of landline users.
Three years later, the number of mobile users jumped to more than 5 times to 233 million, according to data from Cellular operators association of India (COAI).
Due to an increase in FDI (Foreign Direct Investment) cap to 74%, from 49%, the sector gained more financial clout that helped boost development in mobile technology and connectivity.
In 2009, Taiwanese smartphone maker HTC launched their first smartphone in India, priced at about Rs 30,000. This was followed by the entry of Chinese brands in 2014 that sold cheaper handsets to Indian consumers. The Chinese brands became more popular than homegrown brands like Micromax, Intex and Lava.
At the other end of the spectrum, Apple and Samsung were selling handsets for people looking for premium gadgets.
Enter Jio
The sector continued to see steady growth until Asia’s richest man Mukesh Ambani entered the the industry with his Reliance Jio offering in 2016. A move that disrupted the existing order.
Jio gave its subscribers free voice calls, and data at extremely low rates. In an attempt to play catch up, rivals spent a lot and compromised their margins.
Mobile operators like Aircel, Telenor had to shut shop, leaving only 3 players in the industry - - Jio, Airtel and Vodafone. Jio today is the largest mobile network operator in India, followed by Airtel and Vodafone.
Reliance’s dominance in India’s telecom industry today is linked to its acquisition of Infotel Broadbad Services just few hours after the company won 4G auction.
The small internet service provider won a slot and 4G spectrum in each of India’s 22 telecom circles. The bid amount was several times the net worth of Infotel.
At the time of auction, the spectrum was supposed to be used for data services only. However, the rules were later changed to allow voice services on the same spectrum.
Legal woes
The already squeezed operators were told by the Supreme Court to pay their Adjusted Gross Revenue (AGR) dues for he last 10 years. This situation could stifle competition in the sector, which is currently ruled Jio and Airtel. Vodafone stated that it was not in a position to pay the dues.
Telecom operators are supposed to share a percentage of AGR with the government, as a part of the ‘revenue-sharing fee’ model that was adopted from ‘fixed license fee’.
The government intervened and formally submitted to the Supreme Court to stagger the AGR payment dues over 20 years. This could significantly ease burden on a few operations.