A look back at the biggest stories this week

Whether it’s important, depressing or just entertaining, the telecoms industry is always one which attracts attention.

Here are the stories we think are worth a second look at this week:


Facebook reignites the fires of its Workplace unit

Facebook has announced its challenge to the video-conferencing segment and a reignition of its venture into the world of collaboration and productivity.

Full story here


Trump needs fodder for the campaign trail, maybe Huawei fits the bill

A thriving economy and low levels of unemployment might have been the focal point of President Donald Trump’s re-election campaign, pre-pandemic, but fighting the ‘red under the bed’ might have to do now.

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Will remote working trends endure beyond lockdown?

It is most likely anyone reading this article is doing so from the comfort of their own home, but the question is whether this has become the new norm is a digitally defined economy?

Full story here


ZTE and China Unicom get started on 6G

Chinese kit vendor ZTE has decided now is a good time to announce it has signed a strategic cooperation agreement on 6G with operator China Unicom.

Full story here


ITU says lower prices don’t lead to higher internet penetration

The UN telecoms agency observes that, while global connectivity prices are going down, the relationship with penetration is not as inversely proportion as you might think.

Full story here


Jio carves out space for yet another US investor

It seems the US moneymen have a taste for Indian connectivity as General Atlantic becomes the fourth third-party firm to invest in the money-making machine which is Jio Platforms.

Full story here


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Silver Lake pays a premium for a chunk of Jio Platforms

Private equity firm Silver Lake has shelled out $750 million for a 1.15% stake in the Indian telco, which represents a 12.5% premium on the price Facebook recently paid.

In the baffling Indian numbers, Silver Lake is handing over ₹5,655.75 crore at an equity value of ₹4.90 lakh crore (~$65 billion). When Facebook bought 10% of the company a fortnight ago, the valuation was more like $57 billion. While we don’t doubt Jio has had a cracking couple of weeks, something else must be going on for the price to shoot up so.

“I am delighted to welcome Silver Lake as a valued partner in continuing to grow and transform the Indian digital ecosystem for the benefit of all Indians,” said India’s richest man Mukesh Ambani, Chairman of Reliance Industries, Jio’s parent. “Silver Lake has an outstanding record of being a valuable partner for leading technology companies globally. Silver Lake is one of the most respected voices in technology and finance. We are excited to leverage insights from their global technology relationships for the Indian Digital Society’s transformation.”

“Jio Platforms is one of the world’s most remarkable companies, led by an incredibly strong and entrepreneurial management team who are driving and actualizing a courageous vision,” said Egon Durban, Silver Lake Co-CEO. “They have brought extraordinary engineering capabilities to bear on bringing the power of low-cost digital services to a mass consumer and small businesses population. The market potential they are addressing is enormous, and we are honored and pleased to have been invited to partner with Mukesh Ambani and the team at Reliance and Jio to help further the Jio mission.”

The reason for the premium remains unclear. It could be that the mere fact Facebook got involved made Jio Platforms 12.5% more attractive as an investment. Then again, as Tech Crunch speculates, Silver Lake could have bought a lower class of share, or is anticipating an imminent IPO. From Jio’s perspective, these infusions of cash could be contingencies against the depressed global economy or could be a war chest for further investment.

Reliance Jio offloads towers to settle Government bill

Telecoms disruptor Reliance Jio has been forced to sell its tower assets to Brookfield Infrastructure Partners for approximately $3.55 billion.

While Reliance Jio is not feeling the pinch as painfully as its competitors, the business is facing a significant financial outlay to settle a spectrum fees dispute which has been on-going for more than a decade. With 25,215 crore Rupees (c.$3.551 billion) in compensation for the tower infrastructure business, Reliance Jio should be in a healthier position, albeit a bit lighter on assets.

“We are pleased to enter into this long and strategic relationship with Brookfield, which is one of the largest and most respected managers of infrastructure assets globally,” said Mukesh Ambani, MD of the Reliance Industries group.

“We are confident of Brookfield’s abilities to manage this large portfolio of high-quality infrastructure assets and further enhancing value creation opportunities. This transaction demonstrates the belief of global investors in the potential of India’s digital opportunity.”

Although the disposal of assets, or at least 100% ownership of said assets, is not an entirely comfortable position for the telcos to be in, it is becoming increasingly commonplace around the world, for a variety of reasons.

Telefonica has been playing with the idea of an IPO or partial sale of its tower infrastructure business unit, Altice has recently sold off 49.99% of its newly separated wholesale business and Vodafone created its own standalone tower business mid-way through the year. These are examples of asset divestment, though it is to fuel the expensive jobs of 5G and fibre broadband. The India situation is of course slightly different, though it has the telcos frantically searching for additional cash.

An argument over the total amount telcos owed for spectrum fees came to a conclusion in recent weeks, with the courts ruling in favour of the Government. Unfortunately for the telcos, this means over a decade of licence fees, interest and missed payment penalties will now have to be settled. For Bharti Airtel it has meant asking the Government for relief, Vodafone Idea have threatened to shut the whole business down and Reliance Jio is offloading its tower business to Brookfield.

While annual licence fees for spectrum are common place, such lengthy legal cases to dispute them are not. In a healthy regulatory environment, the telcos complain but generally accept the prodding and poking of authorities. Considering the friction which is being witnessed between the telcos and authorities in India, this is anything but a healthy situation. Whether it is charging too much for spectrum, favouring certain telcos or mis-managing termination regulation, the Indian landscape is quickly turning into a farce.

The Telecom Regulatory Authority of India (TRAI) and the Indian Government are slowly killing off competition and sleep-walking the country towards a monopoly.

Vodafone Idea threatens closure over $13 billion fine

Vodafone Idea has stated it will shut-down its business unless relief is offered by the Indian Government for the $13 billion demands which have been directed at the firm.

Speaking at a conference in New Delhi, Vodafone Idea Chairman Kumar Mangalam Birla has threatened to compromise the competitive landscape in India even further in light of the monstrous spectrum bills which have been handed to the telcos. This is an argument which has been on-going for more than a decade, though the penalties and interest fees may well cripple Vodafone Idea.

“If we are not getting anything then I think it is end of story for Vodafone Idea,” said Birla. “It does not make sense to put good money after bad. That would be end of story for us. We will shut shop.”

This dramatic statement from the Chairman specifically links back to a dispute concerning spectrum licence fee payments, as well as additional interest and penalties. Ultimately, the telcos could be liable for an eye-watering 1.47 Indian rupees, roughly $21 billion. Looking at the bigger picture, this is further evidence the Indian Government and the Telecom Regulatory Authority of India (TRAI) is unable to manage the market effectively.

Looking at the fine, the Indian Government has stated the licence for spectrum requires the telcos to had over a proportion of revenues during the period which the licence has been held. The debate is over how much is owed, as the telcos seem to believe it should only be revenue associated with the spectrum, while the Government does not.

The saga itself was elevated to the High Court, with the Judge ruling in favour of the Government. With the monstrous bill standing, both Vodafone Idea and Bharti Airtel have petitioned for relief. Reliance Jio is also facing the same fees, interest and penalties, but as it has only been operational since December 2016, the financial burden is significantly less.

For Vodafone Idea, despite the on-going potential for profits in India, it appears the financial stress is simply getting too much. The shifting dynamics of competition in India have already forced a merger between Vodafone India and Idea Cellular, and it will get to a point where the out-going cash makes it in tolerable to continue operating in the country. It seems the point of no-return is looming large on the horizon.

From a revenue perspective, you can see this is a market which is in trouble. There is significant potential for upshot as digital takes hold, though the telcos will have to weather the storm.

  Industry Revenue (Rupee, Billions)
Q1 2019 390
Q4 2018 432
Q3 2018 426
Q2 2018 469
Q1 2018 440
Q4 2017 435
Q3 2017 466
Q2 2017 493
Q1 2017 505

With tariffs set to increase between 15-40% over the coming months, the overall revenues in the Indian telecoms market will increase, though it might be a matter of too little, too late for Vodafone Idea. As you can see from the quarterly revenues, a significant chunk of cash has been taken out of the market through Reliance Jio’s aggressive pricing strategy, forcing consolidation and crippling competition.

Taking a view of the bigger picture, this is another example of the Indian authorities ineffectively managing the telecoms market. The Government and regulator have been attempting to drive India forward into the digital economy, but the aggressive pursuit and favour granted to market disruptor Reliance Jio is crippling the traditional telcos.

With Vodafone India and Idea Cellular merging, Telenor and Reliance Communications exiting, Tata being acquired by Bharti Airtel, the state-owned telcos only surviving because of Government hand-outs and Bharti facing similar financial burdens, it seems only Reliance Jio is in a healthy position. In pursuit of digital glories, authorities have placed India on a fast-track to a monopolised telecoms market, which is not healthy for anyone.

Vodafone and Bharti set to raise prices help pay government bill

Beleaguered Indian operators Vodafone Idea and Bharti Airtel have indicated they will need to start charging their customers more.

Neither of them explicitly blamed the massive government bill they’ve been asked to pay for the unspecified price hike, but the fact that it has happened so soon after they got the bill and that they made the announcements almost simultaneously means it’s very unlikely to be a coincidence. The increase will kick in at the start of next month.

“To ensure that its customers continue to enjoy world class digital experiences, Vodafone Idea will suitably increase the prices of its tariffs effective December 1, 2019,” said Vodafone Idea in a statement to Business Standard. “The acute financial stress in the telecom sector has been acknowledged by all stakeholders and a high level Committee of Secretaries headed by the Cabinet Secretary is looking into providing appropriate relief.”

“The telecom sector is highly capital intensive with fast changing technology cycles that require continuing investments,” said Bharti Airtel in a statement to the Economic Times. “It is, therefore, extremely important that the industry remains viable to support the vision of Digital India. Accordingly, Airtel will appropriately increase price offerings in the month beginning December.”

Their nemesis Reliance Jio announced a month ago that it was going to start charging for stuff it had previously given away for free, which led to some muttering. Now that its competitors are also raising their prices it’s clear that the government cash grab will ultimately cost regular people. Vodafone and Bharti will be hoping their customers don’t punish them too much for this move, but it will surely lead to them losing some more business to Jio.

The Indian telecoms crisis shows no sign of abating

The Indian government is showing no sign of backing down on its demands for massive payments from Bharti and Vodafone.

Bharti Airtel took an exceptional charge of around $4 billion on its latest quarterlies, to account for most of the bill presented to it by the Indian government for historical license fees. This follows a letter sent by the Indian Department of Telecoms demanding they pay up on timely fashion.

“On the AGR verdict of the Hon’ble Supreme Court, we continue to engage with the government and are evaluating various options available to us,” said Bharti Airtel boss Gopal Vittal in his comments on the quarterlies. “We are hopeful that the government will take a considerate view in this matter given the fragile state of the industry.” The charge indicates they’re not that hopeful.

Meanwhile Vodafone CEO Nick Read had a bit of a moan about the situation during his own earnings call earlier this week. This doesn’t seem to have gone down too well back in India, with government officials expressing their displeasure to the Indian media, according to the Standard. Read seems to have slightly retreated from his previous position, but not much. His underlying point that there is rapidly diminishing incentive to put up with all this aggro remains.

It looks like the best Voda and Bharti can hope for now is a bit of relief on the government bill, but they’re still going to have to shell out a lot of rupees. What this will mean for the future of the Indian telecoms market is unclear. Presumably Relaince Jio will be in a stronger position than ever to differentiate itself through network investment, which will surely have a negative effect on competition.

Jio accuses Indian cellular trade body of foul play

India’s leading mobile operator group thinks the fact that the trade body lobbied on behalf of two others is proof of bias against it.

The trace body in question is the Cellular Operators Association of India (COAI), which apparently wrote to the Indian government yesterday to lobby for some kind of assistance for its members: Vodafone Idea and Bharti Airtel. The thing is Reliance Jio is also a member of the COAI and presumably doesn’t want its competitors to get extra help, so it’s not happy about the letter.

Jio communicated its displeasure at considerable length in a letter of its own to the COAI, which it also shared with Indian media. It characterised the COAI letter as having alleged an unprecedented crisis in the telecom industry and said it was shocked that the letter was sent before Jio had had the opportunity to contribute. It went on to say this is typical bad behaviour by COAI, which calls into question just how shocked Jio actually was.

“Evidently, submission of this letter… is another manifestation of COAI’s prejudiced mindset completely laced with the one-sided thought process,” continued the letter, warming to its theme. “By such unwarranted behaviour COAI has just proved that they are not an industry organization but just a mouthpiece of two service providers.”

It then bangs on about all the things that were wrong with the letter, which amount to the aforementioned bias in favour of Vodafone Idea and Bharti Airtel. Jio clearly doesn’t want its rivals to get any help from the government, and even went so far as to insist that the disappearance of its two main competitors wouldn’t harm competition, which feels like a bit of a reach.

Neither the COAI nor the Indian state seemed to have responded to the letter at the time of writing, but they both seem to be stuck in the middle of an increasingly acrimonious war between Jio and the incumbents whether they like it or not. This is what happens when the state pokes its nose into the commercial sector too much. It created a very benign regulatory environment for Jio and is now staring at a potential monopoly. Nice one.

Jio starts charging for calls and its punters aren’t happy about it

Disruptive Indian operator Reliance Jio has announced it will start charging its customers for calls to other networks due to a regulatory change.

Until now Jio had been swallowing the 6 paise (hundredths of a rupee) per minute interconnect usage charge (IUC) incurred when its users called someone on another network. This formed part of the super-aggressive pricing strategy designed to steal market share from the incumbents, which was an unqualified success.

The cunning plan seemed to be to follow the classic internet business model of focusing on building up a massive user base first, then working out how to get cash out of them later. But now Jio seems to be going back on that and is looking to recoup that IUC from its users, who aren’t too happy about the sudden moving of the billing goalposts.

Jio is insisting it’s just as much of a victim in this situation and is only introducing the charge because the Indian telecoms regulator – TRAI – is mucking it about over plans to scrap the IUC entirely next year. In the press release announcing the news charge Jio goes into great length about how often TRAI said the charge would be scrapped by the end of this year, but then claims it’s having a rethink – hence the new charges.

As well as blaming TRAI, and also to some extent the other operators, who it accuses of some kind of poor form too arcane to dwell on, Jio is also attempting to sugar the pill by throwing in some ‘free’ data in exchange for money spent. Free must have a different meaning over in India. Here’s the table it has sent its punters announcing the new state of affairs.

jio voice call charges

If Indian Twitter is anything to go by, this hasn’t gone down well among the millions of Indians who switched to Jio, seduced by all the actual free stuff, as opposed to free stuff you have to pay for. The hashtag #boycottjio is trending, with the tweet below a typical example of the kind of stuff it’s yielding.

We don’t know why TRAI is having another look at this IUC thing; maybe Jio has been naughty, maybe the other operators have lobbied against it, maybe TRAI just thinks Jio is getting a bit big for its boots and need knocking down a peg or two. Alternatively the TRIA decision could be nothing new and Jio is just using it as a smokescreen to start taking back some of its freebies. Regardless of the reasons this may represent Jio’s first major setback since taking the Indian telecoms world by storm. This video alone is unlikely to resolve it.