Top Menu

Dear Reader, we make this and other articles available for free online to serve those unable to afford or access the print edition of Monthly Review. If you read the magazine online and can afford a print subscription, we hope you will consider purchasing one. Please visit the MR store for subscription options. Thank you very much. —Eds.

The Telecom Industry in India: Free Market or Monopoly-Finance Capital?

Woman using a mobile phone

Image credit: By Biswarup Ganguly - Own work, CC BY-SA 3.0, Link.

Rahul Varman is on the faculty of the Indian Institute of Technology, Kanpur, India, where he teaches and writes about corporations and the neoliberal order.

The author is grateful to Manali Chakrabarti for suggestions on earlier drafts. This piece is part of an ongoing larger work on the telecom industry in India.

The remarkable success of the telecom industry in India in the past three decades, mostly helmed by big capital, is perhaps the best achievement that the ruling classes across ideological and political divides have accomplished. There seems to be a phone in every hand, cutting across class, caste, community, age, and gender divides. Possibly, a mobile phone is the only thing that unites India today, in a true sense of the word, and observers have called this a “miracle.” The indispensability of cell phones was best epitomized during the worst days of the COVID-19 pandemic, when people’s lives hinged on their phones, whether they needed oxygen, food, medicine, or education.1

Mobile connectivity as a utility has clearly reached almost every nook and cranny of the nation so rapidly that it is not comparable with anything else. While people have little access to health services, open defecation remains a common sight (in spite of multiple campaigns against it by successive regimes), and there is hardly any access to potable tap water for common people, mobile phones have reached more than 88 percent of the population, and a 4G phone could be bought for as little as 500 Indian rupees in 2020.2 The Telecom Regulatory Authority of India highlighted in 2018 that the cost for a gigabyte of wireless data fell to as low as Rs 12, possibly the lowest anywhere in the world, down from close to Rs 270 in 2014. By comparison, in 1994, mobile calls cost Rs 18 a minute, and a phone was worth Rs 40,000—a luxury that was accessible only to the well-heeled.3

We are told that this success is primarily because of the enterprise of private capital, in spite of the bumbling and corrupt government and ill-informed courts. In this article, I dig deeper into the three decades of the purported telecom miracle and ask a larger question: What do we learn regarding the nature of big capital from the extraordinary success of the telecom industry in India?

India embarked on the path of neoliberalism—at first, haltingly—in the 1980s but rapidly in the 1990s. Telecom was one of the important industries opened up to private capital right at the beginning. The stated mainstream motivation is that private capital would bring in the discipline of market forces entailing efficiency, dynamism, and innovation. The actual consequence is that the commanding heights of the economy came increasingly under the control of monopoly capital in the name of the so-called free market. With neoliberalism, the state is supposed to leave private capital increasingly free to play, with little or almost no regulation. The “free” market, in this sense, actually means freedom for big capital from any regulation and discipline by state institutions.

In this kind of monopoly capitalist system under neoliberalism, three further tendencies need to be noted for our purpose here. One is the tendency for the system to move from one crisis to the other, leading to a concentration of wealth on one side, and pauperization for the masses on the other. Often the profits of these crises are sought through monopoly rents and/or speculation, not by mere selling of goods and services. Two, one of the important avenues for making quick profits in this neoliberal order is monopoly capital’s appropriation of public assets, whether public companies or natural resources like land, mines, and spectrum (bandwidth) at the cheapest of prices. Three, under monopoly capital, corporate agents are price makers and not price takers, unlike under a Smithian market-based system. Corporations can manipulate prices not only to serve their short-term interests through quick profits, but also to promote their long-term strategic goals. Hence, at critical moments, monopoly capital also indulges in predatory pricing. Thus, monopoly capital may use the instrument of low prices, sometimes even by running into operating losses for a while, to eliminate competition and consolidate their monopolistic hold. In this piece, I argue that the overriding motivation that has driven big capital in Indian telecom is the logic of speculation and monopolization, with serious consequences for common people who are now so dependent on the vital telecom services.

Motivations and Actions of Big Business

Perhaps the most enduring feature of the telecom industry is the continuous stream of entries and exits by Indian and international capital. Almost every big Indian business house, as well as some of the largest players across continents, entered and exited the telecom industry in India in the last three decades. The government opened up the sector for private capital in the wake of the so-called new economic policy immediately after the balance of payment crisis in 1991 under the watch of the IMF. Cellular services started in all four major metro areas (Mumbai, Delhi, Kolkata, and Chennai) in August 1995 with two operators each. Since then, almost thirty large clusters of corporate actors are recorded as entering in twenty-five or so years, though the actual number of entities may be significantly higher, as these actors formed multiple companies with complex ties and corporate structures in order to corner telecom licenses.4 Most remarkably, almost all of them have departed, with possibly Bharti Airtel being the only exception to survive as a standalone entity.5 However, in the 1990s, Airtel was a fledgling manufacturer of push-button phones—hardly a part of big capital in India. By 1997, the largest business houses like Tatas, Aditya Birla, Modi, Goenka, Thapar, Escorts, Essar, Max, and so on had entered the telecom industry after the 1995 license auctions for nineteen of the twenty-three “circles” designated by the government for the purposes of telecom services and licensing.6 Wealthy Indian-origin business groups abroad, like the Hindujas, followed suit, and firms like Reliance and Videocon entered in the closing years of the 1990s. All the Indian groups had a foreign partner, as the government recognized that none of the Indian private entities had any experience in running a telecom service. Thus, a foreign partner (with maximum ownership of 49 percent) was mandatory. In this way, a large number of global telecom corporations entered the domestic market. Some notable names included AT&T, NTT (Japan), France Telecom, Telenor, Swisscom, Bell, Hutchison Whampoa, Telstra, SingTel, and Telecom Malaysia, who came in through collaboration waves in the late 1990s and then the latter half of the following decade. Among the international entrants, Vodafone is the only exception, presently continuing its operations, though no longer with its original Indian partner, the RPG group.

Prima facie, it appears as if many corporate houses tried their hands in the telecom sector, most of them burnt their fingers, and only a few could survive, either because of the purportedly peculiar nature of the industry, “bad” government policies, or both.7 Notably, while a spate of big business houses exited after early entry, new players have continuously made attempts to enter. How do we explain this? In what follows, I highlight what appears to be some key motives for the persistent attempts by big business to enter the sector, as well as their conduct and actions. The argument here is based on patterns that can be seen across business groups over these years. Though all the evidence collected cannot be provided for the sake of brevity, illustrative examples will be discussed.

Quick Monetary Gains through Speculation in Corporate Assets

The telecom sector in the 1990s was a capital-intensive industry with rapid technological developments. For a new entrant in a country like India, with little backup of the requisite ecosystem of equipment manufacturing base and know-how, it meant that returns would be possible only if an investor was willing to make long-term investments and build necessary competitive capabilities. But in reality, almost none of the private national players seemed interested in being strategic investors and building capabilities in sync with a nascent industry. Their role appeared to be that of merely cornering licenses and acting as mediators between the foreign players, the Indian state, and other domestic actors. The predominant motive of the Indian investors in the telecom sector seemed to be to get quick windfall returns while treating the telecom venture merely as an added investment in their portfolio across multiple and varied industries. And, probably predictably, most of them exited as soon as they found appropriate bidders, both domestic and international, to buy their stakes. This process was facilitated as the Foreign Direct Investment (FDI) Policy regime of India was liberalized by the government during this period.8

This pattern began immediately after the entry of private players in the industry. In 1996, reports emerged that it was “clear” that most of the licensees who were operating in the twenty-three circles did not have viable business models.9 It was reported that at least eight of them were accumulating huge losses, with revenues not even matching their annual license fees outflow. Predictably, these firms complained that the government was charging massive and “unfair” license fees.10 Notably, these players are some of the largest Indian business houses and their global telecom collaborators. This was a constant refrain across the entire period: companies would not pay their contracted license fees and then bitterly complain that the government was unfair in demanding the dues. By 1998, the industry was reporting a large Rs 4 billion negative cash flow (based on profits before depreciation, but after interest and tax) per month and clamoring for generous government sops, such as delayed payments of government dues and extension of their license duration. These companies played the much-abused “national interest” card. As one executive told Business Standard, “We will have the sector passing into the hands of foreigners. That has not happened even in advanced economies. Telecom is as critical to a country as its defense sector. It has to be in our hands.”11 However, almost immediately after they had begun their operations, many of the Indian telecom operators were either sold off to foreign interests or actively looking for one. The Ruias of the Essar group, Analjit Singh of Max India, and BK Modi of Modicorp had reportedly already given up majority equity control in their cellular ventures.

Take the case of Hutchison Whampoa’s (Hong Kong’s largest investment group) acquisition of Mumbai cellular operator HutchMax Telecom in 1998, gaining control by effectively raising its stake to 68.6 percent, although the permissible limit for FDI was only 49 percent. Hutchinson’s strategy was to acquire 49 percent directly in HutchMax and a further 49 percent in Telecom Investment India, which held 40 percent in HutchMax. Kotak Mahindra held 51 percent stake in Telecom Investment India. The remaining 11 percent in HutchMax was owned by Max India and its promoter Analjit Singh. Similarly, Swisscom gained majority stake in Sterling Cellular and Modicom Networks sold significant shares in the controlling company to the American International Group. The same 1998 Business Standard story cited above also reported that other operators lined up for similar maneuvers: JT Mobiles, Koshika Telecom, BPL, Skycell, Fascel, the list goes on. As the chief of a cellular company grudgingly admitted: “All the sops that the industry is asking for is to improve the selling price and fatten the operating profits of the [international] buyer.”12

One of the fallouts of such maneuvers was that almost immediately after the Indian telecom sector was opened up to private players, invisible hands of international finance were everywhere. For instance, in 1997 it was reported that Hong Kong venture capital company Distacom Communications was aspiring to become “one of the largest players” in the Indian cellular services sector with significant holdings in HutchMax, Modi Telstra, and Modicom Networks.13 Around the same time, the American International Group had a number of telecom investments in India—Tata Teleservices, Tata Communications, BPL Mobile, and Modicom Networks.14

Thus in the early years, companies used complex and manipulative tactics, such as selling off licenses, changing brand names, mergers, and acquisitions by some of the largest players—Hutch, BPL, Sterling, and so on. And if none of these dubious methods worked or when good prices became available, then the companies would beat a quick exit from the industry, as in the cases of Koshika, RPG, Usha Martin, Spice-ModiTelstra, Skycell, Escotel, JT Mobile, Fascel; the examples are too many. Huge amounts of money were made through these operations. As a recent Business Standard story says, “the smart boys to hit the jackpot” included the Ruias of Essar, Ajay Piramal of Piramal Enterprises, Analjit Singh of Max group, Rajeev Chandrasekhar of BPL Mobile (now a minister in the Modi cabinet), the Hindujas, the Nandas of Escorts, as well as the BK Modi and Shyam groups, and even professionals like former CEO Asim Ghosh.15

Turning Spectrum and Licenses into Real Estate

Perhaps a key reason for intense corporate traffic in telecom industry is the central position of a natural resource like spectrum. Telecom signals are electromagnetic waves that can travel only through certain channels of spectrum—the bandwidth assigned to a service provider. Spectrum is the highway over which the signals travel. Without access to the spectrum, there is no mobile telecom service. However, it is a natural resource, similar to land, which cannot be produced. Thus, it is available only in limited quantity and only through the state. It is, therefore, a coveted resource for the industry, and, like in the land market, one can make a lot of money just through speculation, as long as it can be cornered at a “good” price and there are operators who are seeking it. This has been the case in India so far, as the demand for spectrum has been exponentially increasing due to the ever widening consumer base, new services being added, and new generations of technology progressing from 2G to 5G in quick succession. No wonder that so much of media coverage on the industry has been consumed by debates and discussions around the selling and pricing of spectrum. The spectrum charges are paid to the state, similar to taxes, and much of the debate has been around spectrum pricing or, more specifically, the mechanism for “price discovery,” as Adam Smith postulated for a “free market.”16 In a Smithian free market, there are enough buyers and sellers and information is supposedly freely available, hence prices are “discovered” in the market, as actors are only price takers (and not price makers). But for a limited resource like spectrum, with only one seller and a handful of buyers, the enterprise to find the right price is fraught with serious consequences for interested parties, giving rise to a whole industry of lobbyists and experts, first to facilitate cornering the spectrum at the cheapest “effective” prices, and then speculating on spectrum at the right time with the right suitors.17

From the very beginning, spectrum allocation has been in the news for all the wrong reasons—unknown or very small actors with right information cornering the bulk of the licenses and extending way beyond their economic means, vehement protests, and long-winding litigations by the losing parties, so on and so forth. There are two notable features in these early sets of bidding, which set the pattern for years to come. First, there seemed to be a gold rush in the telecom sector, during which it was assumed that there were plenty of big and quick bucks to be made. Second, the windfall gains were not to be made by building competitive institutions, but by cornering the spectrum and licenses through manipulation, then speculating on these by means of a quick sale to a higher bidder.

Perhaps there is no better evidence of the speculative (and quick money-making) nature of this whole enterprise than the so-called 2G scam. We will highlight only the key issues briefly that are relevant to our argument.18 Spectrum allocation in 2008 captured the attention of the whole nation after the Comptroller and Auditor General (CAG)’s 2010 report estimated a loss to the exchequer worth Rs 1.76 trillion due to the purported scam—a humongous amount, even fifteen years later and with the scales involved in the telecom sector. The case involved giving away 122 licenses in 2008 at 2001 prices, on a first-come, first-served basis. This was outrageous, as in 2001 there were barely four million mobile subscribers, but by 2008, that number had multiplied by seventy-five times, to three hundred million at the time of the spectrum/license allocation. So much for price discovery! The CAG report brought out in great detail that the allocation did not even follow first-come, first-served protocols—several capricious deadlines and other such conditions were changed, seemingly arbitrarily, for no other reason but to favor certain parties. Tellingly, out of the 122 new licenses awarded, 85 were to parties that did not qualify for even the Department of Telecom’s own eligibility criteria. Even more shockingly, some of the corporate actors that had the richest haul of licenses in the scam were also real estate companies. But if the whole game was property speculation, as we have argued earlier, then perhaps it was quite fitting that they were merely extending their skills to a new domain. Notably, this is over a decade after the first set of telecom companies complained about a perceived lack of market in India, as well as exorbitantly priced spectrum and government levies, expecting government to bail them out.

For instance, one of the largest real estate companies at that time in the country, Unitech, bought twenty-two licenses for a sum of Rs 16.51 billion, and within months offloaded 60 percent of its purported telecom arm’s stake to Telenor (of Norway) for Rs 62 billion, a 600 percent appreciation. Similarly, Swan Telecom, promoted by another real estate company, DB Realty, sold 45 percent of its shares to Etisalat (of the United Arab Emirates) immediately for around Rs 42 billion—the company had obtained its license for only Rs 15.37 billion. Likewise, Shyam Telecom sold off to Sistema of Russia at massive profit. Furthermore, companies like Swan, Loop, and Datacom, each of whom had cornered large number of licenses, were fronting for established players like BPL, Reliance, and Videocon, some illegally, as only one company from a group could bid as per the rules set. As a result, some circles had spectrum allocated to more than twelve companies, clearly an unsustainable proposition given both the limited market in terms of buying capacity and capital intensity and know-how required to establish a reasonable telecom service.19 What followed were irrational price wars and exits of multiple operators. Given all the furor created by the scam, in 2012, the Supreme Court declared the 2008 allocation null and void, canceled all of the 122 licenses, and ruled for a fresh license and spectrum allocation. But by this time, many of the Indian bidders had made huge money, while many of the new investors lost massive investments and could not survive all the price undercutting and dubious dealings.

The story of the acquisition of spectrum and licenses in 2010 by what has now become India’s largest telecom company, Reliance Jio, is in some ways very similar, but in significant ways, starkly different. In brief, two issues are relevant for our purpose.20 One, a small broadband service provider company, IBSPL, fronted for Reliance and acquired countrywide spectrum, and, two, the license to provide Internet services was subsequently converted into a full-fledged mobile services provider. Perhaps it is the latter maneuver (not even allowed in 2010), or maybe the combination, that caught competitors unawares, and they failed to counter this decisive move by Reliance. At the time it entered the auction, IBSPL was a tiny company providing Internet services with paid-up capital of mere Rs 25.1 million, a net worth of Rs 24.9 million, and just one single leased line client from which it earned Rs 1.5 million. Nevertheless, IBSPL managed to meet the financial requirements for bidding—an earnest money deposit in the form of a bank guarantee worth Rs 2.52 billion, hundred times its net worth. More importantly, IBSPL won bids and acquired 20 MHz 4G spectrum for all twenty-two telecom circles for Rs 128.48 billion—five thousand times its net worth. Meanwhile, on the same day as the bids ended, at an extraordinary general meeting of its shareholders, IBSPL raised its authorized share capital by two thousand times, from Rs 30 million to Rs 6 billion, by issuing 75 percent of its shares to Reliance, making itself a subsidiary of the latter. Within about a week, IBSPL ceased to be a private company and converted itself into a public limited company. In January 2013, the company was renamed Reliance Jio Infocomm Limited.

By 2012, the government had come out with a framework for the Unified License regime, which made possible the migration of Internet service providers (ISP) into full-service operators offering voice services. Reliance was the first to avail itself of this policy and converted its ISP license to a unified license that formally authorized it to provide voice services by October 2013 by paying the requisite conversion fees. Originally, the government’s idea was to auction 4G licenses for broadband Internet services while 2G/3G were to be used for voice services. But with the new unified license, the backdoor entry of Reliance (courtesy of IBSPL), and availability of new convergence technologies, where voice calls could be made through data packets as well, Reliance upended the whole game for its competitors. By any criterion, such a fronting for Reliance by IBSPL should not have been allowed. A draft report of the CAG in 2013 passed severe strictures against Reliance and the concerned government bodies. It also estimated a huge loss to the exchequer. This has most likely been underestimated, however, because if competitors knew that it was Reliance that had been bidding for the spectrum, as well as for mobile services, perhaps the whole game would have been played very differently. But that eventuality is only in the realm of speculation now. Probably predictably, the final CAG report tabled in the parliament significantly watered down the findings.

A few of the more notorious cases that have been discussed above are not exceptional. As has been asserted earlier, this has been the pattern all through the three decades of telecom licensing and spectrum allocation. Guha Thakurta and his associates have followed multiple such exercises and come up with detailed stories. These reports are too numerous to be listed in full here, let alone properly discussed.21 What they have found is a long list of irregularities that might have cost the exchequer trillions of lost revenues. Among them are: (1) arbitrary pricing; (2) crossover from one kind of license to another; (3) allowing parties to sell stake, making licensing policy of little consequence; (4) forcing public sector BSNL to provide their infrastructure to these new operators for providing services through intracircle roaming, allowing new licensees to start getting subscribers and providing services before rolling out their network, and then selling off their licenses; (5) allowing sharing, pooling, and trading of spectrum like any other commodity; (6) even more egregiously, allocating double the spectrum over what the companies had paid for; and (7) evidence of strategic bidding by the actors with clandestine understanding, thus gaming the whole system as the number of players drastically went down. Moreover, the licensing regime has been progressively liberalized, making the earlier round of rules and regulations irrelevant and rendering the whole exercise a farce.

Monopoly Eventually

The final outcome of the short-term manipulations and successive entries and exits of telecom players in India over the three decades since the industry has been privatized is that there are just three private players left, who have divided the vast market among themselves.22 There have been two distinct mechanisms through which the industry has reached the present monopolistic endpoint. First, ongoing waves of consolidation among players, particularly two of the three existing operators, are a consequence of consolidation of multiple corporate entities. Second, unsustainable undercutting on the basis of price, mostly by new actors, to get a sizable market, thus results in a bloody internecine war and further consolidation as a large number of players are not able to sustain this sort of cutthroat competition.

Here I highlight these patterns using specific examples. Perhaps the most revealing example of the consolidation in the Indian telecom industry is the twenty-five-year journey of what today has become the third largest telecom company in India, called Vodafone Idea.23 At its surface, it represents a collaboration of one of the largest global telecom corporations, Vodafone, and one of the largest big business houses in India, the Aditya Birla Group.24 The company started in the mid-1990s as a collaboration between one of the then-largest telecom company in the United States, AT&T, and the house of Birla, with $300 million in offshore financing to build the biggest cellular network in the country for the relatively prosperous markets of Gujarat, Maharashtra, and Goa.25 Within a few years, this entity had merged with part of the house of Tatas’ telecom operations; by 2022, Tatas was the second-largest business group in India. In 2000–01, Vodafone India acquired the substantial operations of two very successful and large operators, RPG group and BPL, making it the largest telecom operator in the country. The consolidated corporate entity came up with the new brand name Idea in 2002 and started a massive advertisement campaign. Within a couple of years, first AT&T and then Tatas sold off their respective stakes to the Birlas. Once Reliance Jio, now the largest telecom company in India, entered the fray in 2016, there was a further wave of consolidation. First, Idea bought another large telecom company called Spice. Then, Idea and Vodafone India came together in the biggest telecom merger anywhere in the world in 2018.26 At the time of this merger, they were second and third, respectively, in terms of market share in India, and combined became the largest Indian telecom company with a subscriber base of 390 million. But interestingly, all this consolidation does not seem to have addressed the longstanding troubles of the behemoth. In 2021, the company reported massive losses of more than Rs 440 billion and a cumulative loss of around Rs 1.33 trillion over three years. Further, Vodafone Idea had a debt of Rs 1.9 trillion on its books, including Rs 1.68 trillion owed to the government for unpaid license and spectrum dues.

Though not as dramatic as Voda-Idea, Bharti Airtel too has continued to expand through consolidation since they entered early in the telecom industry, and have acquired at least nine different telecom operators over the years. Presently, it is the second largest telecom company in India.

Telecom is a very capital-intensive industry and technologies change at a fast pace. At the same time, the marginal cost of serving each additional customer is fairly low. Thus, a large consumer base is essential for drawing advantage from economies of scale.27 Moreover, telecom service is effectively an undifferentiated “commodity” and the only differentiation that service providers can offer is a lower price. Therefore, there is overwhelming pressure to cut prices and gain market share. The Indian operators have repeatedly tried to capture the widest possible market by investment in the latest tech combined with sharp undercutting on prevalent prices. But given the limited buying capacities of the masses, these strategies have led to vicious price wars. Two examples, both pertaining to the house of Reliance over two different generations, but with contrasting outcomes, are useful illustrations.28

When the undivided house of Reliance entered the telecom industry in early 2000s, it invested in one of the finest networks of the time, pulling from their deep pockets from an oil monopoly, and a claim of pan-India optical fiber cable spread over 200,000 kilometers. In July 2003, it launched “Monsoon Hungama,” with a mobile phone for Rs 501 at a time, when prices for similar handsets were hovering around Rs 2,000, and free incoming calls.29 Though this helped them achieve substantial market share, it resulted in massive losses and a write-off worth Rs 45 billion in 2006. This price war brought down the tariffs for voice calls to just 40 paise a minute from the then existing rate of Rs 2 per minute. Reliance Communication (RCom) tried to repeat this strategy in 2006–07, but this time the business was already split between the two brothers and the cash-rich monopoly on petroleum had gone to the elder brother, Mukesh Ambani. The end result was that, from the peak of Rs 1.7 trillion in 2010 with the second-largest market share in telecom industry, RCom’s market capitalization fell to less than Rs 21 billion in February 2019. RCom filed for bankruptcy in 2019 with Rs 500 billion of estimated debt on its books, while its assets were merely Rs 180 billion.

Six years after the backdoor entries described previously, Reliance Jio announced its grand entry into telecom services with a claim of being “the largest 4G-only telecom network in the world,” covering eighteen thousand cities and towns and over two hundred thousand villages.30 In a very unusual entry strategy, Reliance Jio conducted test trials of its 4G services in May 2016 by giving out SIM cards, apparently only to its employees and their friends and family. The restrictions on who received these SIM cards were slowly loosened as months passed and, by the end of August 2016, the company had anywhere between 2.5 to 3 million users without officially launching commercial operations. Then, in September 2016, the company announced its formal launch with a “Welcome Offer,” a three-month period of free voice and data services, followed by a “Happy New Year offer” in December 2016, an extension of these free services. In February 2017, CEO Mukesh Ambani announced that Jio had crossed the 100 million-subscriber mark—merely 170 days after its formal launch.

There were repeated complaints by competitors and their collective body, Cellular Operators Association of India, that this kind of predatory pricing would kill competition, but regulatory bodies kept passing the buck from one to another. Finally, the bodies sought a legal opinion and in January 2017, the Attorney General Mukul Rohatgi ruled that “promotional offers are not subject to regulatory principles of non-discrimination, non-predation…in terms of the extant statutory rules.” And so, the freebies continued. The last in the series was called a “Summer Surprise,” a roundabout way of giving customers another three months of free services (April through June 2017) by having them pay in advance for data and voice services that they would use starting in July. Finally, the Telecom Regulatory Authority of India awoke from its slumber and “advised Jio to withdraw the 3 months of complimentary benefits.” J. S. Deepak, the secretary in the Department of Telecom, was forced to rule against this sort of brazen “bloodletting” in the telecom industry with its implications for the government revenues. According to him, Reliance free data offers—and its consequent effect on the revenues of other operators—had cost the government Rs 6.85 billion through the reduced collection of license fees and spectrum usage charges.31 He further added that this would have implications for the massive loans from the public banks to the telecom operators. Tellingly, within a week of writing this note, Deepak was transferred out of the department. The freebies by Jio in 2016–17 and the earlier giveaway of the spectrum in the “2G scam” have been justified by some quarters as providing cheap services to the so-called masses.

At the time of the 2G scam, then Communication Minister Kapil Sibal defended the government with this logic. In May 2017, the Wire quoted Additional Secretary of the Department of Telecom N. Sivasailam commenting that revenue dips on account of license fees and so on (post Jio launch) should be seen as “incomes in the hands of consumers.”32 Data rates became one of the lowest anywhere in the world since the entry of Jio, but this led to many operators failing or selling out, including the company of the younger Ambani brother, RCom. This was largely a consequence of Jio’s strategy to reportedly spend anywhere between $20 billion to $25 billion in building a modern telecom network and then providing it for “free” to all those willing to subscribe for a Jio SIM. Free services were provided over an extended period of more than a year, by which time much of the competition had been debilitated.

Telecom in India: The Overarching Logic of Monopoly-Finance Capital

Thus, while the mainstream tirelessly attributes the extraordinary reach of telecom to the triumph of private capital and market forces, as is obvious from the discussion above, what emerges as the pattern is never-ending attempts at making money through speculation in corporate assets, telecom licenses, and spectrum, and repeated bids at getting a monopolistic hold over the industry. Though how wasteful and parasitic this sort of monopoly-finance capital is needs to be taken up for a detailed discussion elsewhere, here I address how the logic of financialization and monopolization works in relation to the remaining dominant actors in the industry.


Let us take the example of Airtel, an early entrant in the industry. A Bharti Airtel share had a stock price of Rs 12 in 2002, but by 2022 it has become Rs 760, appreciating more than sixty times over twenty years. Sunil Mittal, the main promoter of the firm and a first-generation entrepreneur, is now one of the wealthiest people in India, with a net worth close to $15 billion.33 How wealth can be created from financial manipulation—and how Airtel has done it—is brought out in some detail by a draft report from the Comptroller and Auditor General of India in May 2015. Among many maneuvers of accounting manipulations and cornering spectrum, the report brings out how financial wealth worth more than Rs 440 billion was created by mere corporate restructuring and transferring assets back and forth from one entity to another during 2006–10. The report explains how Airtel spun off several of its divisions and created subsidiaries, to which assets were transferred at book value. These subsidiaries revalued the assets at the market price, and then, after two or three years, the subsidiaries were re-merged with the parent company, “creating wealth.”34

No less remarkable is the massive interest that big finance has shown in the present largest private operator in India, Reliance Jio. The parent company of Jio, Reliance Industries, floated an in-between holding company in 2019, Jio Platforms Limited (JPL), in order to control Jio Telecom and other digital initiatives of the group and to ride on their telecom network. In an extraordinary sequence of events, in April–June 2020, while India was reeling under the COVID-19 pandemic and was in the midst of an absolute lockdown, a series of eleven investments were made in quick succession by big international finance and tech companies in JPL. Thus, it raised around Rs 1.1 trillion by selling over a fifth of its ownership stake with an “astounding” valuation of 165 times its earnings before interest and tax.35 Facebook (now Meta) bought 10 percent for $5.7 billion, Google invested $4.5 billion. Other investors included Microsoft, U.S. investment company KKR, Mubadala (the investment arm of Abu Dhabi), the Saudi sovereign fund, and multiple other influential international players. Before this series of investments, Reliance group had a huge overhang of debt. But by selling almost 30–32 percent of the JPL stake in a space of a few months, it raised $20–22 billion from big tech and international finance.


Once the rivalry had been reduced to mere three operators, the game ceased to be competitive. These firms have been providing each other space and at times even cooperate with one another to push for their common interests. Joseph Schumpeter termed this a “co-respective” system in the case of the big three auto corporations controlling the U.S. market at the time of the Second World War, which, he argued, followed a live-and-let-live policy vis-à-vis one another.36 For instance, in 2013 Reliance and Airtel agreed to share telecom infrastructure—optical fibers, submarine cable networks, and towers, as well as Internet broadband services.37 A much starker example of such “co-respective” behavior is apparent in price fixing by the three operators towards end of 2019. Once all the bloodletting after the Jio entry in 2016 was over and most of the competition had been decimated, the three remaining operators announced substantial price hikes in quick succession. The increases announced in most of their plans were anywhere from 15–47 percent. Not only was the hike by the three obviously coordinated, reports even suggest that it involved some “nudging by top echelons in the government” a telling culmination of the three decades of the so-called telecom miracle.38


  1. Unless otherwise specified, by “telecom” we mean the cellular telecommunications industry.
  2. Throughout this article I mostly use Indian rupees (Rs) to denote monetary value. In the mid-1990s, one U.S. dollar was around Rs 31. By 2000, a dollar was worth Rs 45. This rate then fluctuated in the aftermath of the 2008 crisis. However, since 2011, it has been rapidly rising, reaching Rs 62 by 2015 and Rs 70 in 2020. Presently, it is close to Rs 82. For details, see com/india/currency, accessed on January 26, 2023.
  3. Surajeet Das Gupta, “25 Years since the First Mobile Call: Roller-Coaster Ride for Telecom,” Business Standard, July 24, 2020.
  4. The data is based on media reports too numerous to cite in full and databases created by the author. See, for example “Here’s How India’s Telecom Industry Is Undergoing Transition Over the Years,” Economic Times, October 23, 2017. For a visual treatment, see “India’s Telecom History Through Logos,” The Hard Copy, September 12, 2020,
  5. Airtel has equal ownership of Singapore Telecommunications, SingTel.
  6. In the early years of the industry, India was divided into twenty-three circles for the purpose of telecom services and licensing—four metro areas plus nineteen others, broadly (but not exactly) on the lines of state geographies, also keeping the population to be served in mind. Later, Tamil Nadu and Chennai were merged into one, making twenty-two circles.
  7. This is given as evidence of “free” market-based competition and “survival of the fittest.”
  8. In the 1990s, FDI was limited to 49 percent in the telecom sector. In 2005, it was raised to 74 percent and 100 percent FDI became permissible in 2014. But even before the limits were raised, the government closed its eyes to the flouting of these requirements.
  9. Gupta, “25 Years since the First Mobile Call: Roller-Coaster Ride for Telecom.”
  10. At this point, spectrum was bundled along with the license.
  11. Takeovers in Disguise,” Business Standard, April 13, 1998, emphasis added.
  12. “Takeovers in Disguise.”
  13. Distacom in turn was 30 percent owned by the government of Singapore, 20 percent by investment house Lazard Freres, 10 percent by Peregrine Securities, and the rest by individuals including Italy’s Gianni Agnelli, principal shareholder of Fiat. Sanjit Singh, “Hks Distacom Bets Big On The Cellular Front,” Business Standard, January 24, 2013.
  14. Winners And Losers,” Business Standard, January 27, 2013.
  15. Surajeet Das Gupta, “When Telecom Stood for Pass to Windfall Gains, and Not Financial Stress,” Business Standard, November 27, 2019.
  16. Somehow, there is much noise generated when a price or a tax is charged by the state, especially to big business, while when the same good/service is sold by the private actor, price rises affecting consumers are assumed to be inevitable, as if being governed by natural forces. Witness the debate around spectrum prices versus, say, the steep jumps in electricity prices over the years as the power sector got privatized.
  17. Even when operators have bid relatively higher sums for spectrum/licenses, they have ended up either not paying at all or progressively seeking—and getting—concessions from the government.
  18. For more details and to reflect on how brazen the state-monopoly capital nexus can be even in a high-profile case like telecom licensing, see: Paranjoy Guha Thakurta and Akshat Kaushal, “Underbelly of the Great Indian Telecom Revolution,” Economic & Political Weekly, 45, no. 49 (December 4–10, 2010): 51–55.
  19. The deck for such irrational doling of licenses was cleared in 2005 by removing the limit on the maximum number of players in a circle, which till then was four.
  20. Other important details can be found in Paranjoy Guha Thakurta and Aditi Roy Ghatak, “The Immaculate Conception of Reliance Jio,” The Wire, March 4, 2016,
  21. See, for instance the four-part exposé: Aditi Roy Ghatak and Paranjoy Guha Thakurta, “2G Spectrum: How the Big Telcos Got Away with Murder,” Firstpost, June 1, 2012.
  22. The public-sector BSNL is left with less than 10 percent market share and has increasingly become inconsequential.
  23. This paragraph on Vodafone Idea and Airtel is an outcome of multiple news reports over the years that are too many to cite here but are available from the author. For a glimpse of the spate of mergers and acquisitions in Vodafone Idea, see: Kristie Lu, “India’s BPL, Birla in Mega Mobile Merger,” CNN, June 28, 2001, and Andy Mukherjee, “Can the World’s Most Painful Telecom Market Reform?,” Bloomberg, September 20, 2021.
  24. An offshoot of one of the oldest and most dominant business houses, that of the Birlas in India, Aditya Birla Group in 2022 was the third-largest in terms of revenues with annual turnover of more than Rs 3.5 trillion. It has interests and leading positions in large number of vital industries in India besides telecom, such as aluminum, cement, textile fibers, carbon black, fertilizers, and finance.
  25. At value of the time.
  26. Vodafone entered India market through buying what was Hutch Essar in 2007, one of the largest operators in the country.
  27. This is the case because the high fixed costs get distributed over a larger base.
  28. Reliance Industries is presently the largest business house in India, with revenues of more than Rs 8.5 trillion in 2022 and dominant interests in a large number of critical industries, from hydrocarbon extraction and refining, petrochemicals, retail, and media to telecom. Started in the late 1950s, the company prospered heavily during the economic liberalization of the 1980s and 1990s. The group split between two brothers in 2005, with the telecom part, RCom, going to the younger brother, Anil Ambani. At one time, it was one of the largest telecom companies in India; presently it is going through bankruptcy proceedings. The original Reliance Industries, run by Mukesh Ambani, started a fresh telecom venture in 2016, Reliance Jio, and has become the largest operator in India with a dominant market share.
  29. Some of the details can be found here, among many other places: Rajesh S. Kurup, “Now, Net-enabled Phones for Rs 480 from Rcom,”, December 31, 2007.
  30. More details on this grand entry of Reliance Jio can be found here: Anuj Srivas, “How Reliance Jio’s Entry Tied Regulatory Knots Around India’s Telecom Ecosystem,” The Wire, January 13, 2018,
  31. Srivas, “How Reliance Jio’s Entry Tied Regulatory Knots Around India’s Telecom System.” The company’s true impact on the government dues was much higher, as the Wire
  32. Quoted in Srivas, “How Reliance Jio’s Entry Tied Regulatory Knots Around India’s Telecom System.” Of course, the obvious question is then: Why not put the money directly in the hands of consumers?
  33. India’s 100 Richest People,” Forbes, accessed August 11, 2022.
  34. Aditi Roy Ghatak and Paranjoy Guha Thakura, “What Lies Behind the Incredible Rise and Rise of Bharti Airtel,” The Wire, August 6, 2015,
  35. Generally, a valuation to earnings ratio of ten is considered “healthy” in finance circles. For details on the series of investments in JPL and their analysis, see this story: Abir Dasgupta and Paranjoy Guha Thakurta, “Is Reliance’s Rights Issue Over-Valued?,” Newsclick, May 20, 2020.
  36. Joseph A. Schumpeter, Capitalism, Socialism and Democracy (London: Routledge, 1994 [1942]).
  37. Naazneen Karmali, “Onetime Rivals Mukesh Ambani and Sunil Mittal Ink Telecom Pact,” Forbes, December 11, 2013.
  38. Deborshi Chaki and Mobis Philipose, “Inside the Battle to Save Vodafone Idea,” Mint (blog), March 3, 2020,
2023, Volume 75, Number 01 (May 2023)
Comments are closed.