November 17, 2019, New Delhi
“We welcome the Finance Minister Nirmala Sitharaman’s statement that she would not like any telephone company to shut operations and want all of them to serve their customers”, said Pradeep S. Mehta, Secretary General, CUTS International in a statement released here today.
Established in 1983, CUTS is a leading global public policy research group working on a variety of issues including trade, investment, connectivity, consumer protection and competition issues.
While supporting consolidation in the mobile telephony sector, Mehta said that the functioning of all the four incumbent firms is vital to promote competition and protect consumer interest.
Telephony has spillover effects on the whole economy as well, hence the government’s decision to bail out the debilitated firms is more than welcome. This should not become a precedent for other sectors.
“While the Telecom Regulatory Authority of India (TRAI) has practiced forbearance due to a competitive market, it is high time it establishes floor prices for tariffs rather than allow unbridled competition which has lead to an adverse situation for some operators, including the public sector firms”, said Mehta.
“In China, where there are only three telecom firms, though all in the public sector, the price regulator has set a floor price by virtue of which the firms cannot enter into dirty competition”, asserted Mehta.
The maxim, ‘competition kills competition’ is well nigh applicable in the Indian mobile telephony sector, but regulation requires some visionary thinking for the government and the regulator to apply safeguard action if the situation goes out of hand and preserve competition.
In the long run if the number of players reduces then it could lead to huge economic and shareholder losses and monopolistic exploitation. This is certainly not the intention of the government to run a well oiled economy with aspirations to become a $5tn economy by 2034.
“As it is, the economy is not doing well and if one or two telephony firms shut down, it will send wrong signals to consumers and investors causing further harm”, said Mehta.