Date first published: 15/02/2022

Key sectors: telecommunication

Key risks: public debt, private debt; slow growth


Risk development

India is one of the world’s largest telecommunications markets. Its population tops 1.3 billion, the economy continues to grow and demand for mobile internet services continues to rise. Yet, despite its potential, the market has faced massive disruption over the last five years. Several operators have gone out of business, leaving only three players: Reliance Jio, Bharti Airtel and for now Vodafone Idea (Vi).

Why it matters

Telecom operators will have an important role in India’s economic emergence. The size of the country and the lack of fixed broadband infrastructure implies that expanding access to the internet beyond major cities will be primarily facilitated through mobile operators. The reliability of services and pricing are thus important for internet access to hundreds of millions of people.


Since Jio launched in 2016 prices have dropped significantly. Jio has managed to attract around 430 million subscribers over the last five years, making it the largest provider.. Airtel has 355 million subscribers, while Vi has around 270 million. While competitive pricing has helped expand access, over the medium term the lack of competitors could lead prices to rise and service quality to fall.

Jio has the advantage of being backed by Reliance, one of India’s largest companies. Airtel has struggled in recent years, although remains solvent – in part due to its control over large parts of the market. Vi, however, is in a very difficult position. The company’s gross debt is around US$27bln, and it looked like it could be pushed out of business by demands that it cover adjusted gross revenue (AGR) dues for historic spectrum and other licence fee payments. Vi’s survival depends on a potential nationalisation deal, where the state will take over 40 per cent of the company.

While in theory the three companies compete, which should ensure affordability and quality, in practice parts of the country are effectively monopolised by one of the major operators. If Vi exits the market, or curtails in services to a few priority areas, the lack of competition could create an impediment to India’s future growth. There are already signs that the quality of services is lagging – Jio was rated the lowest in mobile speed of all operators in 2020, and improvements will be incremental.

However, irrespective of Vi’s survival, the market is likely to change. All major companies have plans to invest in expanding their 4G network, as well as creating new 5G services. Such investment is necessary for services to continue to expand and support India’s economic advancement. A consequence is that debt is likely to rise. The increase in debt may be sustainable if prices continue to rise.

Risk outlook

It is unlikely that a Jio-Airtel duopoly will provide the quality of service necessary to power India’s high-tech growth. The Indian government has shown an understanding of the problems that market concentration creates – and has announced a moratorium for payment of AGR and other dues, which will help reduce the financial pressure on Vi and Airtel. It has also announced a relaxation of foreign direct investment restrictions in the sector. Most notably, the government is willing to take a large stake in Vi. These moves are an attempt to support competition in the sector. However, without further support the market will consolidate further, potentially threatening India’s economic future.