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Mergers Won’t Save Telecom Operators From Unsustainable Tariffs, Says Former Airtel Chief

India’s telecom operators are torn between two opposing forces: lower tariffs to compete with Reliance Jio Infocomm Ltd.’s deep discounts and the need to increase prices to stay viable. Mergers will not bail them out, Sanjay Kapoor, former chief executive of Bharti Airtel Ltd., said.

The merger of Tata Group’s mobile services business and Bharti Airtel is a “win-win for both”, he told BloombergQuint in an interview. Yet, “there is a fundamental flaw in the model the incumbent players have been pursuing in this country”, Kapoor said, pointing to high spectrum and technology costs and falling revenue.

The longevity of technology has reduced and what used to be relevant for 10 years earlier is now relevant for five years, he said. Voice and messaging segments of revenue are being pushed out by data as well. On the other hand, "The prices at which we sell our access in this country are absolutely unsustainable,” he said.

Discounting pressures won’t easy anytime soon as Reliance Jio continues to pursue more market share.

We are not seeing competitive intensity dying down in a hurry until the business model fundamentally changes to match up to the input costs. I don’t think this industry is there to make money in the short run.
Sanjay Kapoor, Former Chief Executive Officer, Bharti Airtel

Watch the entire conversation with Sanjay Kapoor to know what he said on the Tata-Bharti merger, and the impact of consolidation on the telecom industry.