Chart of the Day | Why RCom and Aircel had to merge

The merger of Reliance Communications and Aircel, announced yesterday, is a union of two telecom companies who have been struggling to keep pace in a hyper-competitive sector. This is also a sector embarking on a fresh round of consolidation that will leave it with, the prevailing wisdom says, 4-6 players of significance.

The Reliance-Aircel merger is the first of those consolidation moves. In the last five years, both companies have struggled to contend with the big three: Bharti, Vodafone and Idea. Each has had its own challenges. In 2012 and 2013, Reliance bore the brunt of the directive from the telecom regulator to weed out inactive subscribers, and saw its subscriber base plummet; even otherwise, it has struggled to add subscribers. Aircel has added subscribers, but legal troubles around the company have robbed it of the capital and entrepreneurial ballast needed to stay competitive in Indian telecom.

The fourth-largest telecom company by subscribers (Reliance Communications, owned by Anil Ambani) and sixth-largest (Aircel) have joined to create the third-largest telecom company. For how long is anybody’s guess. Unless the two companies decisively and effectively address the issues that have hobbled them, it’s probably only a matter of time before the merged company is either overtaken by current number four (Idea) or swallowed by another (Reliance Jio, owned by Anil’s brother, Mukesh).

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News in Numbers, June 2, 2016: Call drop data in 11 cities, India’s first rail university…

11

What is it? The number of cities that will get access to call drop data in the next 15 days.

Why is it important? The naming and shaming strategy is expected to push telcos to improve their service quality, and keep the drops below 2%. Earlier, the Supreme Court struck down the telecom regulator’s recommendation of imposing penalty on telcos. Now, it is reportedly seeking the authority to do so from the government.

Tell me more: On Wednesday, the Telecom Regulatory Authority of India released the call drop data for Delhi. Airtel’s 2G and 3G call drop rates have deteriorated in May when compared to those last September while Vodafone’s 2G call drop rates improved (though still above the permitted 2% limit) and on its 3G network, it remained constant at 1.4%.

 

46.43%

What is it? Percentage of loans given by public sector banks (excluding the State Bank of India and its associates) of the total as of March 2016.

Why is it important? It’s down from 50.06% in March 2015 and the lowest in over 12 years. The shrinking market share is likely to expedite consolidation in Indian banking industry. Recently, the Minister of State for Finance Jayant Sinha said India would have 8-10 competitive public sector banks “when the dust settles”.  

Tell me more: This is an effect of the central bank’s mandate asking lenders to clean up their balance sheets by March 2017, which led to categorising more loans as bad, increase in provisions and net losses, and deterioration in capitalisation levels. In terms of deposits too, public sector banks lost their market share – from 50.95% in March 2015 to 48.32% in March 2016.

 

Rs 865 crore

What is it? The cost of setting up India’s first railway university in Vadodara, excluding land costs.

Why is it important? The railway university, which would offer MBA, B.Tech, M.Tech degrees, and diplomas is aimed at transforming India into a global centre for research and development in railway engineering and management. Indian Railways is the largest rail network in Asia and the world’s second largest under a single management.

Tell me more: An internal report by the Railway Board last year had suggested the setting up of rail research centres and introducing railway-related subjects in existing universities instead of setting up new ones. The National Academy of Indian Railways in Vadodara is the apex training institute for all Railway officers.

 

Rs 20,000 crore

What is it? The cost of building a common Secretariat on Lodhi Road in Delhi to house various ministries (excluding a few key ones) and departments.

Why is it important? This move is likely to make inter-communication between ministries and departments easier and quicker and would also help the government in tackling shortage of office space, which often pushes them towards high rentals.

Tell me more: The proposal by the Central Public Works Department would be presented to Prime Minister Narendra Modi for his approval. This includes razing down of residential complexes of 4,000 families who will be provided with alternate housing.

 

8,000

What is it? The number of Delhi University (DU) teachers who have been protesting against some recent changes in University of Grants Commission (UGC) rules since May 24.

Why is it important? This affects the evaluation of answer sheets of around 1.3 lakh undergraduate students. They are protesting against the increase in number of working hours, difficulty in getting promotions, especially for Assistant Professors, and the likely loss of jobs for approximately 5,000 teachers, especially those in ad hoc positions.

Tell me more: The UGC has called for a meeting of all stakeholders on June 6 to discuss issues including the basis on which teachers are promoted and their workload and if the issues are not resolved then, it could lead to a delay in DU results and sessions.

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