The EconomistDecember 14th 2019 531N
arendra modi often waxes poetic
about “Digital India”: a country where
clogged, dangerous roads are replaced by
fast, ubiquitous cyber-motorways. The
prime minister can be forgiven a touch of
political hyperbole. In a world transformed
by telecommunications technology, India
has stood out. In the 1990s merely getting a
fixed phone line required a deposit (and
maybe a bribe), then waiting six months, or
six years. Now it takes minutes. India has
1.2bn phone accounts, second only to Chi-
na. Prices are among the lowest in the
world. In 2001 one in 30 Indians had a
phone. Now just two in 30 do not. India has
more than 500m internet users, who shop
online with Amazon or Flipkart (owned by
Walmart), book rides with Uber and its
homespun rival, Ola, and order takeaway
with Zomato. Measured by users India is
the biggest market for WhatsApp (400m),
Facebook (300m) and YouTube (265m). At
night the darkness of poorer streets is
pierced by Bollywood films or cricket
matches flickering on mobile screens.Look more closely, though, and the
physical foundation of this buzzing digital
marketplace looks shaky. Many of the com-
panies that built the underlying telecom-
munications infrastructure are in trouble:
unprofitable, indebted, overtaxed and ex-
posed to political whims. In November Vo-
dafone Idea (in which Britain’s Vodafone
Group owns a 45% stake) and Bharti Airtel,
two of the three big providers, and rcom,
which filed for bankruptcy in February, dis-closed respectively the biggest, second-
biggest and fourth-biggest quarterly loss
ever reported in India—$14.5bn, all told.
On December 6th Vodafone Idea’s chair-
man, Kumar Mangalam Birla, told a confer-
ence that without government support,
“We will shut shop.” Whether or not Mr
Modi hears Mr Birla’s plea, the contours of a
massive industry critical to India’s devel-
opment are about to be redrawn.
The causes of the telecoms firms’ woes
are not mysterious. In 2016 Mukesh Am-
bani, India’s richest man, launched Jio,
which took on Vodafone Idea, Bharti and
rcom. His aim was to create a mobile net-
work and a broad digital platform on top of
it, offering services from e-commerce to
video-streaming. To that end, Jio’s parent
conglomerate, Reliance Industries, has in-
creased its gross debt to $42bn. Lenders
were happy to bankroll Mr Ambani’s pro-
ject, given his group’s lucrative petrochem-
icals business. It helped that the govern-
ment had awarded the company that would
become Jio rights to spectrum for what
many observers thought was a song. Spec-
trum accounts for only 18% of Reliance In-
dustries’ capital invested in its telecoms
business, compared with 37% for Bharti
and 47% for Vodafone Idea, according to
Morgan Stanley, an investment bank.
In its first months Jio charged custom-
ers nothing, then next to nothing. Rivals
had no choice but to slash rates. In the past
three years average monthly revenue perIndia’s digital revolutionSo much rests on so few
making so little
MUMBAI
Half a billion netizens, a score of tech unicorns, a pile of venture capital and the
prospects of Silicon Valley’s giants—all rely on India’s collapsing telecoms firmsBusiness
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