Is the Indian telecom industry ready to move out of Jio’s shadow?
Opinion

Is the Indian telecom industry ready to move out of Jio’s shadow?

Reliance Jio Infocomm Limited, a wholly owned subsidiary of Mukesh Ambani’s Reliance Industries created a splash in the Indian telecom industry with its entry. The revenues of India’s telecom industry have seen a big fall after the entry of Jio despite the number of telephone subscribers in India rising from 1,188.55 million at the end of February 2017 to 1,194.58 million at the end of March 2017 with a monthly growth rate of 0.51 per cent, as per the data published by the Telecom Regulatory Authority of India (TRAI).

Credit Rating Information Services of India Limited’s research estimates that the reason for the sharp decline in revenues of telecom players in the second half of the financial year 2016-17 and in the first quarter of 2017-18 is not only because of fall in tariffs, both for data and voice, but also because of large amount of data usage shifting to Reliance Jio.

The free offerings of Reliance Industries’ telecoms venture Jio, which started operations late last year, sparked a fierce price war in the world’s second-biggest mobile phone market, forcing rivals to launch cheap service plans.

The revenue of Idea Cellular Limited, part of the Aditya Birla conglomerate and India’s third-biggest telecom operator in 2015-16 was Rs 300.8 crore but coming to the figures post-Jio, Idea Cellular Limited consolidated net loss of about Rs 328 crore in the first three months this year. Vodafone too reported a 10.2 per cent dip in its FY17 operating profit at Rs 11,784 crore. The annual revenue of Indian telecom firms declined for the first time since 2008-09 to Rs1.88 trillion in 2016-17.

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In order to counter the Jio effect, many telecom service providers are gearing up for mergers. The Jio storm triggered consolidation in the Indian telecom sector.  India’s largest telecom operator, Bharti Airtel, announced the acquisition of Norwegian Telenor’s India unit. Vodafone and Idea have already said that they are considering merging their businesses in India. Anil Ambani-led Reliance Communications has also signed a pact to merge its wireless business with smaller rival, Aircel.

However, advocating this consolidation telecom secretary, J S Deepak told Press Trust of India, “The way things are, this consolidation is going to be very good for India as we are likely to get four private and one government player-BSNL-MTNL, which is ideal”.

The silver lining

With Reliance Jio launching its Rs 303 plan and competitors such as Bharti Airtel responding with its Rs 345 plan, analysts expect other telecom service providers to follow the suit. This may tone down the Jio effect. This is also evident from the fact that the net profit of Airtel in Q4 2017 stood at Rs 373.4 crore (or Rs 0.93 a share) despite the fierce battle with Jio. Idea’s loss also came down from Rs 385.6 crore in the last quarter of 2016 to 328 crore in March ended quarter 2017. Other operators too saw a decline in the loss percentage of the first quarter of this year in comparison with the last quarter of last year.

“Even Jio customers who retain plans from other companies may reduce usage, impacting their average revenue per user,” said Ambani.

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An expert from Cellular Operator Association of India said that operators need to implement data-oriented pricing strategies. Jio’s free voice service with free national roaming is a compelling offering and incumbents need to match their offerings to remain competitive. The tariff wars are likely to continue in the coming quarters, however, this time, with the end of Jio’s freebie season the fight will be on equal footing.

Disclaimer: The opinions expressed in this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NEWSD and NEWSD does not assume any responsibility or liability for the same.

Prateek Shukla is a journalist working with an online news organisation. He tweets at @Prateeks95.

 

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