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No Endgame To The Telecom Face-Off Yet

What happens when a telecom market goes, from a phase of fierce competition between multiple companies to a phase with only three effective players? We’re going to find out. Before Jio launched its six-month giveaway schemes, there were up to a dozen players fighting for space in each telecom circle.

Reliance Jio Infocomm (RJio) swept up the value-conscious Indian consumer with its free calls and bucketfuls of cheap (initially free) data. Within a year, India became the world’s biggest data consumer. Now, three giants are left standing after the Vodafone-Idea merger.

Two of those three have dodgy balance-sheets, and dangerously high levels of debt. They are also struggling to cope with recent losses. The merged entity, Vodafone-Idea, will be desperately trying to cut costs. RJio is cash-negative and depends on its parent’s resources.

A comparison of subscriber market share numbers with revenue market shares makes the concentration obvious. In terms of subscribers, India had 1.15 billion mobile connections by June end. Vodafone-Idea was the leader with 408 million combined subscribers, while Airtel had 370 million and RJio claimed just about 205 million. That’s about 83 per cent in terms of subscribers. BSNL holds most of the rest.

In terms of revenue market share, Vodafone-Idea holds about 34 per cent, with Airtel at 31 per cent and RJio at 22 per cent. The difference is due to higher data consumption. Purely in terms of data revenues, RJio claims close to 40 per cent.

The Indian market, vast as it is, has hit a plateau in subscriber numbers. There will be fewer new subscribers once smaller players have exited and their subscribers have migrated. Most new subscribers will be low average revenue per user (ARPU) rural residents.

The only way to score in this market is to wean subscribers away from rivals, and the only way to drive ARPU up is to get subscribers hooked on data. That means persuading people to swap their old handsets for smartphones, and moving them onto 4G networks and getting them to consume data.

Data consumption seems to be built on entertainment offerings. Video on the move has proved popular, despite high latency and poor quality of Indian networks. The big three are all betting heavily on content. This involves a new series of alliances with MNCs like Netflix, Amazon Prime, Hotstar, Sony, as well as local content providers. It also means more huge investments as JioFiber indicates. – Business Standard

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