Reliance Jio's entry is likely to benefit Bharti Airtel, Idea
The Rs 1.5-trillion (till July) investment by Reliance Industries has offered users liberty to consume free voice calls and internet data till December 31.
After that, its services will become chargeable, that too at rates which will make key players such as Bharti Airtel, Vodafone and Idea Cellular feel the heat.
The allegations Reliance Jio has levelled against incumbent operators for providing insufficient points of interconnect to successfully make voice calls is another matter of contention.
Reliance Jio claims that against a requirement of 4,000 to 5,000 points of interconnect per operator, the interconnections released by Airtel are less than 2,000, about 1,500 by Vodafone and close to 1,600 by Idea.
Despite all these issues, the incumbent players, whose margins and consumer base face a threat from the RIL telco, still have a silver lining.
We look at how the key telecom players, the telecom industry as a whole and the government will gain significantly from the entry of Jio.
Bharti Airtel, Idea Cellular to gain
As Reliance Jio's commercial launch approached, incumbent telecom operators Bharti Airtel, Vodafone and Idea cut tariff and bundled free calls with data to drive mass market adoption.
The telcos have not cut tariffs after Mukesh Ambani formally launched Reliance Jio services because there is no substitute to Jio's free plans, no matter how much they reduce rates.
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| Telcos have not cut tariffs after Mukesh Ambani formally launched Reliance Jio services because there is no substitute to Jio's free plans. (Picture: Twitter) |
However, from January 1, 2017, when Jio services become chargeable, incumbents are expected to cut rates for data and voice plans significantly to protect market share.
After incumbents cut rates, possibilities are high that Jio customers will shift loyalties to Airtel, Vodafone, and Idea, the established players in the industry. The Jio network may witness mass desertions after consumers stop using Jio sim cards after the free trial period. This could hugely benefit Airtel and Idea, which have invested substantially in their 4G and 3G networks.
Though Bharti Airtel has issued statements intending to end the POIs (Point of Interface) issue with Jio as soon as possible, chances are high if the issue does not get resolved fully, consumers opting for free voice calls may simply switch to others.
A report by a brokerage says, "It will be interesting to see if RJio is able to retain its subscribers after the end of the welcome offer. Based on our channel check, there could be about 30-40 per cent retention, which implies about 10-15 million subscribers."
Telecom industry
The approximately four-month period for which data and voice services have been made free will add new subscribers to the telecom industry. At the end of June 2016, the subscriber base stood at 1059.86 million, according to TRAI data.
The figure is expected to rise significantly as Jio aims to fulfil Mukesh Ambani's ambition of reaching the 100 million customer mark in the shortest time possible. At present, Reliance Jio boasts a subscriber base of over five million.
4G network
The demand for 3G phones has been declining during the last three to four months ahead of the Reliance Jio 4G launch. Experts say with telcos aggresively cutting rates, consumers are switching to 4G compatible phones to enjoy high internet speed.
The timing of free data services for almost four months and phones starting Rs 2,999 could not have been better. Reliance Jio's Lyf brand handsets are your ticket to use unlimited data for four months.
According to an ET report, Samsung Electronics, Oppo, Vivo, Lenovo-Motorola, HTC, Micromax Informatics and Panasonic have decided that they will launch only 4G smartphones.
The consumer base primarily for 4G network is expected to rise significantly. For consumers, this will be an exciting opportunity to choose among the data plans bundled with attractive offers.
Digital India campaign
"World's demand for digital oxygen, that is data, is growing exponentially. Jio aims to fulfill this need of Indians. Access to information will now know no barriers," Ambani said during the Reliance Jio launch.
And if we don't consider voice calls for now, Reliance Jio's 4G data speed and apps seem to be the perfect platform for PM Narendra Modi's Digital India programme.
Digital India is a plan envisioned by Modi "to transform India into a digitally empowered society and knowledge economy". The key to the programme is turning high-speed internet into a core utility.
With lowest data rates in the sector, Jio services can provide digital infrastructure as a utility to every citizen and contribute to PM Modi's Digital plan. Backed by India's largest business conglomerate, Jio aims to take on the telecom behemoth which has subscriber base of almost 50 times (Bharti Airtel: 250 million) its current users.
The starting phase of the race has been exceptional with free Jio services arousing huge interest among the subscribers, but it will be interesting to see if Mukesh Ambani's Reliance Jio can transform into the new Airtel of the industry.