Telecom sector experts have long-believed that in the long run, there will only remain 3-4 strong players, with the smaller ones either exiting the business or merging with the larger ones.
With the entry of Reliance Jio into India’s telecom landscape, the prophecy seems to be coming true at a breathtaking pace, as the smaller players with weaker balance sheets to consider amalgamating with the larger ones in the wake of their business operations fast becoming unviable amid a hypercompetitive environment.
Earlier yesterday, Bharti Airtel said it will acquire Telenor India, taking out one of its rivals who are undercutting the prices by offering cheaper tariffs in order to gain subscribers. Vodafone India and Idea Cellular are also in advanced talks for an all-share merger deal to gain size and scale to take on the competition from Reliance Jio.
Reliance Jio, which now needs to look at earning returns on its investments, itself announced the end to its free mobile telephony services, saying that it will charge its prime customers Rs 303 per month, higher than the median ARPU (average revenue per user) of the Indian telecom industry is below Rs 200 (per month).
You may also like to watch:
On the other hand, Tata Teleservices is already reported to be in talks with Reliance Communications to merge its operations with the Anil Ambani group-controlled entity to join the proposed R-Comm-Aircel-MTS combine.
As is known, Reliance Communications is all set to finalise deals to merge Aircel Ltd into its own wireless telephony business. It is also in the process of finalising a merger of Systema Shyam Teleservices, the owner of MTS services, with itself.
Concentrated pricing power
Assuming that all the consolidation goes through, the industry will be left with only four large telecom service providers with great pricing power, with no new entrant trying to grab the market share with aggressive tariff plans.
Reliance Jio has said that from April 1, its existing users could subscribe to its services with 1GB data per day and unlimited voice calls within India for Rs 303 per month and a one-time payment of Rs 99. Reliance Jio’s pricing, though seen as very attractive in comparison with the other operators, is still not as disruptive as was expected earlier.
Bharti Airtel, Vodafone India and Idea Cellular have their best plans at Rs 340-350 per month, which offer unlimited domestic voice calls, but only 1GB data in the entire month.
While the incumbent telecom operators will for sure try to protect their user base from moving to Reliance Jio, they may not cut tariffs by much. Instead, they may increase their data offerings in the same plans.
You may also like to watch:
On their part, Reliance Jio’s customers, having got a taste of unlimited 4G data on their phones, may continue with the service even with the new tariff. A brokerage report estimates half of Reliance Jio’s users to stay with it post the start of paid services from April 1.
The remaining customers, should they choose to have a mobile phone subscription, will have nowhere else to go apart from the three other big players, who are desperately looking for ways to protect their margins in order to support not only future growth, but also the present operations.