Telcos set for growth war after consolidation
NEXT PHASE Jio may lead rivals Airtel, VodafoneIdea in offering cheaper tariffs as focus shifts to retaining customers
NEWDELHI: In the past 18 months, Reliance Jio Infocomm Ltd has triggered a bloody consolidation in the telecom sector, forcing incumbents to either match Jio’s offers or exit the market completely.
Among the last ones to exit the market will be Aircel Ltd, which, according to a report in The Economic Times, plans to file for bankruptcy at the National Company Law Tribunal. Jio’s entry strategy has already worked for Mukesh Ambani, with the latest data made available by the telecom regulator showing that its market share has doubled to 13.71% by December end 2017, from 6.40% a year ago.
Trai’s latest order on tariff rules has given the green signal to Jio to continue with its promotional offers. But experts say Jio will now face strengthened competitors in Bharti Airtel Ltd and the Vodafone-Idea combine.
“Earlier, subscriber additions were equated with the success of the business. Now with consolidation almost over and with the three top players reaching a sizeable market share, the focus now must shift to retaining customers and how to ensure growth,” said Amresh Nandan, research director at Gartner.
Significantly, Airtel, Idea Cellular Ltd and Vodafone India have retained their respective market shares, which implies that Jio has grown partly at the cost of these smaller players and largely by grabbing a chunk of the new subscriber additions to the overall base. As of December 31, 2017, Airtel had 24.85% of subscriber market share, Vodafone had 18.2%, Idea had 16.83% and Jio had 13.71%.
“Operators now cannot rely on selling packets of data to individual consumers and will need to focus on ‘solution sales’ for enterprise businesses, apart from looking at 5G use cases— smart city applications such as traffic management, waste management, apart from telemedicine, etc,” said Rajan Mathews, director general of COAI.
With the advent of these new offerings, what could also work to Jio’s advantage is that it is the newest entrant in the sector.
“Networks that were earlier designed to offer primarily voice and data need to be transformed to offer these new products. To that extent, Jio, with a greenfield network, has an advantage over other operators who need to focus on cost effectiveness, put in investment in infrastructure and be willing to take a hit on Ebitda (earnings before interest, taxes, depreciation and amortisation) in the short run to win the long-term battle,” Nandan said.
This advantage would, however, be short-lived, with incumbent operators such as Airtel looking to monetise their assets, while the Idea-Vodafone combine gets ready to benefit from cost synergies once the merger is completed.