As Jio comes calling, rivals huddle in strategy rooms
One can call it the Jio effect.
Even as Mukesh Ambani was speaking on Reliance Jio’s roll out, in what could probably be touted as one of the most anticipated annual general meetings (AGMs) in the company’s history, top executives of companies, including Bharti Airtel, Vodafone, Idea Cellular and Reliance Communications, among others, were brainstorming about future strategies.
“Top-level executives from larger telcos said they were not expecting such huge changes and low prices in terms of data and voice from RelJio. They are already holding meetings in strategy rooms to take stock of the situation and plan future actions to tackle Jio and its service,” an analyst, who didn’t wish to be identified, told HT.
The launch of Jio’s network on Thursday witnessed RIL chairman Mukesh Ambani announcing a slew of schemes — 4G devices from ₹2,999, cheap data plans, unlimited night-time 4G connection and free voice calls, among others.
According to experts, the lowpriced schemes will disrupt the market, affect incumbent telcos and force operators to wage a price war to retain old customers and acquire new ones. “Airtel will be the worst affected as it has a larger subscriber base than operators like Idea and Vodafone,” the analyst said.
The launch could hurt voice tariffs and average revenue per user of operators and force them to unveil new plans to match the pricing to protect their market share, experts added.
“The incumbents’ debt profile will deteriorate in 2016-17, as companies will incur high capex on network expansion and acquisition of additional spectrum to compete with Jio,” said Tanu Sharma, associate director, large corporates, India Ratings and Research.
Reliance Infocomm’s launch of a Samsung phone for ₹501 and very cheap calling rates in 2002 triggered a price war. Six years later, telcos started slashing prices after Tata Docomo launched the per-second billing cycle. History may repeat itself in 2016.
Operators have already started slashing prices in anticipation of the Jio launch. Airtel on Monday reduced prepaid data rates by 80%. The company currently has 38 million users in India. Under the new schemes, customers can avail a gigabyte (GB) of data for ₹51 — just one rupee over the rate unveiled by RelJio on Thursday. Earlier, Airtel had offered up to 67% more data on existing schemes. Idea and Vodafone followed suit.
RelJio has accused telcos of not been complying with their agreement in terms of call connectivity and number portability. Ambani during the launch sought cooperation from Airtel and Vodafone to help improve connectivity on voice calls.
On Thursday, Airtel released a statement, claiming to cooperate with Jio. “We welcome RelJio’s entry into the digital world. As a responsible operator, we will fulfil all our regulatory obligations as we have always done.”
“We have always offered great value to customers. We will continue to do so,” Vodafone said.