Survival of the biggest and fittest ; changing scenario in telecom industry post Jio

Telecom Regulatory Authority of India (TRAI) on December 30 of 2015 disclosed that total wireless subscribers in India crossed the mark of one billion users for the first time. The data revealed that from 996.7 million at the end of September 2015, subscriber numbers rose to 1.03 billion at the end of October 2015. With this, Asia's third largest economy India becomes the only country after China to achieve the milestone. China reached the one billion milestone in 2012.

Due to launch of cheaper smartphones and low call rates mobile subscriptions in India have surged in recent years. But the wireless carriers industry in India is already crowded. There are 12 players in the industry, highest in the world in comparison to other countries. Regulators' risk is also high. Add this up and these all points lead to lower profitability of Indian telecom players than operators in other parts of the continent. In addition to that country's richest man, Mukesh Ambani is also entering into the already crowded market with his Reliance Jio product range which will make competition more fearful onwards.

All the top players like Bharti, Vodafone & Idea have beefed up their plans in order to counter the onslaught from Reliance Jio as it would lead to greater pricing pressure and ultimately led to losing of revenue market share. Top players are also eyeing spectrum of the smaller players in lucrative circles as this would help them expand their foot-print.

Bharti Airtel the biggest player in Indian telecom industry increased its share from 23.25 per cent in June, 2015 to 23.72 per cent in October, 2015. Recently it acquired majority stake in Augere Wireless in order to consolidate its 4G footprint ahead of the nationwide roll-out of Reliance Jio 4G services. Bharti is so far the only player with pan-India spectrum for 4G services. Bharti has already rolled-out 4G services across 300 towns in the past year. It also has earmarked Rs 60,000 crores on network transformation plan called ‘Project Leap’ which they would spend over the coming years.

Vodafone India, subsidiary of the world’s largest telecom company, is the second biggest player in the Indian telecom industry and it has increased its market share from 18.42 per cent in June, 2015 to 18.88 per cent in October, 2015. Vodafone is in talks with Tikona Digital Networks for buying its 4G spectrum in order to double its geographical presence according to the media reports. Acquisition of Tikona is likely to boost Vodafone’s prospect as it would have presence in 10 circles. Vodafone recently launched 4G services in Kerala.

The market share of third player IDEA when it comes to subscriber base increased from 16.10 per cent in June last year to 16.67 per cent in October. Recently Idea Cellular bought spectrum in two circles from Videocon at almost double the price which Videocon had earlier paid to secure spectrum. The aggressive move from Idea was widely seen as proactive step that would reap dividends in the long run and help them fight rivals. Idea Cellular also started its 4G services across southern Indian states as it prepares itself for the competition.

The extreme pressure has already led to consolidation talks among other small players in the industry like Rcom, Aircel, Tata Teleservices, Telenor etc. These players can simply shut their shops due to too low profit margins as and when the market starts to get very competitive leading to consolidation. In the long run, only the top players are going to survive this competition.

The new player Reliance Jio has the largest chunk of spectrum in the country, compared to any other operator in India and this puts Jio at a considerable advantage compared to rivals. Concern about added competition credit rating agency Fitch downgraded the 2016 outlook for cellular phone industry in India to negative from stable. So as the industry crossed the coveted mark of one billion subscribers, growth onwards here will be really tough. 

On contrary the internet data subscribers in India stands at 125.22 million which is still far below the overall wireless subscriber base. As per a Microsoft report, India will emerge as a leading player in the virtual world by having 700 million internet users of the 4.7 billion global users by 2025. So the growth potential in the internet data subscriber industry is good and can give chance to carrier providers to grow and improve profit margins and financials.