The country’s telecom players have been digging in to defend their market share
It is a brutal fight out there in India’s telecommications space.
Since the emergence of Reliance Jio September last year, its rivals are changing their strategy ever so often to defend market share because Mukesh Ambani, the owner of Reliance Jio, has shown he has the guts to disrupt the telecom sector.
His latest move is to turn Reliance Jio into India’s largest mobile network and he is willing to spend big bucks to ensure that.
Reliance Jio is a unit of India’s largest conglomerate, Reliance Industries.
Yesterday, at the company’s AGM in Mumbai, he spoke, filled with emotion over the success of the entire Reliance Group over the past 40 years, and noted that Jio’s adoption was even faster than Facebook, Whatsapp and Skype.
He said the past ten months has been an incredible journey for the company.
Jio has broken record after record.
Nobody believed that it could acquire customers to justify (billions of dollars of) investments in a greenfield with LTE, but team Jio has stunned the world by meeting the 100-million customer target.
He revealed that Jio added seven customers/second every day on average and as of yesterday, Jio has over 125 million customers, according to reports out of India.
But he did stop there.
He threw in another surprise by launching what he called India’s intelligent smartphone
To the cheering crowd, he said voice will always remain free on the Jiophone, and zero cost for the phone.
Experts believe this blockbuster device will be a game changer in India’s mobile market.
To top it off, the phone has many features, such as the ability to pay bills, and it can be connected with a TV using a cable, allowing users to watch content on apps, with content provided by Mukesh’s companies, ie JioTV and JioCinema.
Mukesh is bundling entertainment and that means he is getting into the content game early instead of relying on third party providers to provide all the content subscribers need.
Mobile companies globally are finding new ways to monetise networks and finding ways to get into the content game.
Jio is a mobile service offered by a unit of Reliance Industries, owned by Ambani, that is splashing money few have seen. Initially, he put aside US$25bil for the telecom network. Now he is talking of increasing that sum to over US$40bil.
He started off by offering months of free SMS, voice and data to win subscribers but Jio began charging in April this year.
On Thursday, reports said Reliance Industries had announced plans to raise Rs 25,000 crore through privately placed debentures in order to rapidly expand its telecom business and replace its existing high-cost borrowings.
What makes Jio stand out?
Mukesh may be happy with Jio’s achievements thus far but not its rivals.
They have been losing market share since September.
Reports out of India say the biggest difference between other telecom operators and Jio is their optical fiber network. Jio has the longest fiber optic network in the country, ranging over 2.5 lakh kilometers of fibre and Reliance spent US$22bil in the fiber optic network.
“This is more than two times the combined investment of Airtel, Idea Cellular and Vodafone in the 4G segment, and remember that most of the other investments are not even complete as of now,’’ says a report.
The report says Jio has a strategy, first to undercut the market by offering attractive discounts then let everyone switch to Jio for Internet use at cheap rates.
By doing so, it will unleash the power of its fiber optic network to give super fast Internet, grow its subscriber base, and then recoup its investments.
Basically, Ambani has taken on a gamble betting on volume to help him recoup his investments.
In the meantime, the other players are forced to re-look at their own strategies.
Jio is causing a lot of stress to them and even Mukesh’s brother, Anil’s Reliance Communications, is not spared.
Reliance Communications, in a regulatory filing recently, was reported to have said that “the telecom industry’s current financial problem to some extent can be attributed to the entry of a new telecom operator and its strategy of freebies to gain customer and market share.’’
The intense competition is forcing players to consolidate and the biggest change seen thus far is the merger of Vodafone with Idea Cellular, in which Axiata Group Bhd has 20% stake.
This merger will create India’s biggest mobile company with over 400 million users that will control about 35% market share, though Axiata’s stake will be reduced to about 10%.
Airtel, now the leader of the pack, will come down to second spot with 278 million users and 24% market share, followed by Jio with 125 million users, state owned BSNL (103 million), Aircel (90 million) and Reliance Communications (82 million).
“More players will be forced to merge,’’ says an expert.
For now, reports out of India say Jio is eating into the smaller players’ market share but the bigger ones have also seen some erosion in market share.
Frustrated by what is happening, some players are lobbying the government to set a floor prices for voice, SMS, and data services so that the players can generate enough profits to invest and compete based on quality of services.
The industry is also reeling under revenue and profitability pressures, and its debt has risen to a colossal Rs 4.6 lakh crore, says a report.
India has over 1.2 billion mobiles users now and with Mukesh’s ambitious plans to invest up to US$40bil to make Jio the biggest mobile player in India, it will be challenging phase for all players. For Ambani, the game has just begun and Jio is a sure “disrupter’’ in India’s telecom market. One thing for sure, this makes a good case study for management schools, no matter what the end result is.