Reliance Jio's predatory pricing has disrupted India's telecom market
Those with deep pockets will have the definite edge in India’s high competitive, costs and quality conscious telecom services market. Mukesh Ambani-controlled Reliance Jio with access to flagship company Reliance Industries (RIL)’s cash, has reportedly invested over $20 billion into building up the telecom services business in the last 3-4 years. What’s more, the senior Ambani continues to pump in billions of dollars to achieve complete dominance in Indian telecom services market, the second largest globally next to China.
There may be a very slight chance, if any, of Reliance Jio breaking even any time soon, let alone make profits. But, with single-minded dedication, Mukesh Ambani, ably assisted by his three siblings seem to have invested big time into the telecom business. The new bee Reliance Jio, already dubbed the fastest growing telecom company seems to be in no mood to give up on its stated objective of becoming one of the largest global players in the business.
In the process, if it makes life miserable for existing enterprises in India, so be it. Established companies like Bharti Airtel, Vodafone, Idea Cellular and smaller operators like RCom, Systema, Tata Tele, BSNL, MTNL and Aircel are under tremendous pressure, both in top line and bottom line growth owing to disruptive corporate strategies adopted by Reliance Jio.
From the consumers’ point of view, more the merrier seems to be the way forward. Beginning last September, tariffs across services have gone southwards with local and roaming calls to SMSes becoming absolutely free. In several packages, even data downloads up to one GB is not being charged thanks to Reliance’s predatory pricing.
The latest offer of a 4G compliant mobile phone for just Rs 1,500 — and that too refundable after three years — is something the competition may not have even thought of. Targeting 500 million new customers through the Rs 153 per month plan, which includes unlimited data downloads, free calls and SMSes, is quite an ambitious plan.
The Ambani decision to attempt and bring in 500 million new customers seems very ‘bold and innovative’. He may even try and wean away a large number of consumers from 2G services network of competition. In this madness to dominate the market, the telecom services industry is bound to undergo a big churn with large players like Bharti Airtel, Vodafone and Idea Cellular hitting back at Reliance Jio.
Most players would jockey for a larger share of the high-value telecom services in data, video offerings, applications and software. While this is bound to mature the Indian market, further consolidation amongst telecom players, especially the smaller ones, cannot be ruled out.
While the Vodafone-Idea Cellular merger is going through, other fringe players may flock around Reliance Communications and Tata Tele to make the Indian market game for the big boys.
But, telecom companies will have to conduct their businesses right and fair. For instance, the Comptroller and Auditor General (CAG) has already pointed to understating of revenues by over
Rs 61,064 crore owing to books adjustment, license fees, inter-connect charges and spectrum fees collections.
While corporate accountability is a larger issue, denying the government’s revenue share of over Rs 13,000 crore must be unacceptable for law enforcement agencies.
Regulator, Telecom Regulatory Authority of India (Trai) will have to take cognizance of the serious issues pointed to by CAG while allowing market forces to come into full play without making space for monopolies of one or the other player.