THE GREAT INDIAN TELECOM LEAGUE

The Indian telecommunications sector is witnessing challenging times. Having been reduced to a three way fight, time shall tell which one shall hold the sway over the other two.

BY DANFES

From a dozen odd players, there are only three major left in the Indian Telecom Industry. These are Reliance Jio, Bharti Airtel and Vodafone Idea with each of the three vying fiercely for their share & support of the consumer base. While 2018 saw some consolidation, this year may see the three holding on to their customer base whilst attempting to break more ground in the rural belt & also improving their bottom lines. Easier said than done; currently the Indian telecommunications industry is at interesting crossroads. With 5G on the anvil, each of the three players would need to expand the network to make connectivity accessible in the difficult-to-reach areas& also assure its existing customers on efficiency, speed & data.

The government’s push towards digitalization must be reassuring to the operators in their bid to create opportunities for themselves as well as stay liquid. The National Digital Communications Policy 2018, which was released earlier this year, highlights this. Connect India; Propel India and Secure India are the three pillars of the policy. The service providers and the vendors need to come up with innovations to make both possible, `connecting’ the unconnected and enabling newer and innovative technologies to `propel’ the overall growth. The coming year will see Indian telcos adopting technologies such as virtualization to make this possible.

Preparing for 5G
One of the most significant growth areas has been that of data consumption in the country. The mobile internet connections grew from 346 million in late 2016 to 491 million this year, according to the data released by the Telecom Regulatory Authority of India (TRAI). The consumption per user has also reached 3.2 GB per user per month.The indications are that this growth is likely to continue for some time. As of now only less than 30% of the country has access to the internet. Besides, the smartphone penetration is likely to more than double by 2020, according to Morgan Stanley.India’s 4G subscriber base touched 238 million this March.

Already the service providers have started to prepare the networks for the 5G and this is likely to pick up steam in the coming year. Airtel and Vodafone Idea have already used Carrier Aggregation while Airtel has explored Multiple Input Multiple Output (MIMO) for optimum utilization of the available resources. This will gather steam in the coming year as the Indian telecom industry will work to bring 5G to India and also to prepare the networks for extreme broadband applications such as virtual reality, augmented reality and more.

What holds the key to sustainability is the pricing of the newer packs. We believe that Reliance Jio would be aggressive in pricing in circles where it doesn’t have a leadership position. Rural tele-density is likely to cross 70% by fiscal 2023, only other driver for subscriber addition. Currently the area is under-penetrated with a rural tele-density of 58.5% as of 2018, giving scope for operators to expand services in these areas. The consolidation of large telecoms in the industry has led to a decline in their net subscriber addition, as subscribers inactivate multiple SIMs and switch to primary SIM cards.

Reliance Jio Gaining Ground
The merger of the Indian unit of Vodafone Plc. with Idea Cellular in August created India’s largest telco by number of subscribers (422 million), overtaking Bharti Airtel with 343 million subscribers and Reliance Jio’s 252.3 million. Reliance Jio’s 8-million strong subscriber additions, Airtel’s stable market share and Voda Idea losing customers is what some of the reports have suggested is going to the outlook for 2019. Vodafone’s loss has been Jio’s gain with Bharti Airtel subscribers remained flat. Over the past year, Jio’s active subscriber market share has gone up to 24 per cent, gaining 9 percentage points (ppts), Bharti has maintained its share at 32 per cent and Vodafone Idea lost 5 percentage point to fall to 37 per cent. These are ominous signs for the telecom giant who has infused to the tune of 25000 crores in the merged entity. Even when mobile number portability (MNP) requests declined 10 per cent MoM and this, along with the increase in Jio’s subscribers in the fourth quarter of the last fiscal, could imply that a part of the dual-SIM users are shifting usage back to incumbent networks.

Government Role
Sometime ago Prime Minister Narendra Modi had publicly that his government did not make policies for “the Ambanis”. However, this claim too is being questioned as the existing telecom operators such as Vodafone, Bharti Airtel, Idea Cellular and others have openly the Telecom Regulatory Authority of India (TRAI) of showing a pronounced bias towards Mukesh Ambani’s Reliance Jio which has entered the market on a trial basis and promises to provide a slew of packaged services, including voice and data, at very high speeds. Reliance Jio has already spent Rs.1.15 lakh crore on this prestige project and the market perceives it as the most ambitious ever to come out of the Reliance stable. In short, it is seen by the Mukesh Ambani Group as a project too big to fail. But the moot point is whether the regulator and policy makers have also started seeing it as too big to fail! That is where the real problem lies.

The Cellular Operators Association of India (COAI) representing the existing telecom players such as Vodafone, Bharti Airtel, Idea Cellular, have alleged that the telecom regulator TRAI, has issued an unusually large number of discussion papers over the past few months which seek to review key policy measures favoring a new entrant, which is Reliance Jio. They see the attempt to rush through so many policy papers as being linked to the timing of Reliance Jio launch. The COAI has formally written to the government and regulators saying, “We are shocked that some papers seem to have been crafted and timed to serve the interest of new players, with complete disregard for massive investments made by the existing players… We hope TRAI would take a more balanced view on issues impacting the entire telecom industry and ensure a level playing field as some of its consultation papers are heavily loaded in favor of new players and point to a bias against existing operators.”