Why RJio's Entry Can Be A Boon For India's Telecom

by Wrik Sen    Sep 23, 2016

telcos

Reliance Jio 4G has taken the entire Indian telecom industry by storm with free calls and cheaper data rates. The incumbent telecom operators, Bharti Airtel, Vodafone and Idea are slashing tariff and bundling free calls with data to drive mass market adoption to ensure that customer loyalties don’t shift towards Reliance. Looks like the telecom industry as a whole will gain significantly from the entry of Jio.

For example, with the generous offers which will last till December 31, 2016, Reliance is poised to gain a tremendous bit from the shifting customers, or those who take up Reliance Jio sim-cards as their alternative connections. If figures are to be quoted, the Rs 1.5-trillion invested in Reliance Jio 4G, would perhaps bring in 100 million customers into the fold of the telecom industry, within the shortest period of time, if Mukesh Ambani’s claims are to hold true. 

The success of the hype created around Reliance 4G has been such, that infrastructure with respect to inter-connectivity points have already arisen. Reliance has laid allegations that the other telecom majors have not created sufficient inter-connectivity points, which is resulting in the current batch of Reliance users facing issues like call drops, and frequent disconnections.

Read more: Breaking Through The Hype of Reliance Jio 4G Offerings

Though Reliance had demanded 4,000 to 5,000 connectivity points from the other telecom majors, Airtel has given less than 2,000, about 1,500 are from Vodafone, and close to 1,600 by Idea. However, despite the fundamental challenges existing, there is always the positive side to it, which is of strategic importance, especially over the next few months.

reliance

The end of the ‘free era’

Reliance Jio 4G services will be offering the free unlimited voice calls and the cheap data rates, till the date of December 31, 2016, after which the services will become chargeable. That will mark the end of the free era from Reliance Jio 4G, meaning that charges of the service would go up. Though already the competitors like Airtel, Vodafone, Idea and even the state-owned BSNL are trying to offer the best value for money offers, they could be on a more level playing scale, once the free period ends. 

Return of the loyal customers

Borrowing from the last point, the customers who would have shifted to Reliance Jio 4G during the free period, as is being witnessed now, will perhaps shift back to their initial service providers, like Airtel, Vodafone, and Idea. Though there are no official figures, but a brokerage firm is known to have mentioned, “It will be interesting to see if RJio is able to retain its subscribers after the end of the welcome offer. Based on our channel check, there could be about 30-40% retention, which implies about 10-15 million subscribers.”

This means that after the free period is over, Reliance will retain perhaps 30-40% of the customers it brings into its fold, as by then the telecom majors would have definitely something to gain back customer loyalties. If Reliance estimates are anything to go by, around 100 million will be bought into the fold of the telecom industry, and even a chunk of it would mean significant gains, and strategic gaining points from Reliance’s competitors.

Competition high in the 4G market

With the onset of the Reliance launch, came the market slide of rates applicable to 4G services by other telcos. Since Reliance had the reputation of having cheaper rates than the market, something which they stood up to, in parts, the other telcos slashed their rates, or rather, provided better value-for-money packages to consumers.

Read more: 4G Price War: It’s Reliance Jio Vs. The Others 

Also, Reliance has also bought in ‘Lyf’ brand of smartphones, where the cheapest option of a 4G ready handset, comes with a price tag of Rs 2,999 only, thus playing on the affordability factor. If not anything, at this stage of the free period from Reliance, the consumers will be rushing in to buy these handsets, thus bringing a large audience under the ambit of 4G services.

At a later stage, when customers opt for other telecom players, it creates a vast consumer base for them to capitalize on. On a larger scale, the 4G market will have the highest bank of customers, making the segment more lucrative for Indian telecom players.

The fallback on Digital India, positive and hopeful

The fallback on the Digital India initiative, launched by the Prime Minister Narendra Modi, will get a major boost with the competitive market of 4G services. With fast internet within the palm of hundreds of millions of consumers (eventually at least), major goals like financial inclusion, and a data driven economic growth for the country, will be on perfect track that it has always needed.

mukesh ambani

Voice calls aside, the need for data will be even more, considering the size of the IoT market possibilities, which some estimates put at $10-12 billion by the year 2020. Fast internet will have a crucial role to play there as well, as device-to-device communication will get more frequent, will need to be quicker by good measure too, especially in the case of the 100 Smart Cities Mission.

Read more: Will Reliance Jio Do To Data What R-Com Did To Voice

The current status of the market is still within the inertia of the hype that Reliance has managed to generate with its ‘free period’, with every other player trying to readjust to potential conditions of the future. However, it will be next year, when the true test of Mukesh Ambani’s claims will be tested, as he is looking to take on the likes of Airtel especially, which currently has close to 50 times the number of subscribers of the Reliance Jio network.