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Is JIO Set to Monopolize India’s Telecom Sector?

Mukesh Ambani

The telecom industry in India is in deep crisis. Once a booming market having a dozen carriers, it is now left with only three private players, two of them reeling under heavy debt and losses (Airtel and Voda-Idea) and two nearly bankrupt PSUs (BSNL-MTNL). The latest blow from the Supreme Court (SC) ruling on the adjusted gross revenue (AGR), asking the telcos to pay dues and interest amounting to Rs 1.33 trillion within three months came as a death knell to the incumbent telcos. The exception seems to be Reliance Jio Infocomm, which is currently the only profitable operator in the sector.

The cards seem to be stacked in the favor of Mukesh Ambani, be it in telecom or in other digital sectors like the ecommerce, where he plans to launch an Alibaba-like venture. At this rate, some fear, if the industry is moving towards a Jio monopoly in the coming days.

Read more: Apex Court Order Sets Back Telecom Industry

The JIO Effect

For the past several years, the telecom sector has been calling for rationalization of levies, duties and taxes, not to forget the series of political controversies and scams that continued to add to its woes. Of course, some of us would’ve forgotten the irony that in these very years, the sector made massive strides with the rollout of 4G and connecting pretty much the entire nation on its networks, besides generating employment across the board.

And then came Reliance JIO – a brand that built itself on freebies funded by an extra-large purse that changed the firmament since its launch in the September of 2016. The Mukesh-Ambani led telco’s impact was stupendous. Within no time, it emerged as the leading telecom service provider in India, offering unlimited voice calling and free data benefits that lured subscribers who began by using them as a second option, only to dump their original provider at some point.

Soon after, several players like Telenor and Tata Tele services decided to sell off their businesses, while others like Anil Ambani-led Reliance Communications sank under piles of debt. With massive consolidation in the recent years, the two surviving telcos viz. Airtel and Vodafone-Idea, also had to bear the brunt and are staring at tough times ahead.

“It is natural on the part of Reliance Jio to exploit the situation to gain a larger subscriber base at the expense of Vodafone-Idea or any weakness coming from Bharti,” Nitin Soni, Director, Corporates, Fitch Ratings said in a recent interview with Economic Times.

At present, RJio has signed up over 350 million subscribers and is moving ahead with its plan to corner half the revenue market share by 2021. Some believe that’s an ambitious target considering Jio only has around 25% of the country’s total 1,166 million mobile phone users in India. But Soni noted, “Jio has the financial muscle and, more crucially, the staying power to keep afloat.”

A greater twist came in a strongly worded letter last week, Ambani’s Jio clarified that it opposed any move by the government to provide financial relief to rival telecom operators. Criticizing COAI of using a “threatening and blackmailing tone” with the government when it spoke of potential job losses in the sector, a deterioration in service quality and cutbacks in investments, Kapoor Singh Guliani, president for regulatory affairs at Reliance Jio, said in the letter dated November 1 that “… rival mobile carriers could pay off the dues by monetizing their assets and investments or issuing fresh equity.”

The letter addressed to India’s telecom minister comes after a government panel agreed to examine Sunil Mittal’s Bharti and Kumar Mangalam Birla’s Vodafone-Idea’s demand for reducing the spectrum usage levies and the Universal Service Obligation Fund charge. The two carriers are struggling, with Vodafone Idea posting 11 straight quarters of net losses and Bharti slipping into its first-ever loss in the June quarter (but have chances to recover to some extent).

Analysts say if the SC verdict is implemented, it could pave way for two-operator telecom market in India comprising Bharti Airtel and Reliance Jio only as Vodafone Idea’s survival is at stake. Vodafone-Idea’s outstanding licence fee and spectrum usage charges are reportedly much higher than its current $3 billion cash reserve and its market cap of Rs 12,442 crore. As of June 30, 2019, the company had a total debt of Rs 99,300 crore.

The situation is apt for Reliance JIO to wade into the subscriber bases of the others. “Not surprising, to see that as a business they would try to execute well in the market to gain from any weakness of the incumbents,” says Soni, who believes that the company has a strong momentum right now to gain more subscribers. “They have gained a lot of subscriber base and we expect them to achieve 375 million subscribers by the end of December and clearly their market execution has been quite strong in terms of retaining subscriber base and also in terms of network strength,” he said.

However, Ambareesh Baliga, a SEBI registered independent stock market analyst puts a word of caution. “If the telecom sector in India heads towards a duopolistic market, this could be the biggest risk for the subscribers as well as the government. A number of government initiatives including Digital India, financial inclusion schemes, social impact schemes in addition to telecom dependent businesses which have been flourishing based on low connectivity costs could get affected, he said in a recent article with

Baliga also sees a whirlpool effect on the employment market. “The pricing power of the duopoly could be staggering. Thus, the losses for the economy overall will far outweigh the concentrated gains in the hands of few,” he said.

An e-Commerce Twist

The fact the Mukesh Ambani is set to have a share of the pie in every (digital) sector, is evident from his plans of setting up a $24billion ecommerce platform, which experts see as an Alibaba-like venture to disrupt the online shopping space, which is currently dominated by Amazon and Flipkart.

The crux is that the board of Reliance Industries has proposed investments of Rs. 1.08 trillion ($15 billion) into the fully owned subsidiary, which in turn would be pumped into Reliance Jio. With a series of capital transfesr, Reliance Jio Infocomm would be made debt-free by March 2020,. As of now, Reliance Jio’s debt stood at Rs 84,000 crores; its stand-alone profit was Rs 990 crores for the September quarter against the revenue of Rs 12,354 crores.

Recently, Ambani has revealed plans to sell a 20% stake of Reliance Oil and chemical business to the Saudi Arabian Oil Co (Aramco) at an enterprise value of $75 billion. With the new holding firm, Ambani may take the business to the public within five years.

All these strategic initiatives combined with the favorable vibes from the government in New Delhi and his strong international tie-ups suggest that Reliance JIO is clearly heading for the top slot in India’s telecom business. The question that remains is would there be any competition or will India once again sink into a monopolistic regime that government-owned companies ruled in the 1980s and 1990s?

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Sohini Bagchi
Sohini Bagchi is Editor at CXOToday, a published author and a storyteller. She can be reached at