RELIANCE JIO - ITS TIME FOR OTHER TELCOs TO RING '911'?

By Ruma Dubey

This is like a rock star event. There is really no other industrialist in India who garners so much attention and no AGM is covered like as though it is the biggest event of the year.

When an elephant walks or decides to trample in the forest, the others scramble for safety. And that is what happens when Reliance decides to do things its way – BIG!

Jio has literally made living a tough task currently for existing telecos, announcing tariffs which have been unheard of till now. The commercial launch is yet to happen, scheduled for 31st Dec but even before that, its mere announcement has sent shivers done the spine of others, as it means a totally new game plan if they want to survive. Jio is planning to offer data services at a price as low as Rs.50/GB as against Rs.250/GB on an average charged by peers, which is the lowest in the world. Addressing the shareholders, Ambani said that Jio’s base rate for data will be one tenth of current market prices, with zero roaming charges within India, all domestic charges will be free. It plans to introduce 4G handsets for as low as Rs.2999. This will be the world's biggest startup with an investment of Rs 1,50,000 crore.

Bharti Airtel was having a good run on the bourses when all of a sudden, like a bumpy speed breaker, there came the report and downgrade of Credit Suisse. Bang! The stock fell and slipped; and it closed amongst the top losers of the day on the BSE.

Credit Suisse, last year itself had put out a report on the stock, downgrading the stock to ‘underperform’ from ‘neutral’. Credit Suisse had stated that competition from Reliance’s Jio, given the large spectrum holding and ongoing large-scale investments, could pose some serious competition for Bharti. RJio, at the time of launch itself can add 60-80% of Bharti’s current capacity.

It seems more like Credit Suisse touched a raw nerve; it is probably a fear which lurked all the time, around the periphery of Bharti Airtel but somehow no one really wanted to deal with it. And with Credit Suisse spelling it out like it, there is worry, renewed worry that its report and downgrade could prompt others to do the same.

Mukesh Ambani has always done everything king style, huge, larger than life. His foray into Indian telecom is not small – its huge to put it lightly. And Rjio is not looking at doing things in a dull staid manner, rolling out things just to get it over and done with. It is going to do all kingsize – the 4G roll out, apart from high internet speed, promises advanced voice calling service using voice over LTE (VoLTE) technology. This roll out is expected to be the biggest outside Japan and USA. 4G could help connect entire India as internet can enter every house in all parts of India through a mobile device, through broad band services.

There was a time when a wired landline was the only way to talk. Then came wireless communication or the revolutionary mobile telephony. 2G ushered in basic data and SMS services. A decade after that, 3G evolved and data access was at faster speeds with innovative applications. But when Apple launched its iPhone and Google its Android, the world changed forever. Today, we are at an intersection where internet technology has converged with mobile technology. And this convergence has shrunk the world, flattened it. This mass adoption of connected digital technologies and applications by consumers, enterprises and Governments is the revolutionary movement of digitization, which has completely changed the face of the telecom sector.

Chetan Sharma Consulting studied the revenue growth patterns for 65 leading operators in 30 major global markets to understand when the revenue in certain segments rise, stagnate and fall. In majority of the cases it was learnt that once subscriber penetration approaches 70-90% band in a given segment, net revenue peak, then stagnates and then starts declining. In this report, Sharma has stated that the revenue curve for voice is already on the decline in major developed countries like Japan, US and Western Europe. The messaging revenue curve is on the decline in Philippines, Netherlands, Taiwan, Spain and Italy and has approached saturation in UK, France and USA. In emerging nations, both voices as well as messaging revenue curve are on the growth phase. The third revenue curve of access or data is on the rise all around the world though margins are under pressure to keep up with the growing costs. Sharma talks about the 4th wave – a basket of some more innovative products, most of which are yet to be developed but sure to take the sector by storm. And he says that unless telecom companies are ready with the right strategy to tackle this 4th wave, their revenues could decline precipitously.  He has also warned that unless telecom companies become enablers and digital lifestyle service providers and not merely provide access, they will become like utility companies – large revenues but margins shrinking from 30-40% to 8-12%.

The Indian telecom sector is at the cusp of major change. We are evolving from voice to data and the future will be convergence, which is what Rjio is attempting to take us. There is no doubt that Rjio will shake up the sector and rightly so, unless Bharti moves faster, it could hit a bump.