Jio aur marne do

Live and let live, is not an adage Indian telecom believes in. Despite headroom for growth for all, players are killing each other for market share thanks to Jio.  


Notwithstanding the fact that there is enough for all on the plate, Indian telecom giants are trying to kill each other for a bigger bite of the pie. Rather, in a twist to the Hindi adage, Jio aur marne do seems to be the new moto with the entry of Reliance Jio. 

Just look at the facts. Among all the countries in Asia Pacific India is the only big telecom market with enough headroom for growth even by the year 2020 when mobile penetration is estimated to be only 65 per cent. 

So much so, India will be the fastest growing mobile market by 2020 outpacing even China. It will account for 27 per cent (206 million) of the 753 million new mobile connections expected to be added by the end of 2020 compared to China’s 21 per cent or 155 million new additions, says the 2017 edition of the GSMA’s ‘Mobile Economy: Asia Pacific’ report. 

The GSMA represents the interests of mobile operators worldwide, uniting nearly 800 operators with almost 300 companies in the broader mobile ecosystem, including handset and device makers, software companies, equipment providers and internet companies, as well as organizations in adjacent industry sectors.    

According to GSMA's latest report, Asia Pacific as a whole is forecast to grow from 2.7 billion unique mobile subscribers at the end of 2016, to 3.1 billion in 2020, accounting for two-thirds of global growth. Subscriber growth in the Asia Pacific region will mean that mobile penetration in the region (as a percentage of the population) will grow from 66 per cent in 2016 to 75 per cent in 2020. (see News in Numbers)

Asia is home to four of the top five most penetrated markets in the world (Hong Kong, Japan, Singapore and Taiwan).  This means incumbents will have to fight harder to grow both subscribers and ARPUs. However, compared to these countries, India is still in a comfortable position. 

An estimated mobile penetration of just 65 per cent by 2020 means much larger potential for India to grow in its mobile base compared to all other countries in the Asia Pacific. In comparison, China is already said to have reached near saturation with nearly 96 per cent coverage. This augers well for all players, service providers and handset sellers, despite the cut-throat competition in the Indian telecom market which has been in turmoil with the entry of Reliance Jio in September 2016 and the freebies announced by it. Needless to say, a new player in the market does have to try hard to garner sizable share to be a viable business. 

However, while there is enough headroom for growth, the kind of unhindered competitive pricing that one is seeing in India is perhaps unseen in any other country where new players have entered. If anything this no-hold barred thrust for market share will put pressure on operators’ profitability and even their very survival. 

The sector is already under stress reflected in the falling quarter revenue and profit numbers, as also the revenue accruals to the government on account of license fees for telecom operators. According to industry regulatory body, TRAI, the revenue of telecom operators from services dipped by about 15 per cent to Rs. 40,831 crore in the January-March quarter of FY2016-17, while companies like Bharti Airtel and Idea have reported a massive dip in Q1, Fy17-18 revenues and profits. 

While the Department of Telecom is said to have already flagged the failing health and falling revenues of telcos blaming the free offers by Reliance Jio, it has also asked the finance ministry to cut estimates of revenue from the debt laden sector by 37% to Rs 29,524 crore for the current financial year. 

The telecom minister Manoj Sinha last week warned in parliament the revenue collection from telecom services in the form of licence fee and spectrum usage charges may go down in this financial year if mobile phone operators continue to see a decline in their revenues. A drastic fall has been seen in the 2^nd half of the previous year, particularly in the last quarter. 

While a government constitute inter-ministerial group is looking into the financial health of the sector, clearly unfettered competition, in a scenario where everyone can grow by expanding the base and serving the unserved with innovative services, is unfortunate. In the short-term the consumer may seem to be having the last laugh, but the exchequer will be paying a high price in the medium term when bail outs may be necessitated to keep incumbents afloat.