- Education And Career
- Companies & Markets
- Gadgets & Technology
- After Hours
- Banking & Finance
- Energy & Infra
- Case Study
- Web Exclusive
- Property Review
- Digital India
- Work Life Balance
- Test category by sumit
A War That’s Most Disruptive
The challenge is that incumbents do not have the resources to expand their 4G networks as aggressively as Jio. Some of them also need additional spectrum
Photo Credit :
Corporate wars are not announced. There is no gun fire or aerial bombing but the very intensity of corporate competition rivals that of a war. There are casualties, mostly economic but sometime of people too. Most corporate wars are one-to-one but sometimes and very rarely they are one against many.
One such war has been going on for some time in the Indian telecom sector. Now for almost two years and more, the incumbent telecom operators are lined up against a new operator, Reliance Jio. The latter’s chairman on 1 September announced the launch of its telecom services. The services were soft launched for some handsets a few months back. At its annual general meeting of shareholders in Mumbai, Mukesh Ambani, chairman, Reliance Industries announced that all consumers can now apply for the launch Freedom offer, and avail of free services from 5 September to 31 December this year.
While there is still some confusion whether it is a commercial launch or not, the fact is that a tariff plan has been announced, undercutting the current market price for data by one/fifth at Rs 50 per for 1 GB of data. Ambani also appealed to incumbent telecom operators to provide point of interconnection so that voice calls across all networks can be seamless. The issue is that for the next three months he is offering free services, which is going to lead to a massive migration of customers from incumbents to Jio.
None of the incumbents are going to take this easily; they are also going to cut rates to match Jio’s. They will also delay mobile number portability to delay the migration. Now, there will be a pricing war too, and a no-holds-barred one where incumbents will fight tooth and nail for market share.
The telecom battle first started on rooftops where the incumbents did not let Jio install its towers or co-share space. Jio took the terrestrial route installing high-rise towers across public and private spaces, on highways, parks, traffic islands and such places. A whole cottage industry came up around locating sites for these towers and installing them.
A letter submitted by Jio to the Telecom Regulatory Authority of India (TRAI) reads, “Jio will install 8 lakh 4G towers by the time it launches, compared to 2.10 lakh 4G towers of all the incumbents put together.” Jio also fought a proxy war in courts against the installation of these towers in various parts of the country.
The launch of the service has been delayed because of this and several other reasons. Jio’s biggest fear was and remains the quality of service, especially as the government has become aggressive about it in recent past. In the trial runs, Jio faced massive call drops, according to letters submitted to TRAI — 65 per cent call failures for the 15 lakh-odd subscribers of the service. Jio blames this on the POI (points of interconnectivity) not being provided by the incumbent telecom operators. This is the second battleground. By denying Jio adequate POIs the incumbent operators are ensuring that the quality of service is poor on Jio. Ambani also admitted in his speech that calls numbering 5 crore failed due to inadequate points of interconnection.
The incumbents claim that Jio has been testing its services for almost a year and is actually offering commercial service in the guise of testing. Incumbents are also hurt by the fact that Jio is offering free data services which is hurting their pricing and bottom line. Most operators have seen a drop in revenues from data in the last two quarters. Jio claims it has not been able to launch commercially with such a high call drop rate. Jio has been testing its network since 25 December 2015 making it possibly the longest time that any operator has carried out testing with live customer base. Jio’s alibi is that each handset has its own peculiarities and has to be tested for a VoLTE network.
Handsets are not the only challenge. Jio has different frequency spectrum band some of which are being used on VoLTE for the first time. This is also the biggest and the most complex VoLTE network in the world. Moreover, the other networks around it are not VoLTE so when Jio hands over the call to a non-VoLTE network it has to change it to the incumbent technology.
The challenge is that incumbents do not have the resources to expand their 4G networks as aggressively as Reliance Jio. They not just need money for setting up 4G telecom towers but some of the incumbents also need additional spectrum.
After 5 September, a few fundamental changes will take place because of Jio’s launch. First, since voice calls and roaming is free on Jio network, incumbent operators will have to reconfigure their billing plans. Second, incumbent operators will have to revise their data plans downwards to match Jio’s pricing. Third, enterprise customers, an important and high-margin customer for most operators, will have to be offered customised billing plans soon. Fourth, free content that is currently being offered by Jio through its apps will impact the market share of Gaana.com, Wynk and several other entertainment apps. Fifth, Jio’s basic plan of unlimited free voice and 0.3 GB data at Rs 149 when combined with the Rs 3,000 handset becomes really attractive for the masses.
The incumbents and Jio are also fighting over interconnection usage charges (IUC) something that Jio will have to pay the incumbents as it has a smaller base compared to them. Jio wants IUC to be lower especially since it is making voice calls free and only charging for data. This is free income for incumbents and it is unlikely that they will agree to it easily.
The war has well begun, and several small operators who were just surviving are expected to be the first casualty.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.