Reliance Jio Infocomm still the joker in telecom pack
India’s largest private enterprise Reliance Industries has said its telecom arm will launch 4G LTE services at “substantially lower” rates than rivals, setting the stage for a bruising tariff war
Mumbai: The telecom unit of Reliance Industries Ltd, Reliance Jio Infocomm Ltd, is all set to make the going tougher for existing operators such as Bharti Airtel Ltd, Vodafone India Ltd and Idea Cellular Ltd (See http://bit.ly/2aPBpdQ).
India’s largest private enterprise Reliance Industries has already said its telecom arm will launch 4G LTE (long term evolution, a technology standard) commercial services at “substantially lower” rates than rivals, setting the stage for a bruising tariff war.
“During the year, Reliance Jio moved towards the completion of its network infrastructure as well as business services and platforms. We on-boarded over 1.5 million test users, who have been using the services extensively. This has enabled testing of the network, user applications and services and business platforms. The feedback from test users is extremely encouraging,” Reliance Industries chairman Mukesh Ambani said in the annual report for 2015-16 released on 4 August.
“The test programme will be progressively upgraded into commercial operations in the coming months,” Ambani said.
However, R-Jio’s “test programme” has already resulted in it locking horns with industry body, the Cellular Operators Association of India (COAI), over the pilots.
On 8 August, COAI wrote to the Telecom Regulatory Authority of India (Trai), alleging that R-Jio is expanding the scope of the ongoing test-phase of its launch by tapping corporate customers.
Accusing Trai of adopting “unfair” policies to favour new entrants, including R-Jio, COAI approached the Prime Minister’s Office, too, to get relief.
On 10 August, R-Jio countered with a letter to Trai and COAI, explaining that it needs to expand its customer base to test its network. It added that the allegations made by the lobby were aimed at sabotaging its launch.
COAI, a lobby group mainly representing incumbent operators although R-Jio is a part of it, also complained to the department of telecommunications that the test had been launched without the submission of a tariff plan or interconnection agreements. It claims that as a result, telcos on whose networks calls made from R-Jio networks terminate do not receive the so-called interconnection usage charge (IUC).
The fact remains, however, that telco incumbents are gearing up for a pricing war as R-Jio readies for its commercial launch.
Bharti Airtel and Idea Cellular have cut their mobile data tariffs to prevent loss of subscribers at the launch of Reliance Jio Infocomm’s services and to improve capacity utilization after they rolled out 3G/4G networks, a July UBS Securities Pvt. Ltd report pointed out.
Data realizations will decline 15% in 2017, 14% in 2018 and 13% in 2019 for both Bharti and Idea, the report said. However, the increase in data traffic would compensate for declining realization, it added.
The report cautioned that the entry of Reliance Jio has the potential to further disrupt the market in terms of cuts in data tariffs, but at the same time, acknowledged that there is also a possibility that it would lead to an expansion of the data subscriber base, ultimately benefitting Bharti and Idea.
“We believe India’s mobile data market is likely to grow 8x (to Rs.2.13 trillion) by FY26, driving strong operating leverage. We believe both Airtel and Idea are well positioned to benefit from this potential data boom,” it said.
Till the first quarter of this fiscal, RIL has spent Rs.1.34 trillion on Jio, funded by a combination of equity (Rs.45,000 crore), debt (Rs.47,000 crore), vendor financing (Rs.28,000 crore), and deferred spectrum payments (Rs.14,000 crore). This spending has helped R-Jio cover 70% of India with 270,000km of fibre optic cables and 92,000 towers. The company has said it will spend another Rs.15,000 crore.
According to RIL’s annual report, Jio is rolling out a state-of-the-art, pan-India digital services business. This includes fixed and wireless broadband connectivity services offering voice and data quality on an all-Internet Protocol (IP) network. In addition, Jio will offer end-to-end solutions encompassing the entire digital value chain across domains such as education, healthcare, security, communication, financial services, government-citizen interfaces and entertainment.
Jio’s key service objective is to provide anytime, anywhere access to innovative applications and high-speed Internet services, thereby propelling India on to global leadership in the digital economy.
Jio will bring India into the era of “visuality”, where video will replace voice as the preferred medium of communication. Jio will have one of the most comprehensive and powerful video networks in the world, the annual report said.
Jio’s customer offering is built on four key strategic dimensions: the widest coverage of LTE services, network quality, transformational data capacity and affordable services.
Jio’s deployment of LTE, fibre to the home (FTTH) and Wireless Fidelity (Wi-Fi) will make high-speed broadband access widely available to customers across India.
“This type of broadband network offers high capacity and low latency access to services at an affordable price, a first for most Indian customers. Jio will enable IP-centric and content-focused services, with the ability to offer rich, multimedia communication and digital services. Jio is in stabilization phase of this large and complex network and is also testing its services end-to-end for ensuring highest quality of customer service and experience,” the annual report said.