Birla points to Jio free offers for ‘unprecedented disruption’ in telecom
New Delhi: Billionaire Kumar Mangalam Birla has blamed rival Reliance Jio for causing “unprecedented disruption” in the telecom industry by offering free voice and data but hoped the sector would return to growth in 2017-18.
Without naming Jio, Birla, in a letter to shareholders of Idea Cellular Ltd, said the flourishing telecom industry witnessed a 2% decline in annual revenues in the 2016-17 fiscal. His commentary in the latest annual report of Idea Cellular comes at a time when the telecom industry is facing a squeeze on revenue and profitability on account of competition intensified by the entry of Reliance Jio, which is owned by billionaire Mukesh Ambani.
“It has been a period of telecom discontinuity, permanently changing mobility business parameters,” Birla said, adding that financial parameters for all mobile operators have sharply declined. However, Birla said that the recovery is expected in 2017-18 with the new entrant starting to charge for its services, “albeit very slowly”. In spite of short-term challenges, the Aditya Birla Group telecom company remains committed to the process of building world-class broadband services, Birla asserted. On the mega merger of Vodafone’s India unit with Idea, he said a joint merger notification has been filed with the Competition Commission of India (CCI) and the scheme of arrangement has been filed with Sebi and stock exchanges for their approvals.
The two companies will combine their operations in India (excluding Vodafone’s 42% stake in Indus Towers) to create India’s largest telecom operator. “The combined company would become the leading communication provider in India with about 400 million customers, 35% customer market share and 41% revenue market share... ,” Birla said. He was confident that Idea will capitalise on emerging opportunities in mobile voice, digital content, mobile banking and wireless data business as the telecom market invariably moves towards consolidation with five major providers.