In March 2017, Reliance Jio Infocomm Ltd had said that India’s mobile market will be Rs3 trillion in size by 2020-21, adding it is well-positioned to achieve a market share of more than 50%.

But Jio’s own actions point to a singular focus on market share, with little regard for where the industry ends up in terms of revenues. “Reliance Jio’s tariff actions suggest it is happy to live with a 50% share of a market that has shrunk considerably, rather than a lower share in an unshrunk market," said an analyst at a domestic institutional brokerage firm, requesting anonymity.

Industry revenues have shrunk almost every passing quarter since Jio launched operations. To add to the misery of incumbents, the company announced new post-paid tariff plans last week that are at about half the level of incumbents’ base plans in the category. It has also slashed international calling rates drastically, and both of these moves are likely to impact industry revenues by another 5% or so. The impact on profits will be far higher.

For perspective, industry revenues stood at Rs1.8 trillion before Jio’s launch, and analysts had initially estimated a drop to Rs1.6 trillion by fiscal year 2018 (bit.ly/2wN46FB). But revenues already fell to an annualized level of Rs1.31 trillion in the December quarter, even before Jio cut tariffs in the prepaid category in January this year. After the impact of the latest tariff cuts set in, revenues could fall below Rs1.2 trillion. And all of this is before Jio has crossed even the 25% hurdle in terms of market share.

Who knows what lies next? Jio has a majority market share in the prepaid category of connections that use broadband data. But it lags far behind incumbents in the post-paid segment and in the category of non-broadband users within the prepaid segment. If the response of customers to its new post-paid offer as well as its feature-phone offer is lukewarm, it may well decide on more firepower to get to its targeted 50% market share.

That thought is scary, and it isn’t surprising that shares of Idea Cellular Ltd have fallen more than 50% so far this year. In the March quarter, Idea’s pre-tax losses stood at as high as 33% of revenues, after adjusting for one-offs. Jio’s latest tariff cuts will drag Idea deeper into the red, before there is any improvement in its financials. Bharti Airtel Ltd’s India wireless business is also running high losses, though to a lesser extent when compared with Idea.

But what about Jio’s own fortunes? Will a 50% share in a significantly shrunk market cover its high expenses and leave anything as a return on its capital? In the past three quarters, Jio has reported capital expenditure of Rs28,000 crore, and operating expenses and interest costs of around Rs15,000 crore. If expenses remain in that range, revenues may only be enough to cover expenses. Of course, one can argue that Jio will soon enough have other revenue streams such as from home broadband, but the fact remains that its fortunes largely depend on the mobile business.

The only way the company can make a decent return on capital is if most competitors succumb and exit the market. If the industry ends up in a duopoly or a monopoly situation, investors can hope for tariffs to recover and revenues to increase in size. But as things stand, Jio’s 2021 vision on industry revenues looks blurry and in need for a revisit.

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