By Elton Gomes
Mukesh Ambani-led Reliance Jio Infocomm has surpassed Vodafone India to become the country’s second-largest telecom company by revenue market share (RMS). The growth was registered after Jio recorded a strong performance in India’s rural mobile markets. This combined with Jio’s aggressive pricing policies, free voice calling and cheap data plans have all made the telecom giant a tough competitor.
Less than two years after starting 4G internet services, Jio’s RMS widened to 253 basis points (bps) one-quarter to 22.4$ at the end of June, as revealed by Telecom Regulatory Authority of India’s (TRAI) financial data. On the other hand, Idea Cellular’s RMS dropped 106 bps to 15.4%, and Bharti Airtel’s RMS dropped 12 bps to 31.7%.
Although Jio might have done better than its peers in terms of RMS, it has a lot of catching up to do in terms of its subscriber base. After the company began operations in September 2016, Jio Infocomm registered a sequential increase of 14% in its overall adjusted gross revenue (AGR). Jio’s growth could be attributed to the fact that Vodafone and Idea’s AGR fell to 7.1% and 5.2% respectively.
Jio’s rise to the top
After becoming the second-largest company due to aggressive pricing policies, it is highly unlikely that Jio will increase its tariffs. As per a note accessed by the Economic Times, JM Financial said, “Jio is in no mood to raise tariffs anytime soon as it’s adding 9-10 million subscribers per month, delivering strong minutes, data traffic and revenue growth, which is bad news for Bharti Airtel and the (emerging) Vodafone-Idea combined entity, who need to offer some resistance by raising large sums of capital to accelerate 4G network build and also start matching Jio on tariffs.”
Moving forward the Bank of America Merrill Lynch has predicted that Jio will spend $7 billion CapEx spends for extending last-mile fibre connectivity to roll out its fibre-to-the-home fixed broadband services.
In an attempt to become a truly global company, Jio plans to expand its operations to Estonia, as per two sources knowledgeable of the matter spoke to Live Mint said. It was reported that Reliance Industrial Investments and Holdings Ltd will give a Rs 12.20 crore loan to the Estonian unit to start operations. Since its inception, Jio has recorded tremendous growth. The company seems unstoppable as its RMS increased to 19.7% in the third quarter of the financial year 2018, a feat achieved within just 16 months of operations.
Mergers and acquisitions
To topple Jio from the top, industry experts say that India’s telecom companies will have to aggressively beef up their content strategies. Jio’s aggressive bid in the race to gain digital media rights in the Indian Premier League (IPL) has made it critical for rival players to better their own content strategies.
Telecom companies have seemingly taken the merger and acquisitions path in an attempt to compete with Jio. Keeping in mind Jio’s aggressive pricing policies and three months of free data, mergers and acquisitions seem to have become inevitable. On March 21, Idea Cellular Ltd and Vodafone India decided to enter a merger in a $23 billion deal to create India’s largest telecom company. Even though both entities rejected the Jio factor as a reason for the merger, it is quite clear they had a better chance of overtaking Jio if they worked together.
Elton Gomes is a staff writer at Qrius
Stay updated with all the insights.
Navigate news, 1 email day.
Subscribe to Qrius